10,000 jobs at risk, as Chevron, Shell pull out from OKLNG

Nigeria’s unemployment situation is set to worsen, as the fate of about 10,000 workers in the Olokola Liquefied Natural Gas project, OKLNG, is currently on the line, following the pulling out of Chevron and Shell, which threatens the continuation of the project.
The workers, currently employed in the construction phase of the project, risk being disengaged, as Chevron Nigeria Limited, CNL, Wednesday, confirmed its withdrawal from the OKLNG project, blaming it on the lack of progress on the project, eight years after its inception.
Vanguard, had, Friday, exclusively reported that Chevron and Shell had pulled out of the project, citing a number of factors, ranging from non-commitment on the part of the Federal Government to pursue the completion of the project and also the non-passage of the Petroleum Industry Bill, PIB.
Shell, as usual, is still playing a cat-and-mouse game refusing to confirm its pull out as Chevron did, thereby raising questions as to the reason for the secrecy.
Likewise, the word is mum at Nigerian National Petroleum Corporation, NNPC, the principal partner in the project, which had been informed on the oil majors decisions, and had over the years had seconded a lot of its staff to the OKLNG project.
However, after almost a month of taken the decision, Chevron, in a statement signed by its General Manager, Policy, Government & Public Affairs, Mr. Deji Haastrup, said that the company effectively pulled out of the project on July 31, 2013, adding that efforts over the last eight years to mature the project have not resulted in a final investment decision, FID.
The statement also confirmed that Shell pulled out of the OKLNG project, July 31, 2013.
The Chairman/Managing Director, CNL, Mr. Andrew Fawthrop, said the withdrawal affords his company the opportunity to prioritise its investment portfolio.
He said, “The business decision to withdraw from OKLNG is based on a review of our investment portfolio, the lack of progress on the project and a reprioritisation of resources to focus on growing domestic gas supply.”
The Chevron statement also said that the NNPC was duly informed of its decision to withdraw, adding that the divestment process is being managed in accordance with the provisions of the Shareholders’ Agreement governing the project.
Chevron originally had 19.5 per cent equity in the project, but this increased to 22.74 per cent after the withdrawal of BG from the project.
The statement added, “The OKLNG Project Company was formed in 2007 by NNPC, BG, Chevron and Shell. BG and Shell withdrew from the project in June 2012 and July 2013 respectively. NNPC was duly informed of Chevron’s decision to withdraw and the divestment process is being managed in accordance with the provisions of the Shareholders’ Agreement governing the project.”
The LNG project
The Olokola LNG project was originally designed to consist of a marine berth for offloading LNG, along with four LNG trains each with a 5.5 Million Tonnes Per Annum (MTPA) capacity.
The first phase of the construction was designed to complete two of the trains, and the second expected to complete the other two — resulting in a 22 mtpa capacity.
The OKLNG project was initiated in 2005, with the Nigerian National Petroleum  Corporation, NNPC, as the major shareholders, with 46.75 per cent stake, BG — 14.25 per cent, Chevron — 19.5 per cent and Shell — 19.5 per cent.
BG pulled out from the project in 2009, following which Chevron increased its stake to 22.74 per cent.
The Memorandum or Understanding, MoU and shareholders’ agreement for the company were signed by parties in 2005 and 2007 respectively, Final Investment Decision was billed for 2007, production and first shipment of LNG from OKLNG was scheduled to commence in 2009, while phase 2 of the project was scheduled to conclude in 2010.
A source at OKLNG said the project, which is the most cost-effective LNG project in Nigeria, if allowed to come on stream, would have served as a major contributor to Nigeria’s economy development.
According to the source, a number of projects already undertaken at the site, risk being abandoned, such as the pioneer camp among others.
The source said, “The project was going ahead of schedule, all of a sudden, funding ceased.”
The source noted that the plan of the project was for gas producers/owners to send natural gas to the facility where it would be converted to LNG for a fee and pumped into owner ships for sale.
The source said the frustration and eventual pulling out of the oil majors from the project stems from the fact that many years after the memorandum of understanding (MoU) was signed, nothing concrete has been recorded.
“Presently, all the expatriates have left; the only people remaining are NNPC’s staff on secondment to the company and a few contract staff,” the source said.
The Olokola LNG project was initiated in 2005, with the Nigerian National Petroleum Corporation, NNPC, as the major shareholder, with 46.75 per cent stake, while BG Group, which had earlier withdrawn, has 14.25 per cent.
The source said the project, which is the most cost-effective LNG project in Nigeria, if allowed to come on stream, would have served as a major contributor to Nigeria’s economy development.
According to the source, a number of projects already undertaken at the site, risk being abandoned, such as the pioneer camp among others.
The source said, “The project was going ahead of schedule, all of a sudden, funding ceased.”
The Olokola Liquefied Natural Gas project is located between Ogun and Ondo States.  The project was designed to develop an LNG and Natural Gas Liquids facility in the Olokola area of Ogun state. The launch project was 2 X 6.3 million tonnes per year of LNG and ultimate capacity is up to 35 million tonnes per year. LPG production was projected at 30,000 barrels per day, while up to 15,000 barrels per day of condensate was projected to be produced.
The OKLNG project has among its benefits; capacity building in local community for ongoing business relationship with OKLNG; generate about two million tonnes per annum of Liquefied Petroleum Gas, LPG, close to the Lagos market, minimize NNPC funding requirements and improve Nigeria’s global LNG position and revenue from gas exports, among others.
Controversies
The OKLNG has been mired in controversies since the project was initiated under former President Olusegun Obasanjo’s regime. Niger Delta militants, under the aegis of Joint Revolutionary Council, had in 2006, threatened to sabotage the OKLNG, if its FID was taken ahead of the Brass LNG project. The Joint Revolutionary Council was made up of the Dokubo Asari-led Niger Delta Peoples Volunteer Force (NDPVF), Movement for the Emancipation of the Niger Delta (MEND), and the Martyrs Brigade.
The groups had called for the cancellation of the OKLNG project and the termination of the MoU, or face the “fiercest showdown” yet by their forces. The group issued threats at the foreign oil companies involved in the project, Chevron and Shell, as well as Nigeria’s state-owned firm NNPC. The group also said that it would punish Nigerian’s who “collaborate” on the project.
The militants said that they would stop at nothing to make sure the project fails.
They said, “Let us state in very clear terms, that we will destroy this project. We will sabotage the pipelines. We will ambush and attack its workers. We will take hostages. We will sabotage the project’s logistics and vandalizes every facility we set our eyes on.
In a statement signed by Cynthia Whyte, the Group said, “We will like to state in very clear terms that Shell and Chevron will not go unpunished. For more than 40 years, our people have been subject to the worst levels of environmental degradation and despoliation. We have borne acid rains and have stomached putrid water.
Farmlands have been destroyed. Seas have been polluted. Vegetations have been devastated. Yet the infidel partnership of NNPC, Shell, and Chevron still seek to short change our people and deprive them of that which should be given them.
“If the LNG plant will be built in Olokola, then let them get their gas from Olokola or its environs, Any pipeline from any of our communities would be destroyed, site workers found aiding and abetting the laying of pipes will be taken hostage or taken out. Every shipment with facilities meant for Olokola project will be destroyed.”
Also, the Department of Petroleum Resources, DPR, had in 2008, questioned the siting of the project on the Free Trade Zone.
It also questioned the legality of the company, directing the promoters to incorporate the project with the Nigerian Corporate Affairs Commission, CAC, or face serious sanctions, such as denial of operating license.
Mr. Billy Agha, the then Head, Gas Department of DPR, had stated that it was not right to locate a Nigerian business such as OK LNG on a free trade zone, since such a location was initiated to woo foreign investors into the country.
According to him, the government is in a battle with the management of OK LNG over its establishment on the Free Trade Zone, adding, however, that it is 100 per cent in support of the project.
He said, “According to the Free Trade Zone Act, if you are in the zone, it means you are a foreign firm and not a Nigerian company, this is why it is compulsory for them to register with CAC and I have told them they should either comply or forget it.”
“I know the project would boost Nigeria’s LNG production but what I am saying is that they should do the right thing first and register with the CAC, but they come to me and say they have incorporated it in the free trade zone, then I told them I was sorry if you claimed to have incorporated it in the zone, therefore, you cannot register with CAC, then you will not be dealing with DPR because I will not issue you an operating license.”
In August 2006, Chevron awarded the Front End Engineering Design, FEED work to a joint venture between Foster Wheeler and National Engineering & Technical Company (NETCO) for the gas wellhead platforms and pipelines portion of Chevron’s OK Gas Supply Project. The offshore terminal will collect gas from offshore fields and transport up to 2.3billion cubic feet/day Bcf/d of natural gas to the OK LNG plant.
The first shipment of LNG from Olokola LNG was expected in 2009 (Phase 1)., while the Phase 2 was scheduled for 2010. But none of these came to pass as the FID on the project was never taken.
Oil rise to 18month high above $117
Meanwhile, oil rose more than $2 a barrel on Wednesday, with Brent pushing above $117 and the U.S. benchmark soaring to its highest in over two years, amid worries a possible military strike by Western powers against Syria could hit Middle Eastern crude supply.
The United States and its allies have told the Syrian opposition to expect military action soon against President Bashar al-Assad’s forces, which were blamed for last week’s chemical weapons attacks.
“Assuming they take action, it’s likely for the risk premium to be built in for quite a while,” Ric Spooner, chief market analyst at CMC Markets in Sydney said, referring to oil prices.
Brent had jumped to a 6-month high of $117.23 a barrel while U.S. crude hit an intraday high of $111.75 — its loftiest since May 2011.
Oil prices have gained $5-$6 so far this week on worries tensions in Syria could spill over and destabilize the Middle East, which pumps a third of the world’s oil. The risk premium could vary from $10 to $25, Spooner said, adding that if the situation worsens Brent could rise to $119-$126 while U.S. crude could move toward $114-$115.
A prolonged outage at several Libyan oilfields has also underpinned prices.
Libya’s largest western oilfields closed when an armed group shut down the pipeline linking them to ports, its deputy oil minister said on Tuesday.
Total Libyan oil output would be just under 200,000 barrels per day from pre-war levels of around 1.6 million bpd, according to a Reuters estimate, the worst disruption since the civil war in 2011.
“While the events in Syria have little impact on oil prices in isolation, the potential impacts flowing through to the rest of the region are high while sectarian violence continues in Iraq and supplies from Nigeria, Libya and Sudan continue to disappoint,” ANZ analysts said in a note.
Oil could also get another boost if the U.S. Federal Reserve decides to start paring back its bond purchases later than the anticipated September timeline.
“Another potential outcome from Syria is that if it does deteriorate, it could make the Fed less likely to act in September,” CMC’s Spooner said. “It’s another general supportive factor for commodities, including oil.”
Investors are now waiting for weekly oil inventories data from the United States later in the day for clues on demand in the world’s top consumer.
U.S. crude stocks rose last week while gasoline inventories declined and distillate stocks increased, data from industry group the American Petroleum Institute showed.

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