Chika Amanze-Nwachuku
The Ajaokuta-Kaduna-Kano (AKK) pipeline is a 614km-long natural gas pipeline project being developed by the Nigerian National Petroleum Corporation (NNPC).
The pipeline originates from Ajaokuta, in Kogi State traversing Abuja (FCT), Niger, Kaduna and terminates at Kano. The AKK gas project forms the phase one of the Trans-Nigeria Gas Pipeline (TNGP) project, which is part of the Trans-Sahara Gas Pipeline System that will ultimately link Southern Nigeria with customers in Europe.
The project is a component of the Nigerian Gas Master Plan, a gas infrastructure blueprint, which was approved by the Nigeria Federal Executive Council in 2008.
The AKK gas pipeline project, described as the single biggest gas pipeline project in Nigeria’s history is being implemented on build-and-transfer-basis (BT) public-private partnership (PPP) model with a completion period of 24 months and defect liability period of 12months.
The scope of work includes Engineering, Procurement, Construction, Installation, Testing and Commissioning of a 40” x 614km class 600# pipeline system from Ajaokuta to Kano with associated intermediate and terminal facilities to supply natural gas to off-takers at Abuja, Kaduna, Kano and Zaria and along the environs of the pipeline route.
The right of way for the proposed AKK gas pipeline is planned to run parallel to the existing Nigerian Pipelines and Storage Company’s 16 inch-crude oil and 12 inch- product pipelines wherever possible.
The execution of the project was planned in three phases with phase one covering the construction of a 200km-long segment between Ajaokuta and Abuja Terminal Gas Station at a cost of $855m.
Phase two will comprise a 193km-long section to be built between Abuja and Kaduna at a cost of approximately $835m, while the third phase involves the construction of a 221km-long section between the Kaduna terminal gas station (TGS) and Kano TGS. This section will cost an estimated $1.2billion to complete.
Other infrastructure planned for the development includes various associated valve stations, intermediate and terminal facilities.
The project will feature a diameter of 40in and will utilise 24in-diameter steel line pipes for spur lines. It is expected that the gas pipeline will transport 3,500 million metric standard cubic feet per day (Mmscfd) of dehydrated wet gas from several gas gathering projects located in southern Nigeria.
The AKK gas pipeline is expected to be fed from the existing domestic Infrastructure with a capacity of over 1.5 billion cubic feet, daily, Bcf/d and is being expanded by Escravos-Lagos Pipeline System II (ELPS II) and Obiafu-Obrikom 3 (OB3) gas pipeline which will double the capacity to over 3billion cubic gas per day.
Due Process Followed
The AKK pipeline project underwent a transparent and open competitive tender process that resulted in the emergence of the most competitive bidders.
The entire evaluation exercise was carried out by the NNPC and the Infrastructure Concession Regulatory Commission (ICRC).
A project proposal was submitted to the Infrastructure Concession Regulatory Commission (ICRC) in June 2017.
The NNPC originally announced tenders for the development of the AKK pipeline in July 2013.
The PPP compliance certificate was issued in July 2017 along with the approval of the feasibility study.
The Federal Executive Council (FEC) and all the relevant agencies granted their approval for the project in December 2017 after stringent due process reviews and intense scrutiny by the various agencies internally and externally. These processes include:
- Conduct of project bankability study, at project’s conception in 2013, undertaken by Standard Chartered Bank to confirm appetite for attracting financing from international community;
- Execution of the project feasibility and front end engineering design (FEED) by a reputable international company, ILF of Germany in 2014. The details developed at this phase had enough engineering design details to enable a competitive class of estimate to be submitted by the contractors;
- Advertisement of the project in both local and foreign print media in 2013 after completion of the FEED study by ILF in 2015, the prequalified bidders were issued tender documents;
- Competitive tendering and evaluation of the bids by both NNPC and transaction advisers, Alpine and also by a team from ICRC;
- Extensive review of the project design and the final cost in 2017 by the BPP, culminating in the issuance of Certificate of No Objection in August 2017;
Receipt of due process certificates for the project, including Original Business Case and Final Business Case from ICRC and Local Content Compliance Certificate from Nigerian Content Development and Management Board (NCDMB) were issued before presenting it to the Federal Executive Council (FEC) for approval in December 2017.
Mele Kyari to the Rescue
The project was stalled following the inability of the contractors to progress financing in 2019.
But on assumption of duty as the NNPC GMD, Mele Kyari approved the renegotiation of the contract, resulting in further cut of $300million of the contract value.
Kyari’s intervention brought the project on track leading to the award of the contract at a competitive price and the eventual flag off of construction in June 2020.
Besides, a Steering Committee comprising key project stakeholders as NNPC, Ministry of Finance, Ministry of Justice, the Central Bank of Nigeria, the Debt Management Office, Nigeria Extractive Industries Transparency Initiative (NEITI) and representative from the Presidency, was set up by Mele Kyari to ensure transparency in the implementation of the project.
Buhari, Kyari List Benefits of AKK Pipeline Project
Speaking at the flag-off ceremony held virtually in June 2020 due to the COVID-19 pandemic, President Muhammadu Buhari declared that “the AKK project is very dear to the people of Nigeria” thus “government’s commitment to ensure its timely delivery within budgetary allocation and specifications.”
President Buhari noted that the AKK pipeline project was in line with his administration’s Next Level Agenda for sustainable development, enhancement of economic prosperity and increase of the country’s infrastructure assets.
Buhari said: ‘‘We promised Nigerians that we will expand the critical gas infrastructure in the country to promote the use of gas in the domestic market. These include the Escravos to Lagos Pipeline System – 2 (ELPS-2), Obiafu to Obrikom (OB3) pipeline and AKK.
‘‘These projects are fundamental to our desire to industrialize and energize the entrepreneurial spirit that is ever present in our population.’’
The President said the AKK pipeline will provide gas for power generation and for gas-based industries which will in turn facilitate the development of new industries.
He said the hitherto moribund industries along transit towns in Kogi State, Abuja (FCT), Niger State, Kaduna State and Kano State, will be revitalized when the AKK project becomes operational.
Enumerating other gains of the AKK pipeline project, President Buhari said that apart from its significant job creation potential both direct and indirect, the project will foster the development and utilization of local skills and manpower, technology transfer and promotion of local manufacturing.
‘‘Time is short, and our people’s zeal is strong and palpable. Infrastructure development although long, tedious and complex remains a cardinal objective of our Administration’s drive towards ensuring a stable, sustainable and more prosperous future for our citizenry.
‘‘Today marks an important chapter in the history of our great Nation. It marks the day when our domestic natural gas pipeline networks; from Obiafu in Rivers State, Escravos in Delta State and Lekki in Lagos State, are being connected through Kaduna to Kano States thereby enhancing national energy security, creating balanced development, and further integrating our nation,’’ the President said at the flag off ceremony.
The President commended the Government of the People’s Republic of China; the financiers the Bank of China and SINOSURE; and the two EPC Contractors (Brentex/China Petroleum Pipeline Bureau-CPP Consortia and Oilserve/China First Highway Engineering Company-CFHEC Consortia) for their support to deliver the important project.
He also commended the resilience of the Mele Kyari-led NNPC Management and other relevant stakeholders to deliver on the project despite the COVID-19 pandemic.
Speaking in the same vein, the GMD explained that the AKK gas pipeline project, which is part of the Trans-Nigeria gas pipeline project, involves the establishment of a connecting gas pipeline network that will integrate the Northern region of Nigeria with the Niger Delta, Eastern and Western regions of the country.
Kyari expressed optimism that the EPC contract for the 614km AKK gas pipeline project will deliver the project on time, within budget and to quality/specifications.
The GMD further noted that upon completion, the project would enable the injection of 2.2bscf/d of gas into the domestic.
Besides, he said three new captive gas-fired plants to be located in Abuja, Kaduna and Kano, are expected to add about 3,600MW of power to the national grid, significantly boosting power supply to homes and businesses and revitalizing the moribund textile industries, which alone will create over three million jobs in parts of the country.
The AKK pipeline, the GMD added, will also supply 2bn ft³/d (56mn ft³/d) of gas, in the short term to domestic customers.
In addition, the AKK project will support the development of petrochemicals, fertilizer, methanol and other gas-based industries that will also generate employment and facilitate balanced economic growth.
Contract Inflation Allegation, a Hoax
Reacting to recent report by an online media that the AKK pipeline contract was inflated to the tune of $1.527billion, the NNPC, in a release by Dr. Kennie Obateru, its Group General Manager, Group Public Affairs, described it as baseless, false and malicious.
Obateru, while dismissing the report as deliberate falsehood and unfounded, said the NNPC was considering “instituting legal actions against the medium and her collaborators.”
He noted that the unfounded allegation was brought to the attention of the Bureau for Public Procurement (BPP), which completely rejected it as false and not portraying the true position of the BPP’s report on the subject.
“This is clearly a concocted analysis aimed at attacking the character of the Group Managing Director (GMD) of NNPC, Mallam Mele Kolo Kyari, and the integrity of the Bureau of Public Procurements (BPP). Mallam Mele Kyari did not become the GMD until July 2019 and he is being mentioned in a process that took place in 2017 by the account of the publication.”
Obateru noted that a further cut of $300million of the contract value was achieved under the Mele Kyari-led NNPC Management leading to the recognition by the Federal Executive Council as an unprecedented action.
The NNPC spokesman further explained that the BPP, following a detailed review and analysis of the procurement bid, confirmed that the unit costs for line pipes adopted by the NNPC for the project were reasonable when compared with current market prices for 40”, 36”, 20” and 14” steel pipes, adding that it was on that basis that BPP confirmed and granted certificate of no objection dated August 11, 2017.
Criticisms Trail False Allegation
Stakeholders in the oil and gas industry said that reports about the AKK pipeline contract inflation “were a hoax.”
They expressed outrage at the recent publication by an online media (not armadanews.com), asserting that those peddling the fake news were only out to smear Kyari’s reputation by linking him to a process that took place in 2017, two years before he became the GMD.
Some of the stakeholders spoken to posited that Kyari deserves some accolades not just for the new down of transparency and openness in the hitherto corruption-ridden Corporation, but for putting in place and implementing robust strategies to transform the NNPC and enhance its potential and capacity to compete favourably with other national oil companies around the world.
They also commended the GMD for the strategies he has put in place to ensure availability of adequate gas for both the domestic market and export.