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Chevron Pulls Out of $3.5bn Brass LNG Project

Category: General


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Chevron Pulls Out of $3.5bn Brass LNG Project

February 19, 2006/thisday


 

 

The nation’s quest for greater economic utilization of its huge gas resources may have suffered a setback yesterday after US oil major, Chevron pulled out of the $3.5 billion (N455 billion) Brass LNG project.


The Nigerian National Petroleum Corporation (NNPC), which holds a major equity in the project to be located in Brass River, in Bayelsa State, however, said the 2009 scheduled delivery date of the project would not be affected by the sudden withdrawal of Chevron.


The Brass LNG, designed to produce 10 million tones 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.

Although circumstances surrounding the withdrawal of Chevron from the project it kicked off in 2003 along with the NNPC, Italian firm, Nigerian Agip Oil Company (NAOC) and another US firm ConocoPhillips, still remained hazy, sources told THISDAY that it was to enable the company concentrate on other ongoing priority gas projects.


\"The company has a mutual understanding with the Nigerian government to that effect,\" said a source of the company’s withdrawal from the gas project adding, “Our pulling out is very much with the understanding of the government to let us continue with other gas projects. 


The official disclosed that Chevron is not only the leading firm in the OK LNG project but also the lead supplier of gas to that project.

Chevron holds 17 percent equity in the Brass LNG project. The NNPC owns 49 percent shares, while Agip and ConocoPhillips hold 17 percent shares each.

Chevron on the other hand, is the project leader in another key Nigerian gas project, the $6 billion Olokola (OK) LNG, which is to be sited in the border town of Ogun and Ondo states. Other partners in this project are the NNPC, Shell and BG Nigeria.

The final investment decision (FID) on the Brass LNG was to have been signed late last year, but was shifted to the fourth quarter of 2006, following the delay in completion of the feasibility studies.

Only last month, BP Plc said it signed a memorandum of understanding (MoU) with Brass LNG to purchase 2 million tonnes a year of liquefied natural gas. The deal, which is expected to be concluded later this year, will cover a 20-year period from 2010.


Industry officials expressed concern that the rising tension and continued violence in the Niger Delta may have been behind Chevron’s decision to pull out. The US government only last week advised its nationals to quit the Niger Delta where four foreign oil workers were kidnapped in January for more than two weeks by a militant group that identifies itself as the Movement for the Emancipation of Niger Delta (MEND) for more than two weeks. MEND has also issued threats to launch fresh waves of attacks in the oil-producing region.

Chevron, however, denied any link to the crisis for pulling out of the gas project. “We told the government to let us continue with other gas projects. It (the pull out) is in line with the government’s strategy to optimizing gas utilisation in the country,  an official said.

Apart from the OK LNG, Chervon is the project leader of the $590 million West African Gas Pipeline (WAGP) project, which entails the piping of natural gas from Nigeria to Ghana, Togo and Benin Republic. Also, the company is building the $1.9 billion Gas-to-Liquids (GTL) project in Escravos, Delta State.

The NNPC has, however, assured that Chevron’s withdrawal from the Brass LNG project would not affect work on the project. \"The Brass LNG is still very much on course and the target date of completion will not be affected by Chevron\'s withdrawal,\" a senior official of the corporation said yesterday.

\"We already have companies jostling to take up Chevron\'s equity in the project and this will be concluded very soon,\" the official added. He, however, declined to name the interested parties.

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.



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