SHELL (SPDC) DELAYS GAS PROJECTS OVER FUNDING CONSTRAINTS – THE NEED FOR THE FEDERAL GOVERNMENT TO PLAY ITS FUNDING PART IN THE JV

By Zik Gbemre

With recent reports that the Shell Petroleum Development Company (SPDC) may be groaning under insufficient fund to float some of its gas projects that are positioned to further reduce gas flaring in the county due to lack of adequate Joint Venture (JV) funding, we consider it necessary to urge the Federal Government of Nigeria that has 55% stake operated by the Nigerian National Petroleum Corporation (NNPC) and its Subsidiaries, in the nation’s oil and gas JV to adequately play its funding part so as to support the gas projects intended by Shell (SPDC) to reduce gas flaring.

The Oil multinational, in its 2016 Facts Sheets, said “the planned start-up dates for two major gas gathering projects – Forcados Yokri Integrated Project (FYIP) and Southern Swamp Associated Gas Gathering (SSAG) Solutions have been delayed due to a lack of adequate joint-venture funding”. Despite these challenges, Shell (SPDC) said gas flare reduction from its operations continued in 2015 with a 28 per cent decrease compared to 2014 and a flaring intensity reduction of 15 per cent from the previous year.

The report further noted that: “Progress was made on several gas gathering projects, which are now at advanced stages of completion. For example, we have installed a gas-gathering plant at the Olama Station that is ready for final commissioning. The Adibawa, Escravos and Otumara Gas Gathering Projects are also at advanced stages of completion,” it stated. Managing Director Shell (SPDC) and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, said: “Shell Companies in Nigeria are also actively involved in the development and utilization of natural gas, pioneering its production and delivery to domestic consumers and export markets.

He said: “Although, the SPDC JV’s market share of domestic gas has reduced through a series of divestments since 2010, which enables Nigerian companies to play a more strategic role, Shell companies still remain a crucial part of the national gas energy mix. For example, our Afam VI Power Plant alone contributed 14 per cent of Nigeria’s grid-connected electricity in 2015, consolidating its achievements since first power in August 2008. Another entity, Shell Nigeria Gas (SNG), supplies natural gas to 87 industrial customers.”

The truth is that the Nigerian Federal Government cannot be talking about improving the nation’s power supply through gas powered stations when gas projects that would ensure this happens, are being stalled by IOCs due to funding constraints by JV partners, which the Federal Government’s NNPC handles a major stake of. It will also be foolhardy for the NNPC and the Federal Government to address the issue of gas flaring and expect an improvement in the nation’s electricity supply when some identified all-important gas projects are left stalled or abandoned due to funding constraints. It simply does not make sense. Just last month, it was reported that the Group General Manager of the National Petroleum Investment Management Services (NAPIMS), Mr. Dafe Sejebor, disclosed that the NNPC subsidiary was owing IOCs involved in JP production about $7 billion. This is just an example of the failure of the Federal Government and the NNPC/Subsidiaries not fu lfilling its JV funding obligations as the major stakeholder.

If it has been reported that Nigeria lost about $1billion as Oil Companies operating in the Country flared a large proportion of gas produced from January to September 2014 according to data from the NNPC, it is therefore expected that the Nigerian Federal Government should do whatever that needs to be done to support its JV partners like Shell (SPDC) in trying to address the issue of gas flares. The said report from the NNPC data noted that about 295 billion standard cubic feet (scf) of natural gas was flared in the nine-months period stated. With a proven gas res