IHS Global Insight Perspective | |
Significance | On 3 July an IGA was signed between the governments of Nigeria, Algeria and Niger for the development of the TSGP project. |
Implications | The signing of the accord is another indication that the vast project is gathering momentum and now IOCs will be sought as partners in the project. |
Outlook | There are a number of obstacles that remain in the path of the proposed 4,128-km pipeline, most notably the security situation throughout the three countries that the pipeline would traverse. However, the IGA could signal renewed interest from the European Union (EU), which view the pipeline as a key future project to increase security of supply. |
Agreement Officially Signed
The hugely ambitious Trans Sahara Gas Pipeline (TSGP) project has taken a considerable step forward with the signing of an IGA between Nigeria, Algeria, and Niger. The accord was signed in Abuja, Nigeria on 3 July by the petroleum and energy ministers of the three countries: Rilwan Lukman of Nigeria, Chakib Khelil of Algeria, and Mohammed Abdullahi of Niger. The TSGP project is gathering momentum and Lukman said in a speech; "The signing of the agreement is a significant stride in the actualisation of a key element of our joint protocol on regional cooperation and development". The US$21-billion planned TSGP could supply up to 30 bcm/y of gas to Europe from as early as 2016, though this timeframe is optimistic. Nigeria National Petroleum Corporation (NNPC) general manager Mohammed Barkindo said that the agreement "gives this project the official stamp of approval from the three governments, directing the national oil companies of these three countries to begin in earnest the definitional phase of this project".
Enhancing Algeria
Algerian support for the TSGP has always been strong, although as a core transit country it is has focused on supporting Nigerian and IOC initiatives, rather then forming any of its own initiatives. Algeria's support has translated into action by state-owned oil and gas giant Sonatrach, which has assisted with planning and conducting studies on a possible pipeline route. The positive Algerian feelings with regard to the TSGP have two roots, the main being that it would provide an enhancement to Algeria's already strategic position as a core gas supplier to Europe. The second is the mutual benefit the project would have for Sonatrach's engineering efforts. As it develops some of its new south-central and south-western Sahara acreage it will be able to route the TSGP along the trunkline, carrying gas from the new fields northwards to the coast. This could lead to some considerable cost savings, as two pipelines can benefit from almost one set of front-end engineering and design (FEED) work along much of the TSGP's long Algerian stretch. Over the coming decades the new Timimoun, Reggane, Ahnet, In Salah, and neighbouring basins in the south-west and south-central Sahara region will grow in importance and become some of Algeria's core gas areas. Their generally higher development costs—they are not only located very far from their markets and existing logistics, but also in many cases have relatively tight reservoirs—will therefore benefit strongly from Sonatrach being able to cross-use surveys, planning and development efforts, and investments, although as things stand the all-Algerian pipeline will have a significant head-start over the TSGP.
As the end-point before the gas hits the European markets Algeria and Sonatrach will have a significant role to play—which they are well placed to do—in the marketing of the gas. Algeria will be able to strengthen all its own export ventures while offering the TSGP consortium the choice of at least two or three routes to the market. The TSGP is planned to reach either the Beni Saf port in western Algeria or the El Kala port on its eastern Mediterranean shoreline (or both), after having been connected to the inland Hassi R'Mel gas hub, allowing TSGP gas to reach either the export pipeline connecting it to Spain or Italy (or both). TSGP gas could also potentially be connected to Algerian LNG ventures, providing the consortium with at least some more potential flexibility for a part of its marketing. This is seen by Algeria as enhancing its role by adding an associated market share to its own European market share and Sonatrach is likely to make sure that it will be allowed to play a significant marketing role within the consortium.
Outlook and Implications
One of the main next steps is for the governments and the NOCS to identify the most appropriate IOCs to partner with to enable the TSGP project to be fully sanctioned. It seems almost certain that Russia's Gazprom will be involved, following Russian President Dmitry Medvedev's state visit to Nigeria last month. Gazprom's interest in the TSGP project is both geopolitical and geostrategic. Indeed, the signing of the MoU also comes on the heels of Russian President Dmitry Medvedev's recent state visit to Nigeria, part of a high-profile, four-state tour of Africa on which the Russia leader was accompanied a huge delegation of Russian government and business officials and where Gazprom and NNPC agreed to form a JV that will help Nigeria implement its Gas Master Plan Infrastructure Development project (see Nigeria: 26 June 2009: Gazprom, NNPC Form Joint Venture as Part of Russian President's Landmark Nigeria Visit). Aside from simply boosting Russia's profile in Sub-Saharan Africa as part of a renewed effort by Russian leaders to exercise political and commercial influence on the continent, the Gazprom-NNPC JV (NiGaz Energy) has the potential to become a strategic partnership in the Russian gas giant's international portfolio, particularly if the TSGP project comes to fruition. With Europe focused on diversifying its gas suppliers and reducing reliance on Russian gas, Gazprom's participation in NiGaz Energy could give the Russian state gas firm another avenue through which it can supply gas to Europe and thus attempt to protect its share of the European market in the long term.
Two other companies that have already expressed interest in the pipeline project are Italian energy group Eni, which has a presence in both Nigeria and Algeria, and French supermajor Total, which has openly supported the project since the beginning of the year with Guy Maurice, managing director of Total E&P in Nigeria saying; "Total is ready to be involved in this project". However, the three countries who signed the IGA have not agreed international partners for the project yet.
Perhaps the largest stumbling block outside the potential partners' control remains security. Nigeria's Niger Delta has seen a large increase in the number of attacks over the past two months. The proposed 4,128-km pipeline would carry gas through Niger and Algeria's vast southern Sahara region and some of its more restive mountain regions south of the Mediterranean coast. This would also pose an immense challenge, with Niger's Tuareg rebels or al-Qaida in the Maghreb posing formidable obstacles in the vast, sparsely populated expanse. A final threat, before the gas reaches its safe export points along the coast, comes in the shape of Algeria's difficulty in reasserting full control over its more densely populated mountain regions in the north, where militant Islamism has been rampant. Niger's Energy Minister Abdoulahi said that the country's government wholly supported the project and would work hard to see to its actualisation. Abdoulah said that his country was committed to the development of the economies of the transit states and assured the partners of the security and safety of the pipeline network.
Now the IGA has been signed the TSGP may receive further interest from the EU as the project would facilitate the development of the economies of the three countries while also providing another platform for a sustainable and reliable energy supply to Europe.