Loan to be repaid from pipeline transmission tariff, sovereign guarantee

Set August 2020 for financial closure

By Michael Eboh

The Federal Government, Tuesday, disclosed that funding for the $2.6 billion Ajaokuta-Kaduna-Kano (AKK) gas pipeline would be provided by the Bank of China and SINOSURE, while two Chinese firms would be working along with their Nigerian partners in the execution of the project.

Speaking at the virtual flag-off of the construction of the AKK Gas pipeline at the Ajaokuta and Kaduna campsites simultaneously, President Muhammadu Buhari commended the Government of the People’s Republic of China; the financiers, the Bank of China and SINOSURE; and the two Engineering Procurement and Construction (EPC) Contractors for their support to delivering the important project.

The EPC contractors are Brentex/China Petroleum Pipeline Bureau-CPP Consortia and Oilserve/China First Highway Engineering Company-CFHEC Consortia.

Governors Yahaya Bello of Kogi State and Nasir El-Rufai of Kaduna, physically flagged off the commencement of works at the Ajaokuta and Rigachikun sites respectively, while the president participated remotely via video-conference from the Council Chamber in Abuja.

ALSO READ: $2.8b AKK pipeline project: Buhari strikes again by Femi Adesina

Listing the benefits of the project, billed to be completed in two years, Buhari said the AKK gas pipeline would provide gas for generation of power and for gas-based industries which would facilitate the development of new industries.

He added that it would also ensure the revival of moribund industries along with transit towns in Kogi State, Abuja (FCT), Niger State, Kaduna State and Kano State, adding that the cascading effect and impact of the AKK, when operational, would be immeasurable.

He said: “It has significant job creation potential, both direct and indirect while fostering the development and utilization of local skills and manpower, technology transfer and promotion of local manufacturing.’’
Buhari affirmed the government’s commitment to ensuring timely delivery of the landmark AKK gas pipeline project within budgetary allocation and specifications, stating that the project was very dear to the people of Nigeria and must succeed.

The President, therefore, directed the NNPC and partners to remain focused, noting that the AKK project was part of the delivery of the present administration’s Next Level Agenda for sustainable development, enhancement of economic prosperity and increase of the country’s infrastructure assets.

He said: ‘‘We promised the nation that we will expand the critical gas infrastructure in the country to promote the use of gas in the domestic market. These include the Escravos to Lagos Pipeline System – 2 (ELPS-2), Obiafu to Obrikom (OB3) pipeline and AKK.

‘‘These projects are fundamental to our desire to industrialize and energize the entrepreneurial spirit that is ever-present in our population.’’

The president appealed to Governors of Kogi, Niger, Kaduna and Kano States as well as the Minister of the Federal Capital Territory to provide the enabling environment and support for the project.

Also speaking Minister of State for Petroleum Resources, Chief Timipre Sylva, described the AKK gas pipeline project as a transformational initiative that is capable fast-tracking Nigeria’s industrial development.

He said: “The AKK is a development corridor; a backbone that has been created from the South to the North. It will take gas from the South to the very end of the north, and hopefully when we start production in the north, it would also take the gas produced in the north, to the rest of the country.

“We expect that along that corridor, all types of investments will now commence. We are expecting fertiliser projects, gas-based industries, like the petrochemicals and power plants among others. Actually, on the back of this project, there is already going to be power plants to be built in Abuja and in Kano. The project would cost about $2.8 billion and is actually funded by China as the president said.”

Speaking in the same vein, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, who confirmed the source of funding for the project, stated that all the required conditions precedent for closing the debt financing had been provided.

Kyari stated that the process of obtaining internal approvals by the lenders was in progress to enable financing close by August 2020, adding that the loan would be repaid through the pipeline transmission tariff and through the support of a sovereign guarantee.

He said, “The EPC contract for the 614 kilometres AKK gas pipeline project was awarded at a total contract sum of US$2.592 billion to Messrs. Oilserv Plc/China First Highway Engineering Company (Oilserv/CFHEC Consortium) for the first segment covering 303km and Messrs. Brentex Petroleum Services/China Petroleum Pipeline Bureau (Brentex/CPP Consortium) for the second segment covering 311km under a debt-equity financing model with loan from Bank of China and SINOSURE, to be repaid through the pipeline transmission tariff and supported by a sovereign guarantee.”

According to Kyari, as part of the agreement, NNPC was utilizing the equity contribution to commence execution of the project to recover lost time and put the project back on track.

He expressed confidence that the EPC contractors would deliver the project on time, within budget and to quality/specifications.

Upon completion, Kyari noted that the project would enable the injection of 2.2 billion standard cubic feet per day (bscf/d) of gas into the domestic market and facilitate additional power generation capacity of 3,600 megawatts (MW).

Kyari further highlighted that the AKK gas pipeline project, which is part of the Trans-Nigeria gas pipeline project, involved the establishment of a connecting gas pipeline network that would integrate the Northern region of the country with the Niger Delta, Eastern and Western regions of the country.

He said: “The realization of this project will, therefore, bring about the needed transformation in power generation and industrial growth in the Country.

“I would like to recognize and commend the collaborative efforts of all stakeholders which include the Executive Governors of Kaduna, Kano, Kogi and the Niger States, the Ministries of Petroleum Resources, F.C.T, Finance, Budget and National Planning and Foreign Affairs, the Central Bank of Nigeria, the Debt Management Office, the Infrastructure Concession Regulatory Commission, the Department of Petroleum Resources, the Nigerian Content Development and Monitoring Board, the EPC Contractors, the Project Lenders, Host Communities, Security Agencies and others too numerous to be mentioned but never the less are an integral part of the realization of this project.”

Vanguard