Nigeria's Senate To Probe Setback to LNG Investor

Nigeria's Senate Joint Committee on Gas, Power, Steel and Metallurgy is investigating whether an LNG investor has been unfairly disadvantaged by the government over a power plant supply contract.  

Senate officials say its ongoing probe is as a result of the Federal Ministry of Power reneging on a deal made with Greenville LNG, regarding the supply of LNG to the Kaduna Power Plant. Greenville made substantial investments on the back of the deal.

Results of the investigation may be revealed next week, and the senate has already warned that it may affect the power plant's scheduled inauguration. 

Instead of sourcing from Greenville, the ministry decided to make use of diesel, despite earlier decisions by both parties that LNG is most competitive and the company's pledge to build storage facilities.

The diesel-run plant will cost the country about naira 46mn ($127,000) per day to run; diesel-fired electricity costs N79 (21.7 US cents) per kilowatt-hour to generate, whereas gas-fired electricity costs N37 (10.2 US cents) per kWh. The chairman of the Senate's gas committee, Albert Bassey, already told representatives of the power ministry in November that the Senate cannot approve the inauguration of the Kaduna Power Plant if it runs on diesel, both for cost and environmental reasons.

In August, NGW reported that Greenville LNG had signed a memorandum of understanding (MoU) with the Nigerian government to supply LNG across the country; a representative made it clear then that by October 2017, operations would begin in earnest. However, the about-turn by the power ministry may put a stop to that, as a visit to the company's Abuja office revealed that full operations are still on hold.

Addressing the committee's focus for the investigation, a consultant to the Nigerian Senate, Sowumi Olabode, told NGW that the Senate is keen to find out why the power ministry is opting to go for diesel which is much more expensive: "The investigation is all about understanding the rationale for such a decision and the thinking of the ministry of power."

Greenville LNG chairman Eddy Van Den Broeke has said that Greenville had imported 250 trucks to transport LNG to the power plant before the change of parameters by the ministry. "It will cost $200mn more to use diesel because there is no other fuel available that can replace LNG and Greenville. I would want the ministry to give me one cent of response on this change of theory," he said.