Shell plans £5.3bn expansion of Nigerian operations

Shell last night unveiled plans for a major expansion of its operations in Nigeria through investment in a $7.5bn (£5.3bn) liquified natural gas development.

The project is Shell's third major investment in Nigeria since the crisis caused by the execution of the Ogoni leader Ken Sara-Wiwa seven years ago and its biggest single investment anywhere in the world in the past 12 months.

Shell and its partners in Nigeria LNG have agreed to double the capacity of their existing operation, making it one of the biggest LNG plants in the world.

The project involves building a further two "trains", increasing the capacity of the plant to 21 billion cubic metres of gas a year. Shell has contracted to take 3.8 billion cubic metres itself.

Shell's total contribution will be $2.4bn with the remainder of the investment coming from its three partners – the Nigeria National Petroleum Corporation, Agip and TFE. Shell has a 25.6 per cent share in the venture.

Of the $7.5bn, about $2bn will be spent on the two new trains while the remainder will be invested in additional upstream facilities and an expanded fleet of 18 ships to transport the gas.

As part of the deal, Shell has also undertaken to achieve a further reduction in flaring from its Nigerian gas fields.

Since the Sara-Wiwa affair in 1995, Shell has undertaken two other big projects in Nigeria. One was an earlier expansion of the LNG plant. The other was the Bonga deep water oil and gas project.

Ron van den Bergh, the chairman of Shell Nigeria, said: "We have had to face many issues in this country but we are confident we can cope with situations as they arise."

Separately, Shell announced that it has forged a joint venture to begin supplying natural gas to power generators in Japan.

The pact with Tokyo Gas Company will mark Shell's entry into Japan's retail gas market, which is undergoing deregulation, a spokesman at Tokyo Gas, Japan's largest city gas firm, said.

Tokyo Gas will take a 51 per cent stake and Shell Gas & Power Japan Ltd taking the remainder.