Early Delivery And Cash Backing Pushes Nigeria's LNG Production

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The signing of a $1.06 billion loan package by the Nigerian Liquefied Natural Gas Company (NLNG) was concurrent with the start of production at the third module of the company's Bonny Island gas complex. The first gas from the new train is being transported to Spain, which marks the project as having been completed on budget and three months ahead of schedule, which is a welcome boost for Nigeria's struggling industrial development record.

The loan package signed with a consortium of 19 foreign banks, the African Development Bank (ADB) and six Nigerian banks will help to finance the building of trains four and five. The overall cost of the two trains is 2.1 billion dollars with shareholders such as the Nigerian government, Shell (LSE:SHEL) (London, United Kingdom), TotalFinaElf (TOTF:PARIS) (Paris, France), and Agip (AGIP:LAGOS,MILAN) (Milan, Italy) expected to fund the balance.

When the two new trains are finished in 2005 the total production from five trains will be 17 million tons per annum. The project first began production in 1999 and now with the third train's production coming in it will be producing nine million tons of LNG and 1.25 million tons of liquefied petroleum gas (LPG) a year.

Trains one and two convert gas mainly from dedicated gas wells into LNG. The new train has the capacity to convert 'associated' gas from oil wells, which would otherwise be flared, into LNG and LPG. Shell is a 25.6% shareholder and joint venturer in NLNG and the Bonny Island gas complex. The company expects the third train to play an important role in meeting its commitment to stop flaring the gas associated with oil production in Nigeria by 2008. Shell's partners in the NLNG joint venture are the Nigerian National Petroleum Corporation (49%), TotalFinaElf (15%) and Agip (10.4%).

NLNG sees the new facilities as consolidating the company's track record as a reliable supplier to the Atlantic basin market. Nigeria will now be well placed to serve the demands of Western Europe, the Mediterranean, South America and the USA. Customers have confirmed their commitment to major additional volumes from trains four and five in 2005.

Oil and energy resource exports represent more than 95% of Nigeria's total annual revenues. The country's gas reserves are currently estimated to last for 110 years and Nigeria ranks 10th in the world in proven reserves with around 160 trillion cubic feet (4 500 billion cubic meters) accounting for a third of Africa's current proven gas stocks.