Chevron confirmed Thursday that it has withdrawn from a struggling liquefied natural gas project in Nigeria, as it focuses on supplying natural gas to the domestic Nigerian market instead.
Chevron Nigeria Limited, which is operating the project, confirms that Chevron has withdrawn from the Olokola LNG Project after eight years of unsuccessfully attempting to make the project financially viable. The oil and gas giant pulled out of the project at the end of July.
“We are planning to focus more on the domestic gas market, which appears to have much more opportunities in that space,” said Kurt Glaubitz, a spokesman for Chevron. “We are now looking at alternatives to commercialize the gas resources domestically.”
The OKLNG project company was formed in 2007 by the Nigerian National Petroleum Company, Chevron, Shell, and BG, a British-based natural gas company. The other major investors, BG and Shell, withdrew from the project in June 2012 and July 2013 respectively. Chevron has 22.74 percent equity in the project.
The high costs of liquefied natural gas processing plants, typically tens of billions of dollars to build, have made even seasoned players flinch at their construction. The announcement comes a few months after Australian-based Woodside shelved its plans for a liquefied natural gas project off the northwest Australian coast, choosing to partner with Shell for a floating liquefied natural gas plant instead.
Chevron plans to extend its current business in Nigeria to support of the Nigerian Master Gas Plan, a government-led initiative to increase its supply of domestic natural gas.
While many LNG projects are located in remote locations, such as the planned Woodside plant in Western Australia, Glaubitz said that the project’s relative proximity to concentrated populations in Nigeria makes accessing the domestic market viable.
“The resources are close to market in this case and the market can absorb those volumes,” Glaubitz said. “While we are leaving the project, we are not leaving Nigeria. We continue to be interested in pursuing those opportunities and are active in those efforts.”
Chevron Nigeria has a joint-venture with the Nigerian National Petroleum Corporation and has assets covering approximately 2.2 million acres in the Niger Delta region. It also operates in several deep-water offshore plays, including the Agbami Field.