NNPC, Shell, Chevron and BG sign MOU on $6 bln Nigerian LNG project

Source: Reuters 7/25/2006, Location: Africa

State company Nigerian National Petroleum Corp (NNPC) and three foreign oil and gas majors have signed a memorandum of understanding (MOU) to formalise the $6 billion Olokola liquefied natural gas (LNG) project.

The four-train Olokola, which will have a total capacity of 22 million tonnes per year, is expected to start its first two trains in 2011. Together with other projects, it would make Nigeria one of the world's biggest producers of LNG.

Nigeria is looking to LNG, gas which has been cooled into liquid form for easy transport by tanker, as a way to make better commercial use of its huge gas reserves. A large proportion of Nigerian natural gas is currently flared because of a lack of infrastructure to exploit it commercially, causing major environmental damage to the oil-producing Niger Delta.

NNPC has a 49.5 percent stake in the Olokola project while Chevron and Royal Dutch Shell each have 18.5 percent and BG has 13.5 percent.

Olokola, which is being fast-tracked by the government of President Olusegun Obasanjo, will be built in a free trade zone straddling the southwestern states of Ondo and Ogun.

The MOU, signed by NNPC and its partners on Monday, formalises the relationship between the project and the free trade zone, a Chevron spokesman said. He said the MOU did not represent a final investment decision (FID) by the partners.

NNPC said in January it expected the FID on Olokola to be signed in the third quarter this year, while the FID on another LNG project, Brass, would be signed in the fourth quarter.

Chevron was originally a partner in the $5 billion Brass project until it pulled out in March to focus on Olokola instead. It has been replaced by Total. Other partners in Brass are ConocoPhillips, ENI and NNPC. The Brass plant will be built off the coast of Bayelsa state in the Niger Delta near the Brass oil export terminal. It is expected to produce an initial 10 million tonnes of LNG and 2.5 million tonnes of liquefied petroleum gas per year.

Nigeria's first LNG plant located on Bonny Island in southeastern Rivers state, also in the Niger Delta, is expected to raise production to 22 million tonnes per annum when its sixth train starts up in 2007.

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