Uche Cecil Izuora
The UTM Offshore Floating Liquified Natural Gas (LNG) has been designed to take gas flared by oil major ExxonMobil and convert it into economic use.
Nigeria has more than 209 trillion cubic feet of gas reserves, but loses over $1 billion in annual revenue due to gas flaring, government estimate shows.
The 2.8 million tons per annum (MTPA) floating vessel owned by UTM will tap flared gas from ExxonMobil’s Oil Mining Lease 104 (Yoho field) in offshore Akwa Ibom, in southern Nigeria.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), on Friday granted UTM Offshore Limited the first license to operate the facility to tap flared gas from an ExxonMobil oil field in the Niger Delta.
Such plants are springing up on the continent as Africa seeks to tap its gas resources.
Farouk Ahmed, head of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said the plant’s capacity had been upgraded from 1.2 MTPA to 2.8 MTPA due to growing LNG demand.
The engineering work will be completed in 2028, and production will roll out in the first quarter of 2029, UTM Offshore CEO Julius Rone said
“This is just the engineering phase, and there are other variables. So it is not possible to give you the cost, but it is a multibillion dollar project.”
The facility will deliver 500,000 metric tons of liquefied petroleum gas for domestic market, while the LNG will be exported, he noted.
Afreximbank provided $2.1 billion in financing the first phase of construction and committed for $3 billion for the second phase.
“This marks a significant milestone and aligns with the gas expansion ambitions of the government,” Ahmed said.
Nigeria, is trying to pivot away from its reliance on oil by promoting investment in the country’s largely unexploited 200 trillion cubic feet of proven gas reserves. Most of the nation’s gas output is currently either flared or re-injected into wells.
UTM was initially granted a license to build a 1.2 million tons per annum facility in 2019, but it was upgraded to 2.8 million tons “because of increased LNG demand in the market,” Ahmed said.
The plant, located in offshore Akwa Ibom state in the oil-rich Niger Delta, is expected to be commissioned in 2028, with first-gas a year later. It will produce LNG, petroleum gas and condensate.
The company had signed a Memorandum of Understanding (MoU), with the African Export-Import Bank in 2021 to raise as much as $2 billion for the project, and the bank has received a first-level approval to invest $350 million in the project, said UTM Chief Executive Officer Julius Rone. A final investment decision is expected in the last quarter of the year, he said.
The company had also concluded contracts with Japan’s JGC Corp. and Houston-based KBR Inc. to design the project, with Vitol Group having an off-take agreement for LNG produced at the facility. Last year, the company signed a deal that saw state-owned Nigerian National Petroleum Co. Ltd. take a 20% stake in the project.
UTM had proposed getting feedstock for the project at an offshore oil field that’s operated by Exxon Mobil Corp. in partnership with the Nigerian National Petroleum Company Limited (NNPCL) but that asset is in the process of being sold to Seplat, which has ambitions of its own to develop its vast gas reserves. Rone said talks are progressing with to participate in the midstream arm of the project.
Seplat didn’t immediately respond to request for comment.
“It is a stranded gas that can only be monetized through a floating LNG technology. It will only add to Seplat’s balance sheet to say they have a ready-made buyer for a gas they have not developed,” he said.
