On Thursday, September 15, the Nigerian National Petroleum Corporation (NNPC) Limited, the Economic Community of West African States (ECOWAS) and Morocco’s National Office of Hydrocarbons and Mines (ONHYM) signed a memorandum of understanding (MoU) to kick off the construction of the Nigeria-Morocco Gas Pipeline (NMGP).
The signing took place in Rabat, Morocco, with Mallam Mele Kyari as a signee representing the NNPC, Dr. Amina Benkhadra as a signee for ONHYM and Mr. Sediko Douka, signing on behalf of ECOWAS.
The NMGP is a 5,600km gas pipeline that will travel the length of 13 African countries – Nigeria, Benin Republic, Togo, Ghana, Cote D’Ivoire, Liberia, Sierra Leone, Guinea, Guinea Bissau, Gambia, Senegal, Mauritania to Morocco.
In its statement, the NNPC said the NMGP will originate from Brass Island in Nigeria and terminate at the North of Morocco. From Morocco, the pipeline will be connected to the existing Maghreb European pipeline that originates from Algeria all the way to Spain.
Addressing the gaps in the MoU
No timeline was given for the completion of the pipeline. This is an important aspect of the agreement and not giving out that information could be interpreted wrongly by stakeholders.
A memorandum of understanding (MoU) is a document that describes a formal agreement between two or more parties. However, an MoU could be referred to as a gentleman’s agreement and not a legally binding document. So, what happens when a new government administration comes into power in Nigeria by May 2023?
Incoming administration by May 2023
In a chat with Nairametrics, natural gas analyst, Kayode Oluwadare told this reporter that the NMGP project is highly dependent on the completion of the Ajaokuta-Kaduna-Kano (AKK) pipeline, which gets its feed gas from the Escravos pipeline.
“The delays in the completion of the AKK as well as the Nigeria-Morocco pipeline is likely to transcend into the upcoming administration who will likely have its own priority projects. As far as this administration is concerned, this project is now on hold,” he says.
According to Etulan Adu, a natural gas policy expert told Nairametrics that there is a challenge in terms of political will when it comes to projects of this kind.
“We have seen deals abandoned by incoming government because of how the terms of contracts were outlined by the previous administration. It is a good deal for Nigeria and Europe too, but if final investment decision (FID) is not concluded before the exit of this administration, the project would face bottlenecks,” Adu concluded.
Is there a likelihood of abandonment?
Kayode Oluwadare says he does not think the NMGP is ever going to be completed. He cited regional insecurity as one of the reasons for his gloomy prediction.
“Regional insecurity will increase the risk profile of the project and that would dampen investors’ confidence. Also, constructing a pipeline across almost half the length of Africa to serve the European gas market through Morocco or Algeria does not make a business sense.
“This is because Europe cannot commit to long-term, take-or-pay contracts. I would rather the country looks more in the direction of greenfield and brownfield LNG projects that will primarily aim to serve the more reliable Asian gas market,” says Oluwadare.
For Etulan Adu, the demand and availability of finance across the countries highlighted will push the project forward.
“ECOWAS and the push by the King of Morocco could help actualizing this gigantic project. If the EU stands up for it, then the project would work. If major financing would come from ECOWAS and other interested parties and the FID is concluded prior to the exit of this administration then we can see the continuity of the project,” Adu said.
Déjà vu: Nigeria has signed this same contract twice – In 2016 and in 2018
- In December 2016 and in June 2018, Nigeria and Morocco signed a Memorandum of Understanding on the same Nigeria-Morocco Gas Pipeline. Nothing happened after that. What is different this time?
- Etulan Adu says the interest from Europe and the current drive for alternative gas supplies globally to tackle the energy crisis have made all the difference.
- “However, most analysts I had discussions with prefer investments in LNG facilities rather than this pipeline, because of the hostilities in countries along the way. Europe’s Energy security is key here in terms of this project. Qatar has mentioned that it can’t meet up with Europe’s natural gas demand if Russia is taken out of the market, so that is a major difference between then and now,” Adu says.
- Kayode Oluwadare says Morocco depends on Algeria, Libya and Egypt for gas and they have always seen sub-Saharan gas supplies in exchange for proximity to the European gas market as their most realistic chance of being a liquefied natural gas player.
- “This deal would favour Morocco more. Also, the ongoing supply disruptions in Europe and the resulting high prices have created a business case for the project. But I think this window of opportunity is narrow and won’t last long enough to warrant that sort of high-capital project,” Oluwadare told Nairametrics.