Total acquires Chevron’s interest in Nigerian Brass LNG

Aug 03, 2006 02:00 AM

The $ 3.5 bn Brass LNG Project got back on track with the announcement by French oil major, Total, that it has acquired Chevron's interest in the project located 90 km west of Bonny Island, Rivers State.
Also, the Federal Government will soon sign Production Sharing Contract (PSC) agreements with Chinese and Indian oil firms that won a total of six oil blocks at the mini bid round conducted by the Department of Petroleum Resources (DPR) last May.

Total said it had acquired the 17 % equity interest formerly owned by the American oil giant in the Brass LNG project. Chevron, Nigeria's third largest oil producer had early this year pulled out of the LNG project, in which it played a greater role in its take-off, citing commitments to other major gas projects in Nigeria. Total explained that the acquisition of the stake in the liquefied natural gas project (LNG) was a further step in its strategy of growing and diversifying its production in the country, the world's eighth biggest oil exporter.
"The Brass LNG project will enable Total to step the monetisation of its Nigerian gas resources from onshore fields, offshore clusters under development and oil mining leases 112 and 117, in which the group recently acquired a 40 % interest," it said.

A go-ahead for the first two trains of the project was expected by year-end, with production scheduled to start up in 2011. At the initial stage, two trains would be built, with a capacity of 5 mm tpy each, with most of the LNG destined for export to Europe and the US.
Total partners the project with the Nigerian National Petroleum Corporation (NNPC), Italy's ENI and ConocoPhillips and it said the feed gas will be supplied from the partners' production, with Total accounting for a third over 20 years.

The newly-acquired interest was in addition to Total's 15 % stake in the Nigerian LNG company (NLNG), whose capacity was recently expanded to almost 18 mm tpy, with the commissioning of trains 4 and 5 earlier this year. Train 6, with a capacity of 4 mm tpy, is under construction and is scheduled to come on-stream in 2007.
A top-tier global LNG operator with equity sales of 7.7 mm tons in 2005, Total is targeting average LNG production growth of 12 % a year through 2010 and the Brass LNG project is expected to support the group's post-2010 LNG expansion and diversification.

The Brass LNG project, designed to produce 10 mm tons of liquefied natural gas from two trains, is one of the key projects targeted by the Federal Government to monetise the country's gas reserves, a larger proportion of which is currently being flared.
Chevron's withdrawal from the project had jolted other partners including the NNPC, Italian firm, Nigerian Agip Oil Company (NAOC) and another US firm ConocoPhillips, creating fears that the scheduled completion date of 2009 might be missed. NNPC owns 49 % shares, while Agip and ConocoPhillips hold 17 % shares each.

US engineering firm Bechtel was to handle construction of the Brass LNG plant, using the Cascade technology patented by ConocoPhillips, a shareholder in the project. The plant is to be fed with gas from Agip and Chevron oil fields scattered in the Niger Delta.
The Brass LNG, along with the OK LNG, the West African Gas Pipeline project and the Bonny LNG project, are key to helping the Federal government realised its objective of raising revenue from gas exports. Meanwhile, the Federal Government will soon sign Production Sharing Contract (PSC) agreements with Chinese and Indian oil firms that won a total of six oil blocks at the mini bid round conducted by the Department of Petroleum Resources (DPR) last May.

DPR Director, Mr Tony Chukwueke told that the signing of the PSC, which will automatically hand over the licenses to the oil acreages to the winners, was delayed after the process got entangled in the negotiations to assign indigenous oil companies to block winners.
"We are about to sign the PSC Because of the LCV (local content vehicles), the process has been complicated a little bit. The Petroleum Minister has recently directed that we should play down the LCV situation now, so we are going to sign those PSC in the next couple of days," said Chukwueke.

ONGC-Mittal won two deepwater blocks OPL 209 and 212, which where part of Shell's Bonga field and ExxonMobil's Erha field and earlier relinquished, while Taiwan's CNPC won four blocks, OPLs 721, 732, 471 and OML 65. The Federal Government had earlier said the PSC for all the 16 oil blocks awarded should be signed 30 days after the awards.
ONGC-Mittal clinched the blocks in return for a $ 6 bn investment in an oil refinery and a railway line in Nigeria while CNPC pledged a $ 2 bn investment in the Kaduna refinery.

The auction was aimed at drawing investment into the country's downstream and power sectors, and the bidders were expected to invest at least $ 2 bn in projects on refining, power generation and agriculture in addition to the blocks they won.
Eleven companies had participated in the mini-auction for the 18 oil blocks. Other winnerswere Transnational Corp, INC Natural Resources, Nig-Del United, BG-Sahara Group and Clean Waters.

Source: This Day
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