Nigeria floats new IJV for methanol production

[By Sopuruchi Onwuka]

Nigeria has added yet another significant gas processing venture in its list of hydrocarbon development projects as the government evidently enters a crucial race against the global energy transition which currently pulls demand away from petroleum commodities.

(From L): Group Managing Director (GMD) of the NNPC, Malam Mele Kolo Kyari; Executive Secretary of NCDMB, Engr. Simbi Kesiye Wabote and Executive Vice-Chairman of BFPCL Chief Ben Okoye in a handshake after the signing the Final Investment Decision (FID) for the construction of10,000tonnes/day methanol production plant by the Brass Fertiliser and Petrochemical Company Ltd (BFPCL) in Abuja on Friday

Government agencies and a private firm weekend firmed up another incorporated joint venture (IJV) for gas processing, further advancing the business model which drives the highly successful Nigeria Liquefied Natural Gas (NLNG) Limited, the Anoh Gas Processing Company (AGPC) Limited, and the Eleme Petrochemical Company Limited (EPCL).

The IJVs put government’s gas monetization agenda on fast track after earlier investment opportunities in liquefaction and fractionation were botched by policy alterations that emphasized flow of greater volumes of gas into the domestic market.

The $3.5 billion or N1.7 trillion methanol project will be sited in petroleum production hub of Bayelsa State, home of the sitting Minister of State for Petroleum Resources, Chief Timipre Sylva, whose ministry is partnering private investors in an incorporated joint venture that would initiate the country’s first large scale methanol production plant with capacity for 10,000 tons per day.

The ministry is coordinating partnership between its key agencies, the Nigerian National Petroleum Corporation (NNPC), the Nigerian Content Development and Monitoring Board (NCDMB) on the one hand and privately owned DSV Engineering for a venture that would be operated by special purpose entity, Brass Fertiliser and Petrochemical Company Ltd (BFPCL).

The Group Managing Director of the NNPC, Mallam Mele Kyari; Executive Secretary of NCDMB, Engr. Simbi Wabote; and Executive Vice-Chairman of BFPCL, Chief Ben Okoye; signed the project final investment decision (FID) on behalf of their organisations.

With the FID, the BFPCL is to embark on the methanol production venture to assist in realizing the objectives of rapidly commercializing the nation’s abundant natural gas reserves that stand the risk of value erosion as global energy demand shifts to renewable, sustainable and emission free options.

“As energy transition processes go on, you must monetize these gases as quickly as possible. NNPC will continue to collaborate with all the strategic partners. We will ensure that feedstock is available for this project and subsequent projects that would happen in the Brass hub,” Chief Sylva stated weekend.

The minister pointed out that presidential approval for the Brass Gas Company was secured in government had in July 2020 with the target of aggregating and monetizing over 10 trillion cubic feet of stranded gas with processing facilities to be built in the area.

The methanol plant, he stated, is also conceived to spur evolution of gas-based industries and methanol import into the country.

The project, with delivery schedule for 2025, promises to establish Nigeria within the world’s first 10 global supply factors for methanol, and also boost the country’s domestic capacity for production of industrial goods.

The Oracle Today reports that methanol, also known as methyl alcohol, is a gas derivative prized in the manufacturing industry for its highly versatile application in the production of wide range of items that serve domestic, commercial and industrial purposes.

Methanol is globally accepted as efficient industrial and power generation fuel. When converted to formaldehyde its usage extends to the textiles industry, including the production of synthetic leather which presents cheaper and environmentally friendly alternative to real animal hide.

In health and medicine, methanol serves as raw materials and parts of the processes in the production of many health and medicinal products, including vitamins, streptomycin, hormones, cholesterol drugs and many other pharmaceuticals.

Methanol is also used in making solvents and thinners used in the manufacturing industry. It is popular in producing and removing shellac, a naturally produced resin with wide applications as a glue and insulator. Methanol also helps in removing poisonous brominated flame retardants from recycled electronics.

Use of methanol in removal of resins connects to the use of methyl alcohol in production of resins and plastics, filters and baby nappies. Methanol is an integral component in the production of bulletproof vests.

From fuels to olefins used in plastic production, the demand for methanol has placed it in the foreground of demand in the energy transition landscape; and methanol demand is likely to rise as its popularity grows.

The demand outlook for methanol and investment reward propositions support funding opportunity for the Brass project even at a time global lending agencies channel project financing away from hydrocarbon developments.

According to the financing plan, the venture partners provided initial equity funding of $670 million for BFPCL, representing about 20 percent of the capital requirement.

The remaining funding gap, according to the NCDMB, would be closed with debt financing from the international money market where deals have been closed with international, continental and regional credit institutions including a consortium of Chinese banks led by the China Exim Bank, and African Development Bank (AfDB).

The NCDMB stated that an unnamed Engineering Procurement and Construction (EPC) contractor and technology provider have already been chosen.

The country’s biggest onshore production facilities operated by Shell under a joint venture with NNPC, Total and Eni are expected to provide feedstock to the plant. The Gas Supply and Purchase Agreement (GSPA) has been signed, the agency stated.

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