Bank of China contributes to $2.45 billion syndicated loan for Ajaokuta-Kaduna-Kano Gas Pipeline Project (Linked to Project ID#67051, #60925)

In June 2017, Nigeria National Petroleum Corporation (NNPC) — a Nigerian state-owned oil company — submitted a proposal for the Ajaokuta–Kaduna–Kano (AKK) natural gas pipeline project to the Government of Nigeria's Infrastructure Concession Regulatory Commission (ICRC). The project’s feasibility study was approved in the July 2017. A PPP compliance certificate was also issued for the project in July 2017. Then, in December 2017, Nigeria’s Federal Executive Council (FEC) approved the project. In 2020, NNPC signed a $2,456,944,166.11 syndicated loan agreement with Bank of China and the Industrial and Commercial Bank of China (ICBC) for the Ajaokuta-Kaduna-Kano Gas Pipeline Project. Bank of China’s contribution is captured via Project ID#67052 and ICBC’s contribution is captured via Project ID#67051. The estimated borrowing terms of the loan are as follows: a 12-year maturity, a 3-year grace period, an interest rate of LIBOR plus a 3.75% margin, and a 7% Sinosure insurance premium. The Federal Government of Nigeria issued a sovereign guarantee in support of the loan (in January 2020), which accounts for 85% of the total project cost ($2,890,522,548.36). The Nigerian Gas Company — a subsidiary of NNPC — agreed to cover the remaining 15% of the project cost ($433,578,382.25) through an equity contribution. According to the Government of Nigeria's Debt Management Office, '[t]he [Federal Government of Nigeria's] Contingent Liabilities increased in the 2020 due to the inclusion of the Contingent Liabilities arising from the Federal Government of Nigeria guarantee issued in respect of the NNPC-AKK Gas Pipeline Project executed by the Nigerian National Petroleum Corporation (NNPC).' The proceeds of the loan are to be used by the borrower to finance a commercial contract between NNPC and a consortium consisting of Brentex Petroleum Services Ltd and China Petroleum Pipeline Engineering Co Ltd (CPP), which was awarded on April 27, 2017 and signed on April 10, 2018. The borrower is expected to repay the loan through a pipeline transmission tariff. The purpose of the project is to build a 614 km pipeline that will carry natural gas between the southern and northern parts of Nigeria. The pipeline will originate at the Ajaokuta terminal gas station (TGS) in the Kogi state in southern Nigeria and pass through Niger, the Federal Capital Territory (FCT), and Kaduna to terminate at a gas station at Kano. The pipeline will cross seven major rivers and ten major roads along its route. The AKK pipeline project is divided into four segments. The first segment will run from Ajaokuta to Abuja in the FCT for a total distance of approximately 200 km. The second segment will extend for 193 km from the Abuja TGS to the Kaduna TGS, while the third segment will stretch for 97km from Kaduna to Zaria, and the fourth and final section of the pipeline will run for approximately 124km from Zaria to the Kano TGS. The pipeline will comprise 40 inch-diameter pipe joints and operate at a pressure of 1,000 pounds per square inch (PSIG). The Ajaokuta–Kaduna–Kano (AKK) pipeline will transport up to 3,500 million cubic feet (mcf) of gas a day from various gas gathering projects in southern Nigeria. Hydrocarbon liquids will be processed at Ajaokuta to produce liquefied petroleum gas (LPG), while the remaining gas will be transported to supply feedstock for new power plants and petrochemical facilities at Abuja, Kaduna, Kano, and Katsina. The pipeline will eventually reach North Africa, forming part of the broader 4,400km Trans-Saharan Gas Pipeline which will export natural gas to customers in Europe. Brentex Petroleum Services Ltd, China Petroleum Pipeline Engineering Co Ltd (CPP), Oilserve, and China First Highway Engineering Company are the contractors responsible for project implementation. Construction began on June 30, 2020. Then, in July 2021, the financing for the construction of the pipeline became complicated due to the fact that Bank of China decided to withhold loan disbursements. The project will be implemented in three phases, and as of August 8, 2022, the project was in Phase 1. Phase 1 includes the construction of a 200 km-long segment between Ajaokuta and Abuja Terminal Gas Station at the cost of $855 million. Phase 2 will consist of a 193 km-long section built between Abuja and Kaduna at the cost of approximately $835 million, and Phase 3 will consist of a 221km-long section built between the Kaduna terminal gas station (TGS) and Kano TGS and cost an estimated $1.2 billion.

Additional details

1. The Chinese project title is 阿焦库塔-卡杜纳-卡诺天然气管道 or 尼日利亚AKK天然气管道项目. 2. There are some indications that the borrowing institution is a special purpose vehicle and joint venture between Oilserv and NNPC. This issue warrants further investigation. 3. One source suggests that Nigeria Petroleum Development Company (NPDC) — a subsidiary of NNPC — also secured a $635 million loan for the project. This issue warrants further investigation. 4. AidData has estimated the all-in interest rate by adding the average 6-month LIBOR rate (0.89%) in 2020 to 3.75%. 5. The size of Bank and China and ICBC’s contributions to the syndicated loan are unknown. For the time being, AidData assumes equal contributions from Bank of China and ICBC ($1,228,472,083.05). 6. The precise date on which the loan agreement was signed is unknown. However, it is known that the Group Managing Director of the NNPC, Mallam Mele Kyari, stated in June 2020 that all the required conditions precedent for closing the debt financing had been provided and the process of obtaining internal approvals by the lenders was in progress to enable financial close by August 2020. For the time being, AidData assumes a financial commitment date of August 1, 2020.

Number of official sources

8

Number of total sources

40