NNPC/NLNG Condensate Frauds: Another One For The In-Tray?

By Ifeanyi Izeze

Why is the production and sale of the huge volumes of condensates from our oil fields a mystery that only the gods of the Nigerian National Petroleum Corporation (NNPC) and maybe that of the Nigerian Liquefied Natural Gas Limited (NLNG) should know?

Curiously, all the talks about revenue earnings and associated remittance or diversions in the nation’s oil business have always being tied only to crude oil and natural gas. Nobody has ever bothered to tell us how much we are making from condensates and other Natural Gas Liquids (NGL), and even butane gas that are all products of the LNG processes in addition to the huge volumes of condensates that come from the oil wells.

As earlier posited, the secrecy around the entire condensate production in this country looks more criminal than mere classification of official secret. It may interest Nigerians to know that the fraud in the sale of condensate in this country far outweighs what happens with our produced crude oil. The only difference is in the scale because we produce more crude oil than condensate. Is it not surprising that even the packaging of the Oso Condensate Act No. 15 of 1990 came with an inbuilt default that granted the NNPC unilateral omnibus power to borrow even from hell despite the harsh conditions that come with such borrowings?

It is on record that Nigeria produces large quantity of condensate in both the eastern and western Niger Delta basin. The question of what Nigeria has earned over the years from its condensate production is very important because for whatever reasons, our annual budgets are syndicated only on crude oil production and sales and maybe whatever comes in from our natural gas (LNG) projects. Nobody talks about what we generate as revenue from the sale of the over 600, 000 barrels of condensates produced every day from oil operations in the Niger Delta.

If countries like Angola would organize carnivals and world press conference to celebrate the sale and delivery of its first condensate cargo from its LNG export plant in Soyo, then the resource (condensate) may not afterall be a useless by-product of oil and LNG production processes as the industry operators want us to believe.

Exactly what quantity of condensate, LPG and even raw butane does NNPC or whoever gets from our various LNG trains in a stream day? How are they sold- domestically or at the international markets and at what price? How are the proceeds accounted for- as part of LNG earnings; turn-key oil earnings; or a stand- alone revenue? These questions have become pertinent now that the world is actually showing us that what we were previously meant to believe were fugitives and useless by-products of crude oil and LNG production processes are afterall as valuable as the raw crude oil and LNG.

Even in crude oil production from oil fields (onshore, offshore) this country turns out tangible quantities of condensates in terms of volumes on daily basis. So where are they? What the NNPC foreign joint venture partners and maybe in connivance with our national apex oil concern have been doing was to use Nigeria’s daily crude oil production figures to mean crude plus condensates. This is sinister because condensate is not part of OPEC production quota allocation to its members including Nigeria. So what have we been doing with our produced condensate of over 600, 000 barrels per day?

Angola LNG celebrated first condensate cargo, the world was told, was sold to the Angolan state-owned oil company Sociedade Nacional de Combustíveis de Angola (Sonangol) on a FOB Soyo basis. All condensates, LPG and butane from the countires $10 billion LNG project have been committed for sales to shareholder affiliates of Angola LNG. Is this information not clear enough to help track payments or otherwise for the products which are aside the LNG the plant was mainly set up to produce.

Hear the Angolan LNG marketing Chief Executive, Artur Pereira: The loading and sale of the first condensate cargo marks a further landmark for Angola LNG. We have now produced and sold all of our different types of product, LNG, LPG, domestic butane, and now condensate.

“At full production the plant will be able to supply 5.2 million mt/year of LNG, in addition to butane, LPG and condensates products. It delivered its first cargo of LNG in June 2013 to Brazil's Petrobras, and its first butane cargo to Sonangol in March 2014.”

If the partnership, funding and processes arrangement of the Nigerian LNG is not different from what obtains in the Angolan project, why are we not getting turn-key values from ours as countries like Angola are doing? In the Angola LNG, Chevron holds 36.4% equity, Sonangol -22.8%, British Petroleum (BP)-13.6%, Italy’s Eni -13.6% and France’s Total -13.6%. Is this different from our own LNG where we have Shell and Mobil taking up the British and American interests respectively?

Condensates are low-density hydrocarbons which are liquid at ambient temperature. Figures from the U.S. Energy Information Administration,  Statistics and Analysis shows that a large portion of Nigeria's oil production, around 400,000 barrels per day, come out as condensate with an API gravity higher than 46 degrees. Condensate is in a very high demand  in the U.S. and Canada where it is used as diluents in the Absent Diluent Technology diluents (dilbit) in extracting oil from shale and oil sand/raw bitumenin both countries  respectively. Propelled by the boom in oil sands and tight oil production, condensates are emerging as an ever more important element of the energy industry. Condensate feedstock is also highly sort in the petrochemical industry because of its high yield of naptha (over 50 percent by volume). We must ask questions now!

IFEANYI IZEZE is an Abuja-based Consultant and can be reached on:iizeze@yahoo.com