Nigeria: NIPCO Unveils Plan for $3bn Floating LNG Project

NIPCO Group has announced plans to develop a $3 billion Floating Liquefied Natural Gas (FLNG) project in Nigeria, a single undertaking that would exceed the roughly $2 billion the company has invested in the country's oil and gas sector over the past 37 years combined.

Managing Director of NIPCO Gas Nagendra Verma disclosed the plan at a press conference on Thursday, describing it as the company's entry into the LNG sector.

The proposed project would have an envisaged production capacity of approximately 3 million tonnes of LNG per annum, subject to feasibility studies, regulatory approvals and a final investment decision.

Verma noted that NIPCO is considering sites in the Escravos area of Delta State and the Akwa Ibom region, with the final location to be determined once the ongoing feasibility study is complete.

"We are looking at strategic locations that will facilitate access to upstream gas resources, LNG processing, marine transportation and both international and domestic markets," he said.

A leap beyond the company's usual scale

Since its founding in 1988, NIPCO has built its business around fuel retail, LPG storage and distribution, and gas pipeline infrastructure, investments that together total about $2 billion, according to the company.

That history includes pioneering private-sector investment in Liquefied Petroleum Gas, the cooking gas used by millions of Nigerian households, when it entered the market in 2009 and broke what had been a near-total hold on the sector by the local affiliates of international oil companies. The company now operates about 700 fuel retail outlets nationwide and roughly 30 Compressed Natural Gas (CNG) stations.

Against that backdrop, a single $3 billion FLNG project represents a scale of investment NIPCO has not previously attempted, raising the practical question of how the company intends to finance it..

Verma explained that NIPCO has spent the past six to nine months on preliminary technical, commercial and feasibility assessments, and is "considering various development concepts, technology solutions, financing structures and commercial options with a view to establishing a technically robust and commercially sustainable project," but he did not disclose specific funding sources or partners at this stage.

Betting on gas that has long gone undeveloped

Nigeria holds among the largest proven natural gas reserves in Africa, but a significant share remains undeveloped for lack of infrastructure to process and transport it, leaving some discovered gas effectively stranded.

Floating LNG technology, which processes and liquefies gas aboard a vessel moored near an offshore field rather than through a fixed onshore plant, has already been deployed elsewhere in Africa, including in Mozambique and Cameroon, as a way to monetise offshore gas without the cost and delay of building permanent onshore facilities.

NIPCO Chairman Bestman Anekwe said additional LNG capacity would support gas monetisation, industrial growth and energy security, while also contributing to foreign exchange earnings and job creation, and that the company would draw on its existing relationship with the Nigerian National Petroleum Company Limited as the project develops.

Verma added that the ongoing technical review covers upstream gas supply and reserves, FLNG configuration, marine and export infrastructure, domestic supply opportunities, shipping logistics, and project economics and financing.

Whether NIPCO can secure financing for a project several times the size of its entire existing investment portfolio will likely determine how quickly, if at all, the proposal moves from feasibility study toward a final investment decision.