The Trans-Saharan Gas Pipeline (TSGP), part of a ambitious plan to pipe Nigerian natural gas to Europe, took a step forward on 9 July when senior Algerian and Nigerian officials, alongside the EU Energy Commissioner Andris Piebalgs, launched a promotion campaign for the $10bn mega-project. At a Brussels meeting on 9 July, Mr Piebalgs threw his weight behind the TSGP, guaranteeing European gas demand and urging European financial institutions to support it. But concerns about the project, ranging from the security situation in the Niger Delta to the availability of Nigerian gas present challenges yet to be overcome. Simon Martelli reports from Brussels.
Proponents of the TSGP, which has often been dismissed by its critics as impractical, emphasized the strategic value of the project to an audience comprised largely of representatives from major oil companies and banks. On the one hand we have an African region rich in natural gas, a large part of which is being flared, Algerian Minister for Energy and Mines Chakib Khelil said. This region is confronted with the challenges of poverty, under-development and environmental degradation. On the other hand, Europe faces the challenge of a growing energy deficit, especially in natural gas, coupled with the need to diversify its supply sources and reduce its greenhouse gas emissions.
The 48-56in, 4,188km pipeline is the brainchild of Algerias state-owned Sonatrach and Nigerias NNPC, and is designed to carry 20-30 bcm/year of gas to southern Europe from the Niger Delta, through Nigeria (1,037km), Niger (841km) and Algeria (2,310km), also supplying poorer parts of the region on the way (MEES , 25 September 2006). The plan would enable Europe to reduce its dependence on Russian gas imports and help address the looming gas shortage in Europe. The project would comprise infrastructure to allow the export of Nigerian and possibly also Algerian gas, 15-18 compression stations depending on the width of the pipeline, and a 220km subsea pipeline from Algeria to Spain running parallel to the proposed Medgaz pipeline. The branch to Italy would follow the same route as the Galsi pipeline, running from El Kala in northeast Algeria, via Sardinia. The project is expected to start up in 2015.
Fostering Regional Development
I am convinced that it could represent a promising supply route and source of gas to Europe, Mr Piebalgs said, adding that security of gas supply should be a priority for the EU. The Commissioner acknowledged the ambitious scope of the project, particularly from the technical and political points of view. But he cited as an example of similarly ambitious projects the 1mn b/d 1,780km Baku-Tbilisi-Ceyhan (BTC) oil pipeline which started up in June 2006 (MEES , 5 June 2006). At the time it was conceived, it seemed unrealistic, Mr Piebalgs said. BTC not only brought revenue to the investors and companies involved, but also prosperity to the region.
The TSGP forms an important part of the New Partnership for Africas Development (NEPAD) energy initiative. As well as boosting gas supplies to Europe, it is expected to provide central and northeastern Nigeria, and Niger, with relatively clean, low-cost energy. This would help to reduce deforestation and promote economic growth in the area. It would also enable the recovery of huge volumes of gas in Nigeria that are being flared. Around 2bn cfd (20.4 bcm/year), or 30% of Nigerias total gas production, is flared, according to the General Manager of Strategic Planning at NNPC David Ige, although the Nigerian company plans to drastically reduce this by 2009. Finally, fiber optic cables will be attached to the 4,200km pipeline, significantly expanding the telecommunications network in the three countries it crosses.
Khelil Says Financing Not A Problem
Before any discussion of how the intercontinental pipelines construction will be financed, a project company needs to be set up by partners that can guarantee the supply of gas to Europe, Dr Khelil said. Once those partners have been identified and the European buyers agreed, there should not be a problem financing the project and the construction phase could then begin, he added. The minister pointed to the progress made on the Medgaz pipeline as an example of this process. Unlike Medgaz however, the TSGP has yet to qualify as being officially of European interest, which limits the flexibility of banks towards the project.
The EU is pushing for the full liberalization of its gas and electricity markets, which would ensure the creation of more cross-border interconnectors and enable gas from the project to reach countries other than Italy and Spain. But finance will inevitably rely on long-term offtake agreements, which have been viewed in the past as obstructing further gas market liberalization in the EU.
So the project remains in the early stages, despite strong political support and even though the pipelines technical and economical viability has been assured by the UK-based consultants Penspen and IPA Energy, who completed the feasibility studies in September 2006 on behalf of Sonatrach and NNPC (MEES , 25 September 2006). Since then, the only company known to have actively expressed interest in participating is the state-run Gas Authority of India Ltd (GAIL), following the visit by Indian Minister of Petroleum and Natural Gas Murli Deora to Algeria in April.
Practical Challenges
Industry experts believe there are considerable practical challenges that still need to addressed, not least of which are ensuring the security of the pipeline and guaranteeing the availability of Nigerian gas. Dr Ige at NNPC recognizes that his countrys gas demand far exceeds supply, with 6bn cfd being consumed domestically, and several big power plants due to be connected to the national gas network soon. But we have 180 tcf of gas reserves in Nigeria, and we have never even explored for gas. Now we are reforming our fiscal regime to stimulate gas exploration and investment, he said.
Others say that if gas supplies can be guaranteed, the pipeline linking Nigeria to Europe has the advantages of being permanent and direct, where LNG supplies take time and depend on favorable market conditions. The project will also promote African development. It is far too soon to know whether 2015 is a realistic completion date. But it seems that progress is finally being made on a project which was first conceived almost 30 years ago.
