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Rabat – For all the apparent optimism and political will from governments involved, the gas pipeline project agreement between Morocco and Nigeria (NMGP) is set to hit significant political and economic hurdles that could cause a massive delay in completion.
In a recent analysis, Fitch Solutions highlighted grim prospects for the progress and completion of the Morocco-Nigeria gas pipeline.
Titled “Planned Nigeria-Morocco Gas Pipeline Faces Fundamental Challenges,” the report stressed that political and security concerns in some of the countries concerned with the NMGP will cause delays. Fitch’s report said that “considerable commercial, technical, legal and financial challenges” will make the project “unlikely to materialize in the short or medium-term.”
After Nigerian President Muhammadu Buhari visited Morocco in late 2018 to finalize the agreement of the 2016-initiated project, expectations soared. Media reports pointed to the series of bilateral agreements the two countries signed and President Buhari’s and King Mohammed VI’s earnest desire to advance continental autonomy on strategic matters like energy.
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According to Fitch, though, recommendations from the project’s feasibility studies suggest reasons for a more pessimistic take on the time needed to materialize the commitments.
Number of countries involved will cause delays
“The envisioned pipeline route is poised to have high exposure to political risks,” the report noted, referring to feasibility studies’ results.
Earlier this year, Nigerian and Moroccan energy authorities green-lighted British engineering company Penspen to “execute phase 1 of the front-end engineering and design (FEED) study for the planned NMGP,” Fitch noted.
Previously, Penspen completed the project’s first feasibility studies in July 2018, and the British company recommended that the NGMP route follow a combined onshore/offshore route for “political, legal, and security reasons.”
Because it will be based on Penspen’s preliminary recommendations, the first phase of the FEED study “will entail an in-depth evaluation of gas demand and supply mechanisms in the West African region, as well as negotiations with countries whose sovereign waters would be crossed by the pipeline.”
In total, 13 countries—Nigeria, Benin, Togo, Ghana, Cote d’Ivoire, Liberia, Sierra Leone, Guinea, Guinea Bissau, the Gambia, Senegal, Mauritania, and Morocco—are concerned with the NMGP.
Read Also: UK’s Penspen to Plan First Phase of Nigeria-Morocco Gas Pipeline FEED
In-depth negotiations with all the governments involved means taking into account each country’s security and socio-political concerns, which will considerably slow progress. “The first and most obvious obstacle lies with the sheer number (thirteen) of countries which would have to agree before the project can move forward,” the report pointed out.
To illustrate its pessimism, Fitch referred to the case of the West African Gas Pipeline (WAGP), which involved four countries. Even with “only four countries,” the report explained, it took WAGP 12 years to realize its first gas delivery.
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As negotiations between four governments took 12 years, the report suggests it is fair to assume that dealing with 13 will take much longer. “Current timeframes indicate that construction of the pipeline is slated to be phased over a period of 25 years based on increasing needs of the countries crossed and Europe.”
Geopolitical challenges
But the number of countries may only be the tip of the iceberg because other more structural and geopolitical reasons might prove lethal to NMGP.
Firstly there is the extreme volatility of Nigeria’s gas market. Militant factions in the West African country’s Delta region have destabilized other regional energy projects.
The report said, “The issue of availability of Nigerian gas to make the NMGP commercially viable could also prove problematic; especially when one keeps in mind how supply volatility in Nigeria (vulnerable to militant attacks in the Niger Delta) has negatively impacted pipeline exports through the WAGP.”
Trends in the European market add another grim prospect for NMGP.
Read Also: Morocco to Get Full Ownership of Gas Pipeline Linking Algeria to Europe
In addition to supplying the thirteen countries on NMGP’s route, the project seeks to capitalize on financial revenues by exporting natural gas to Europe. But while Europe’s growing gas demand could prove a particularly good market for NMGP, “European customers will likely remain well supplied by Russian and Norwegian gas.”
Senegal and Mauritania are currently in the negotiation phase of a similar project, featuring Senegal, Mauritania, Guinea Bissau, and Gambia. The completion of the NMGP might trigger regional rivalry.
Among all the political hurdles, however, developments in Nigeria may prove the deadliest to NMGP’s completion.
The recent rapprochement between Morocco and Nigeria is widely credited to the close friendship between President Buhari and King Mohammed VI.
But Nigerians have been increasingly dissatisfied with President Buhari’s performance.
Polls have indicated Buhari will likely lose to Atiku Abubakar in the coming elections in February. Buhari’s uncertain reelection odds add “a layer of uncertainty” to NMGP, according to Fitch’s report. Fitch concluded, “A change in leadership could see any major project of this kind at risk of being re-evaluated or abandoned.”
