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Business News of Friday, 16 September 2022

Source: nairametrics.com

For the third time, Nigeria signs cross-border pipeline MoU with Morocco

The photo used to illustrate the story The photo used to illustrate the story

On Thursday, September 15, the Nigerian National Petroleum Corporation (NNPC) Limited, the Economic Community of West African States (ECOWAS) and Morocco’s National Office of Hydrocarbons and Mines (ONHYM) signed a memorandum of understanding (MoU) to kick off the construction of the Nigeria-Morocco Gas Pipeline (NMGP).

The signing took place in Rabat, Morocco, with Mallam Mele Kyari as a signee representing the NNPC, Dr. Amina Benkhadra as a signee for ONHYM and Mr. Sediko Douka, signing on behalf of ECOWAS.

The NMGP is a 5,600km gas pipeline that will travel the length of 13 African countries – Nigeria, Benin Republic, Togo, Ghana, Cote D’Ivoire, Liberia, Sierra Leone, Guinea, Guinea Bissau, Gambia, Senegal, Mauritania to Morocco.

In its statement, the NNPC said the NMGP will originate from Brass Island in Nigeria and terminate at the North of Morocco. From Morocco, the pipeline will be connected to the existing Maghreb European pipeline that originates from Algeria all the way to Spain.

No timeline was given for the completion of the pipeline. This is an important aspect of the agreement and not giving out that information could be interpreted wrongly by stakeholders.

A memorandum of understanding (MoU) is a document that describes a formal agreement between two or more parties. However, an MoU could be referred to as a gentleman’s agreement and not a legally binding document. So, what happens when a new government administration comes into power in Nigeria by May 2023?

In a chat with Nairametrics, natural gas analyst, Kayode Oluwadare told this reporter that the NMGP project is highly dependent on the completion of the Ajaokuta-Kaduna-Kano (AKK) pipeline, which gets its feed gas from the Escravos pipeline.

“The delays in the completion of the AKK as well as the Nigeria-Morocco pipeline is likely to transcend into the upcoming administration who will likely have its own priority projects. As far as this administration is concerned, this project is now on hold,” he says.

According to Etulan Adu, a natural gas policy expert told Nairametrics that there is a challenge in terms of political will when it comes to projects of this kind.

“We have seen deals abandoned by incoming government because of how the terms of contracts were outlined by the previous administration. It is a good deal for Nigeria and Europe too, but if final investment decision (FID) is not concluded before the exit of this administration, the project would face bottlenecks,” Adu concluded.

Kayode Oluwadare says he does not think the NMGP is ever going to be completed. He cited regional insecurity as one of the reasons for his gloomy prediction.

“Regional insecurity will increase the risk profile of the project and that would dampen investors’ confidence. Also, constructing a pipeline across almost half the length of Africa to serve the European gas market through Morocco or Algeria does not make a business sense.

“This is because Europe cannot commit to long-term, take-or-pay contracts. I would rather the country looks more in the direction of greenfield and brownfield LNG projects that will primarily aim to serve the more reliable Asian gas market,” says Oluwadare.

For Etulan Adu, the demand and availability of finance across the countries highlighted will push the project forward.

“ECOWAS and the push by the King of Morocco could help actualizing this gigantic project. If the EU stands up for it, then the project would work. If major financing would come from ECOWAS and other interested parties and the FID is concluded prior to the exit of this administration then we can see the continuity of the project,” Adu said.