NNPCL, UTMOL sign historic agreement to further drive down cost of cooking gas

As part of efforts to grow the gas market and make cooking gas accessible and affordable to consumers, the Nigerian National Petroleum Company (NNPC) Limited and UTM Offshore Limited today signed the Heads of Terms Agreement which spells out terms of 20 per cent equity contribution of the NNPCL in the UTM FLNG Project.

The signing ceremony which took place at the NNPCL corporate headquarters in Abuja is a collaborative effort between the two companies to provide clean energy to Nigerians for various uses.

According to the group managing director, UTM Offshore Limited, promoter of the project, Mr Julius Rone, the signing is indicative of UTMOL’s commitment to help bring down and stabilize the price of cooking gas and make same accessible to more consumers. He emphasized the benefits to include a healthier environment, investment opportunities and thousands of direct and indirect employment opportunities to Nigerians.

The front-end engineering design, FEED, is already on in Lagos, Yokohama and Paris with JGC, Technip and indigenous companies acting as consultants.

Mr Rone emphasized how important that stage of the project is as it would enable UTMOL to have an idea about the project cost, prepare a full budget and work towards the FID, saying that the stage cannot be skipped.

“Final Investment Decision (FID) is expected to be taken in the fourth quarter of 2023 with planned Project start up in the fourth quarter of 2026. When completed, it will produce 1.7mmtpa of LNG and 300,000 metric tons of LPG (cooking gas) which will be fully dedicated to the domestic market. The project is estimated to provide direct employment for 3,000 Nigerians and another indirect employment for an additional 4,000 people. The LPG produced will help bring down the price of cooking gas, improve the socioeconomic wellbeing of Nigerians, reduce deforestation, gas flaring and its attendant carbon emission”.

The facility which will be located about 60km offshore at 64m water depth, will be built by reputable engineering companies – JGC of Japan and Technip of France, with the support of KBR as the Owners Engineer. It is worthy of note that the two contracting companies and KBR were the consortium that built the six (6) existing LNG Trains for Nigerian LNG Ltd.

Having got the first outcome, which is level four, the next outcome will be level three while the final outcome will be level two. At the same time, the Engineering Procurement and Construction, EPC draft contract is being worked with Templers, UTMOL’s lawyers and their international counsel, White and Case.

“Today is a great day for Nigeria. For us at UTM, we are very delighted that NNPCL has considered this project worthy enough to invest in, and to partner with UTM to deliver Nigeria’s first floating LNG. This is a major landmark achievement for an indigenous company to partner with one of the world’s best energy conglomerate which is NNPCL.

“We are very proud to work with NNPCL to deliver this first floating LNG. We believe that with NNPCL on board this project, by the special grace of God, we will deliver the first floating energy by December 2026 just as we promised Mr President.

“We understand how important this is to Nigerians and Nigeria’s economy, and we are committed to enlisting and partnering with only the best to actualize this project. We are leaving no stone unturned in terms of the quality of companies that will deliver this project. So, apart from these international companies of foremost global reputation that have been contracted to build the facility, our historic partnership with NNPCL today signals yet another milestone in our dedication to ensuring that this project is not only realized but also meets the set objectives.

“Our aim is to complete the FEED towards the end of October 2023, and hopefully start work on the Open Book Estimate, OBE, for the EPC contract in November 2023.

“There are many intellectual property rights attached to such a project and such rights cannot be moved from one company to another. It may end up in the EPC with JGC and Technip. And once that is done, in line with international best practice, they need to also do the OBE negotiation with us. It was for this reason that we brought in KBR Consulting Limited of the UK, an international engineering company of the same status as JGC and Technip, to serve as our engineering consultant since we do not have the experience yet to measure the deliverables from the outcome of the feed. The company will help us ensure that whatever JGC and Technip are doing in terms of engineering is in conformity with the project schedule and expectation.

“The importance we attach to this project because of its immeasurable value to our country means we have to be meticulous about the quality of those we engage on it. The Petroleum Industry Act, PIA, has also encouraged us to go on with the project without any anxiety and we are confident that government will demonstrate sufficient political will in this regard.

“It is worthy of note that this is the first indigenous company to embark on such a project and by the grace of God, we will succeed together with all our partners who have been working with us on this project since 2019

“It is in light of this that we appreciate the group chief executive officer of NNPCL, Mr Mele Kyari and his management team for demonstrating the uncommon zeal, patriotism and belief in UTM by staking their own commitment to the project. It says a lot about what we are doing and the direction we are headed. I can assure you that in no distant time, Nigerians will start reaping the benefits of the project,” he concluded.

In his remarks, NNPCL’s executive vice president, EVP, Gas, Power and New Energy, Mr Mohammed Ahmed said gas being a transition fuel, everything done in Nigeria today makes the world view the country as a gas nation rather than a fuel nation.

“We cannot commercialise this if it is not pulled out, and we cannot also pull it out if we don’t invest in it. To be able to commercialise these gas assets, we need to harness resources together. Where we can go it alone, we do, but where we cannot, we partner with others. And even if we don’t initiate, we partner with those who initiate, support them and also put our money in that investment. That is the beauty of collaboration.

“It will be recalled that UTM as a company approached the NNPCL as far back as 2019 for NNPCL to show interest in the project. We did that and all the needed processes abd approvals have been secured for us to be part of this project. Not only to invest but also to support, and I can confirm that NNPCL is very much interested in this project. We have demonstrated that by signing up to 20 per cent and we will do whatever it takes to ensure that this project is executed.

“The entire process has culminated into this signing of Head of Terms. The implication of this is that we will progress with other activities; we will begin to participate in the fields and all other areas related to the project to ensure it comes to fruition.

“This is the journey so far! NNPCL is fully into this project, to support it, invest in it and also ensure that there is energy availability, sustainability, affordability and security for the country where we also hope to get some revenue for the country”, he affirmed.

In his speech, the chief executive officer of NNPCL, Mr Mele Kyari expressed the commitment of NNPCL to the project saying it is a project of utmost importance to the nation that must be supported to succeed at all cost.

“No matter the amount of reserves you have underground, if you haven’t brought it up to the surface, you have done nothing. This is why we are very interested in this project and we are going to do our own part to ensure its success. Be assured that NNPCL is solidly behind this project”, he remarked.

He expressed confidence in the ability and capacity of the company as led by Mr Julius Rone to bring the project to an effective realization saying the investment of NNPCL in it is indicative of that fact.