Dangote’s gas project faces risks from unstable power sector, others

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Dangote Industries’ proposed 1,100km deepsea pipeline from the Niger Delta to Lagos, Nigeria’s commercial nerve centre, is the most commercially uncertain of the projects under development at the company’s Lekki Free Zone complex, according to Africa Oil + Gas Report.

This is largely due to the fact that the domestic gas market, which the pipeline is expected to serve, is severely challenged. The East-West Offshore Gas Gathering System (EWOGGS), consists of two 38 inch, 550km pipelines, each with a capacity of 1.5 Bcf/day. To begin with, some of the projects that are widely expected to be supplied gas by the EWOGGS may in reality be supplied by other parties. For instance the 560MW Qua Iboe Independent Power Plant is expected to be supplied gas by ExxonMobil.

There may also be some issues regarding the acreages from which the EWOGGS is expected to extract natural gas, as the only gas fields that are ready to come on stream are those in ExxonMobil’s OMLs 70 and 138 and Shell’s OML 77 out of about 7 blocs. But the biggest challenge is the absorptive capacity of the market itself due to the unstable nature of the power sector which currently faces issues of illiquidity, dilapidated transmission and distribution infrastructure and failure of gas payment guarantee structures.