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Nigeria-Europe gas pipeline via Algeria: A mega-project in search of profitability

Ziri

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Nigeria-Europe gas pipeline via Algeria: A mega-project in search of profitability

By Reda.C Posted on Sep 16, 2021 3:33 PM

Gazoduc  Nigéria-Europe via l’Algérie : Un mega-projet en quête de rentabilité

The first phase of the process of building the Nigeria-Europe gas pipeline via Algeria has just been completed according to Mr. Toufik Hakkar, Chairman and CEO of Sonatrach Oil Group. But this process is still on paper and no groundwork has been given to start it up, as profitability depends on several parameters at their head.

"The feasibility study of the Trans-Saharan Gas Pipeline (TSGP) project, connecting Nigeria to Europe through Algeria and Niger, has been completed and submitted to companies from the two African countries" recently declared the head of the national oil company. But all the same, the feasibility of this project remains to be assessed, and is also conditioned by the growth in future world demand for natural gas and prices.

The TSGP (Nigeria-Europe Gas Pipeline via Algeria) still remains a gigantic project. It was in 2006 that it was proposed within the framework of NEPAD, an African Union initiative aimed at launching major structural economic projects on the black continent and above all establishing economic integration on the basis of the principle of good governance that would ultimately promote the increase in foreign direct investment (FDI) in the continent. And it was not until 2009 that an agreement was reached in Abuja for its realization during the time of the former Minister of Energy and Mines, Chakib Khelil, who also served as CEO of Sonatrach.

The TSGP, which is to link Nigeria's natural gas fields to the Hassi R’Mel complex, via Niger, remains a pharaonic project of 4,128 km. Its length would require the mobilization of significant financial and human resources.
For example, the last Russian gas pipeline, the Nord Stream 2, 1,230 km long, cost 10.62 billion dollars. Being longer than the Russian gas pipeline, the TSGP will require, at the very least, the mobilization of 20 to 25 billion dollars for its realization, according to several experts.



For this investment to be profitable in the long term, ie over at least 25 years, this gas pipeline must place 30 billion m3 of natural gas annually on the European market. And it is not easy to mobilize this gigantic amount from the big international banks if there is not a firm and large demand for natural gas in Europe and especially at a price that would allow a return on investment.

Nigeria has the largest natural gas reserves in Africa with 5,200 billion m3. Being far from the European market this country, considered as the first African economy has invested in recent years in the liquefaction of natural gas. In 2020, Nigeria's LNG capacity was 22 million tonnes, equivalent to 30 billion m3 of natural gas.

In proportion to the country's large reserves, exports of natural gas in liquefied form remain, however, low. And to increase its market share internationally, Nigeria and like Algeria and Russia, rely on gas pipeline.

Aware of Nigeria's interest in increasing its natural gas exports, Morocco proposed an alternative project in 2016 in the hope of torpedoing the TSGP and reaping the dividends in a poker game.
This project, perceived as a swagger from Rabat by several experts, consists of building a gas pipeline linking Nigeria to Gibraltar over a distance of 5,660 km, ie 1,400 km more than the TSGP. This submarine pipeline is to cross the coasts of eleven West African countries. It is difficult to estimate the cost of such a project when you consider that the Russian submarine pipeline, the Nord Stream 2, which was only 1,230 km long, had cost more than 10 billion dollars. It is only the Makhzen who believe in the feasibility of such a gas pipeline, the profitability of which would be impossible to achieve.

Nigeria and Algeria pay particular attention to the Trans-Saharan Gas Pipeline (TSGP) project. The completion of this tube would allow Nigeria, Africa's most populous country, to export large quantities of natural gas to the European market. The future gas pipeline will also have socio-economic repercussions on Niger and the other countries of the Sahel, destabilized by insecurity and chronic underdevelopment. The outlook for natural gas markets around the world is very optimistic.

The fight against global warming involves a significant reduction in the use of coal and fuel oil in electricity generation. A reduction that paves the way for less polluting natural gas. For their part, European countries must overcome the dependence of one or two suppliers in their natural gas supply. Providing financial support and paying an acceptable price for natural gas would support the realization of the future TSGP. Something that would allow the European Union to diversify its natural gas supplies in the future.
 

Ziri

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Dec 22, 2020
435
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Country
Algeria
Location
United States

Nigeria-Europe gas pipeline via Algeria: A mega-project in search of profitability

By Reda.C Posted on Sep 16, 2021 3:33 PM

Gazoduc  Nigéria-Europe via l’Algérie : Un mega-projet en quête de rentabilité

The first phase of the process of building the Nigeria-Europe gas pipeline via Algeria has just been completed according to Mr. Toufik Hakkar, Chairman and CEO of Sonatrach Oil Group. But this process is still on paper and no groundwork has been given to start it up, as profitability depends on several parameters at their head.

"The feasibility study of the Trans-Saharan Gas Pipeline (TSGP) project, connecting Nigeria to Europe through Algeria and Niger, has been completed and submitted to companies from the two African countries" recently declared the head of the national oil company. But all the same, the feasibility of this project remains to be assessed, and is also conditioned by the growth in future world demand for natural gas and prices.

The TSGP (Nigeria-Europe Gas Pipeline via Algeria) still remains a gigantic project. It was in 2006 that it was proposed within the framework of NEPAD, an African Union initiative aimed at launching major structural economic projects on the black continent and above all establishing economic integration on the basis of the principle of good governance that would ultimately promote the increase in foreign direct investment (FDI) in the continent. And it was not until 2009 that an agreement was reached in Abuja for its realization during the time of the former Minister of Energy and Mines, Chakib Khelil, who also served as CEO of Sonatrach.

The TSGP, which is to link Nigeria's natural gas fields to the Hassi R’Mel complex, via Niger, remains a pharaonic project of 4,128 km. Its length would require the mobilization of significant financial and human resources.
For example, the last Russian gas pipeline, the Nord Stream 2, 1,230 km long, cost 10.62 billion dollars. Being longer than the Russian gas pipeline, the TSGP will require, at the very least, the mobilization of 20 to 25 billion dollars for its realization, according to several experts.



For this investment to be profitable in the long term, ie over at least 25 years, this gas pipeline must place 30 billion m3 of natural gas annually on the European market. And it is not easy to mobilize this gigantic amount from the big international banks if there is not a firm and large demand for natural gas in Europe and especially at a price that would allow a return on investment.

Nigeria has the largest natural gas reserves in Africa with 5,200 billion m3. Being far from the European market this country, considered as the first African economy has invested in recent years in the liquefaction of natural gas. In 2020, Nigeria's LNG capacity was 22 million tonnes, equivalent to 30 billion m3 of natural gas.

In proportion to the country's large reserves, exports of natural gas in liquefied form remain, however, low. And to increase its market share internationally, Nigeria and like Algeria and Russia, rely on gas pipeline.

Aware of Nigeria's interest in increasing its natural gas exports, Morocco proposed an alternative project in 2016 in the hope of torpedoing the TSGP and reaping the dividends in a poker game.
This project, perceived as a swagger from Rabat by several experts, consists of building a gas pipeline linking Nigeria to Gibraltar over a distance of 5,660 km, ie 1,400 km more than the TSGP. This submarine pipeline is to cross the coasts of eleven West African countries. It is difficult to estimate the cost of such a project when you consider that the Russian submarine pipeline, the Nord Stream 2, which was only 1,230 km long, had cost more than 10 billion dollars. It is only the Makhzen who believe in the feasibility of such a gas pipeline, the profitability of which would be impossible to achieve.

Nigeria and Algeria pay particular attention to the Trans-Saharan Gas Pipeline (TSGP) project. The completion of this tube would allow Nigeria, Africa's most populous country, to export large quantities of natural gas to the European market. The future gas pipeline will also have socio-economic repercussions on Niger and the other countries of the Sahel, destabilized by insecurity and chronic underdevelopment. The outlook for natural gas markets around the world is very optimistic.

The fight against global warming involves a significant reduction in the use of coal and fuel oil in electricity generation. A reduction that paves the way for less polluting natural gas. For their part, European countries must overcome the dependence of one or two suppliers in their natural gas supply. Providing financial support and paying an acceptable price for natural gas would support the realization of the future TSGP. Something that would allow the European Union to diversify its natural gas supplies in the future.
Trans-Saharan gas pipeline

The revelations of the CEO of sonatrach (Algerian Oil & Gas Company)

Algerian diplomacy has made it one of its priorities. Ramtane Lamamra discussed the subject with his Nigerien counterpart.

A project that will make people talk in MoroccoA project that will make people talk in Morocco
Out of the box thanks to political and economic news that has made it a strategic project for the whole Afro-Mediterranean, the trans-Saharan gas pipeline project, connecting Nigeria to Europe through Algeria and Niger, has gained in readability and becomes achievable. This prospect is all the more realistic as the feasibility study is well and truly completed. The CEO of Sonatrach, Toufik Hakkar, who made this revelation yesterday at the public radio channel 1 forum, indicated that the said study was submitted to companies in the two African countries, Algeria and Nigeria. The experts' work concerned regional demand for gas, which has risen substantially, but also in relation to the price of gas. Hakkar will point out in his remarks that the cost of the caloric unit has gone from 10 to just one dollar in 10 years. For the CEO of Sonatrach, the new tariffs make the trans-Saharan gas pipeline project feasible, in that it may "influence the decision-making to launch such an investment". An expertise that encourages the launch of a market-oriented study, in order to "determine the demand for gas before deciding on the advisability of engaging in this project". This commercial approach, however necessary it may be, remains somewhat formal, given the strategic dimension of the project, which is supposed to generate considerable subsidies to the countries concerned by the route, in addition to long-term economic and social stabilization. It should be noted that the price fluctuation could be supported by mechanisms to be developed in the future, especially knowing that the technical study of the project is "tied up and the route of the gas pipeline defined", assures the CEO of Sonatrach, who carried out the feasibility study. Algiers is awaiting ratification by Abuja of the intergovernmental agreement signed in 2009, making the project officially feasible. As part of the NEPAD program, the trans-Saharan gas pipeline has been the subject of an attempted diversion of the project by Morocco. Algerian diplomacy, which has come back in force in recent months, has made it one of its priorities. Ramtane Lamamra raised the subject with his Nigerien counterpart and revealed an upcoming visit of the Minister of Energy and Mines to Niamey to discuss the details. It therefore seems that Morocco is totally disqualified.

The CEO of Sonatrach mentioned other major projects. That of the integrated phosphate of Bled El Hadba (Tébessa) is one of them. With an investment of 6 billion dollars, it should be launched at the beginning of the year 2022. The choice of the partner, who will contribute to the financing of this immense project which is spread over three wilayas, will take place towards the end of the year. 'current year.

In the field of processing industries, the Hassi Messaoud station, with a capacity of 5 million tonnes "will be launched during the last quarter of the current year", informs the CEO. This contribution will cover demand. local in essence. The other mature project is that of the polypropylene production unit in Turkey, in which Sonatrach has a 34% stake. The name of the partner who will be responsible for carrying it out "should be announced in the coming days," said Toufik Hakkar.


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