AKK Gas Pipeline Construction Allegedly Stalls Over Funding, Inflated Contract

By Adedapo Adesanya

One of Nigeria’s promising projects touted to boost its oil and gas industry, the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project, may have been abandoned as financers cannot work with the project’s bloated contract.

According to Guardian Nigeria, the AKK gas pipeline project has been stalled, as there is no funding to cover the cost of the second and third phases from Abuja to Kaduna and Kaduna to Kano after it was discovered that the contract cost was inflated by over 570 per cent.

This is in contrast to the value for projects in Mexico, Argentina, and Chile, among others, a source close to the decision-making told the publication.

“Globally, the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometre. In Nigeria, the Final Investment Decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570 per cent inflation above global standards,” it reported.

The federal government inaugurated the AKK gas pipeline, which spans a length of 614 kilometres in 2021, to transport natural gas from Ajaokuta, Kogi state, through states and urban centres in Nigeria.

Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China, and China Export Credit Agency (SINOSURE) – were to provide 85 per cent or $2.38 billion funding requirement. Their Nigerian counterparts, Oilserve and Oando, were to balance the 15 per cent or $420 million.

But the Guardian source revealed that “These companies cannot afford to go into cahoots with Nigerians because they would be easily caught when they submit their financial reports to their countries of origin.”

The project was initially expected to be completed in the first quarter of 2023 after several drawbacks and delays.

It was also revealed that the Nigerian National Petroleum Company (NNPC) Limited, through the Nigeria Gas Transport Processing Company (NGTPC), had attempted to bridge the funding gap but to no avail.

“Assuming the imports are not waived, the cost of duties and tariff at the ports would not exceed 15 per cent of $268,337,369 million or $40,250,605 million ($308,587,974 million), which is 11 per cent of the EPC that was scheduled for this project and gives you an insight into why the firms quit,” the source revealed, speaking on task waivers granted to Engineering, Procurement and Construction (EPC).