Lloyds List: Majors link in Nigeria LNG project: Shell, BG and Texaco involved in multi-million-dollar plan to create one of the world's biggest producers, writes Tony Gray (ShellNews.net) 14 April 05

SHELL is joining forces with BG Group and ChevronTexaco in a giant multi-billion-dollar liquefied natural gas project in Nigeria.

Along with the Nigerian National Petroleum Corp, the three oil and gas majors have signed a memorandum of understanding on the Olokola Liquefied Natural Gas, or OK LNG, project.

The project will produce 20m tonnes a year from four LNG trains, becoming one of the world's largest producers.

A Shell spokesman said a final investment decision was expected to be taken next year.

OK LNG is the outcome of two separate studies, one conducted by Chevron and BG and the other by Shell.

Both focused on the Olokola area, which has natural deepwater access, with target shipment dates of 2009 and 2010, respectively.

In view of the similarity of timing and location, NNPC saw an opportunity to achieve significant synergy and cost savings by merging the two projects.

The integrated project will involve joint ownership of all facilities, except for the individual trains.

It will also entail a single operator, and a common engineering, procurement and construction contracting strategy.

Two of the LNG trains will be owned by Shell and NNPC and two by BG, ChevronTexaco and NNPC.

The individual train owners will buy their own feed gas and sell their own LNG.

At this stage, ownership of the many LNG carriers that will be required to transport the gas has yet to be decided, the Shell spokesman said.

But, to put OK LNG's shipping needs in perspective, Nigeria LNG will employ 18 vessels when its fifth liquefaction train lifts production to 17m tonnes a year.

Although not the single largest LNG project Nigeria LNG, for example, will be producing 22m tonnes a year when its sixth train comes on stream in 2007 OK LNG is unusual, if not unique, in starting life with four trains.

Most projects begin with one or two trains and then add others incrementally.

The project's corporate governance will be based on a multi-company structure.

There will be a common facilities company to be known as OKLNG, as well as an operating company, OKLNG OpCo.

In addition there will be companies for each of the liquefaction train joint ventures.

Shell said OK LNG was a 'building block in our Atlantic basin aspirations and strategy of extending our global leadership in LNG'.

The OK LNG project will also be another important boost to Nigeria's ambition to challenge Qatar for the role of the world's leading LNG producer in the next five or six years.

Apart from Nigeria LNG, in which Shell is a 25.6% shareholder, other projects include in the West African nation include Brass LNG, which plans to construct a new export facility in Nigeria's central Niger Delta.

This project is part of a large strategic initiative to commercialise Nigeria's natural gas resource base and eliminate gas flaring.

Nigeria has about 187trn cu ft of gas reserves.

The country has been keen to promote LNG projects as part of a strategy to end gas flaring by 2008.

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