Reviving the trans-Saharan pipeline project

Speaking at the 30th meeting of the NEPAD Heads of State and Government Orientation Committee, Jonathan, who was represented, made clear Nigeria’s special commitment to jumpstart the project, which will cost $20 billion and is expected to be operational by 2015. When completed, the pipeline will transport approximately 30 billion cubic metres of natural gas […]

Speaking at the 30th meeting of the NEPAD Heads of State and Government Orientation Committee, Jonathan, who was represented, made clear Nigeria’s special commitment to jumpstart the project, which will cost $20 billion and is expected to be operational by 2015. When completed, the pipeline will transport approximately 30 billion cubic metres of natural gas annually from Warri through Niger Republic, Algeria and the Mediterranean, and on to Europe via Spain. In addition to representing a huge opportunity to diversify the European Union’s gas supplies, the project is intended to integrate the economies of the African region in line with NEPAD’s vision to boost GDP of participating countries, create wealth and improve living standards of the citizens. Although the idea was first proposed in the 1970s, it took 30 years for an MOU between NNPC and Algeria’s Sonatrach to be signed in 2002. With further delays, a feasibility study in 2006 affirmed the pipeline’s technical and economic viability; it has taken almost another ten years to get to this stage.
The objectives of the pipeline are to diversify the export route of marketing Nigeria’s natural gas and engender closer co-operation and integration between Nigeria, Niger, Burkina Faso, Mali and Algeria. The success of the project is vital because it will greatly reduce the environmental degradation caused by gas flaring in the Niger delta as well as provide much needed employment opportunities. The immediate focus for Nigeria must be to connect major gas supply sources in the Niger delta region through pipeline infrastructure traversing south and through the country to deliver gas to the Nigeria/ Niger border. When completed, the pipeline will be operated by NNPC and Sonatrach of Algeria, which together own 90% of the project. The remaining 10% will be owned by SONIDEP, the national oil company of Niger Republic. Reservations have been expressed about the project’s financing arrangements. If the delays in the project continue, and it is not completed expeditiously, the increasing focus on shale oil and the proposed intra-European gas pipeline project supplying gas from Russia could place the Trans-Saharan venture in jeopardy as the market opportunities in Europe could be lost. Since it is clear that the government must make further financial commitment to the project, it is important that the 2006 feasibility study be revalidated because important market changes have taken place since the idea of pipeline was concretised in 2002. Security issues in the era of terrorism are also of concern.
Important too is the fact that gas consumption within Nigeria is growing rapidly and needs to be encouraged to protect the ecosystem.  The need for proper environment impact assessment studies and right of way surveys should also be taken seriously, because both could have impact on eventual project cost.  The money that the president pledged represents less than 5% of the projected cost, which advisedly should not be financed by government borrowing. Addressing issues of how the project will ultimately be financed is a priority when there is yet to be a clear-cut framework to encourage private sector participation. The government must move quickly to facilitate such a framework.  The importance of the project to the economy cannot be overstressed.  About 30% of the infrastructure is located within Nigeria’s borders. For the project to be nationally successful, it is essential that the design ensures access is open to different supply sources within the country. It is a good sign that the NNPC, which is the executor of the project, has completed the concept design for the pipeline and that work has begun on the acquisition of Rights of Way survey of key segments of the pipeline. Still, the government should be careful not to tie the project’s success solely to the trans-Saharan portion. Irrespective of a possible delay in completion or, at worst, complete scrubbing of the regional segment of the pipeline, the Nigerian sector should proceed as planned to widen the market for the product in Nigeria.