Nigeria’s poor economic outlook is threatening the continuing existence of one of its multi-billion-dollar investment projects in the sub-region, the West African Gas Pipeline Company (WAPCo). The company is currently facing serious problems due to low gas volumes and huge financial indebtedness totaling $179m.
Its financial problem is largely due to a huge backlog of funds due to it from shareholders. Nigeria owns 24.5 percent stake in the firm through the Nigerian National Petroleum Corporation (NNPC), while Chevron West African Gas Pipeline Ltd controls 36.9 percent. WAPCo is a joint venture between public and private sector companies from Nigeria, Benin Republic, Togo and Ghana.
At a meeting of the Committee of Ministers of the company held in Abuja last week, the Managing Director of WAPCo, Mr. Walt Perez, told member states that the firm has been floundering on account of reduced revenue flows, poor gas transmission and other operational problems. The situation, he explained, has adversely affected the company’s ability to undertake critical maintenance schedules and meet gas deliveries to its core customers in the sub-region, in particular, Ghana’s Volta River Authority.
The mandate of WAPCo includes the transportation of natural gas from Nigeria to customers in Benin Republic, Togo and Ghana in a safe, responsible and reliable manner, and at competitive prices with other fuel alternatives. Mr. Perez disclosed that its problem of low gas volumes recently worsened with the declaration of force majeure by some production companies in the Niger Delta, which adversely affected its “business planning and immediate prospect of growth in the foreseeable future.”
It is not surprising that the huge debt owed this company is threatening its cash flow. The problem is also a threat to the stakes of member countries, especially Nigeria. We urge the shareholders to quickly reverse the declining financial fortunes of WAPCo to create an enabling environment for it to be a regional tool for energy integration as envisioned by its founders. The company should not be allowed to fold up. There is also an urgent need to address the other challenges facing the project such as inadequate supply of gas.
We are, however, happy about the assurance of the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, that Nigeria will remain committed to the success of the project. It is important for all member states to cooperate on all fronts, including the infrastructural development of the sub-region. This will deepen the integration of West Africa as envisioned by the founding fathers of the Economic Community of West African States (ECOWAS).
Nigeria has a great deal to gain in the WAPCo project. Its success will boost Nigeria’s external gas exports, especially in view of the current decline in oil prices in the international market. Nigeria’s external trade profile has been on a downward slide, according to the Central Bank of Nigeria (CBN) Economic Report.
The report released in 2015 showed that Nigeria’s crude oil and gas exports components of our external trade declined from $18.96bn and $20.85bn in the fourth quarter of 2014 and the first quarter of 2015 respectively to $13.30bn. This accounted for 92.9 percent of aggregate exports for the period under review. The figure for the first quarter of this year may have worsened.
A recent report by the Department of Petroleum Resources (DPR) corroborates the challenges facing WAPCo. It revealed that natural gas production in Nigeria is hampered by lack of infrastructure to convert and monetize the product, in addition to the restiveness in the Niger Delta region. Nigeria currently flares over 428 billion cubic feet of associated gas.
Altogether, Nigeria’s external trade profile will likely worsen if this project collapses. Nigeria cannot afford to risk its investments in commercially viable ventures such as this. Therefore, everything that is necessary should be done to salvage the company. Before now, the company was capable of transporting volumes of natural gas up to contractual levels but its supply of gas is now well below its contractual obligations.
In addition to the gas pipeline project, we urge the Federal Government to intensify its efforts and complete the Seventh Train of the Nigeria Liquefied Natural Gas (NLNG). This project has the potential to bring in over $8bn in Foreign Direct Investment, as well as reduce gas flaring. In 2014, the Nigerian economy reportedly lost about 296 standard cubic feet of natural gas to flaring of gas by oil majors within a nine-month period, yet inadequate supply of gas is listed as one of the challenges facing WAPCo.
We urge the management of WAPCo to address its challenges and maintain a strong focus on the security of its pipelines across the sub-region.