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Nigeria LNG faces export revenue threat at 31

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NBRP lauds NLNG on release of 2022 longlist, opens platforms for exposure of books, authors

By EMEKA EJERE

It is not good news that the crash in demand for liquefied natural gas in Europe has posed a major threat to the federal government’s revenue from the exports of the commodity.

The development is an unfortunate coincidence with the 31st anniversary of the establishment of the Nigeria Liquefied Natural Gas (NLNG) Limited which was marked last week with a disclosure that the company has paid over $13bn to the federal government for feed-gas purchase since the inception of its operations 21 years ago.

The company also said over $7bn in dividends and $8bn in taxes had been paid to the Nigerian government through the Nigerian National Petroleum Corporation (NNPC).

Nigeria is often described as ‘a gas province with significant oil accumulations’, due to her immense natural gas reserves. A large volume of Nigeria’s gas reserves is found as ‘associated natural gas’ along with crude oil. In most cases, such associated gas is burnt off during oil field operations through a process that is commonly referred to as ‘gas flaring’.

Recent statistics indicate that Nigeria is the second highest gas flaring country in the world. Gas flaring has also been a major cause of environmental pollution and a waste of non‐renewable resources that has resulted in a huge loss of revenue for the country.

The NLNG, which is jointly owned by the federal government and three international oil companies, was established on May 17, 1989, to harness Nigeria’s vast natural gas resources and produce the LNG and natural gas liquids for export. While the federal government, represented by the NNPC owns 49 per cent stakes, Shell, Total and Eni own 25.6 per cent, 15 per cent and 10.4 per cent respectively.

According to data obtained from the Nigerian NNPC, the country generated $1.03bn (N314.15bn) from gas exports in 2019. Unfortunately, the collapse in crude oil price has added to pressure on the LNG prices, some of which are linked to oil.

However, the Group Managing Director, NNPC, Mele Kyari, said in March that over 12 LNG cargoes were stranded in the market globally, for the first time.

“The LNG cargoes are stranded with no hope of being purchased because there is an abrupt collapse in demand associated with the outbreak of coronavirus,” he had said.

A source had told BusinessHallmark earlier this month that NLNG is groaning that the market realities of low prices and economic lockdown induced by COVID-19 scourge had changed the business landscape including the LNG business.

“The NLNG continues to closely monitor the global impact of COVID-19 and adapts as appropriate to meet our contractual obligations and achieve resilience,” it said.

Nigeria, which is among the top 10 largest exporters of the LNG in the world, has a capacity of 22 million metric tonnes per annum. The country, which is one of Europe’s key LNG suppliers, is said to have seen demand for its cargoes in Europe tumble in the coronavirus pandemic period as buyers defer deliveries.

However, in commemoration of its 31st anniversary, the company said, “Thirty-one years ago, our founding fathers achieved the realisation of what was previously an elusive dream. On this day, the Nigeria LNG was incorporated, paving the way for the rise of one of Africa’s leading and most successful brands.

“We have recorded many milestones within 31 years of incorporation and over 20 years of production. With a 22 MTPA six-train plant on Bonny Island, the NLNG has reduced gas flaring from 65 per cent to less than 20 per cent and generated over $108bn in revenue.”

The NLNG said it had ensured the supply of 50 per cent of cooking gas in the country, adding that it had achieved 100 per cent Nigerian management and 95 per cent Nigerian staff.

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The company said, “We are the leaders in corporate social responsibility. With the federal government, we are building Bonny-Bodo road worth over N120bn; we sponsor $100,000 Nigeria Prize for Literature Prize and Nigeria Prize for Science as well as scholarships.

“We look to the future with the NLNG Train 7, increasing our capacity by 35 per cent. This will make our market presence stronger and generate more value from over 200 trillion cubic feet of gas reserves in Nigeria.”

Wealth and health

Last year, ahead of the 2019 World Environment Day  (WED) celebration, which amplified the clamour for players in the petroleum industry to curb the rising level of global air pollution, the NLNG Limited declared over $100 billion or N36 trillion gross income from gas monetisation.

The managing director of the company, Mr Tony Attah, who spoke on the company’s 20 years of operations, said the NLNG had over two decades delivered economic, environmental, commercial and social dividends to the Nigerian people.

He said the company had converted over 6.37 trillion cubic feet of associated gas to Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) in the past 20 years, thus helping to cut gas flares in the country from over 60 per cent in 1999 to less than 20 per cent.

Attah stated that apart from capturing flared gas for monetisation, the company had also delivered immeasurable financial returns to asset holders, operators and sundry stakeholders.

From the monetisation of gas hitherto being flared, he said NLNG had generated over $100 billion revenue since inception and paid over $36 billion (N12.96 trillion) to shareholders as dividends. Attah explained that $17.64 billion (N6.35 trillion) of the total dividends went to the federal government through the Nigerian National Petroleum Corporation (NNPC).

He added that another $16.464 billion (N6.0 trillion) out of the $28 billion (N10.08 trillion) used in buying the feed gas from upstream oil production sites was also paid to a government which holds an average of  58.8 per cent stake in the three joint ventures that supply feed gas to the liquefaction company.

Attah stated that NLNG is the biggest taxpayer in Africa with over $40.47 billion or N14.6 trillion in revenues to the government in the past 19 years, adding that the company paid government about $864 million in incremental company income tax (CIT) alone in 2018.

Other payments declared by the company include employee income tax, state and local government taxes as well as regulators’ levies and fees totalling over N60 billion.

Beyond dividends, taxes and gas purchase values, he pointed out that the company has also voluntarily committed to about N222 billion social responsibility projects in Nigeria, especially in rural communities.

In providing details of the company’s corporate social responsibility in the country, Attah counted that NLNG had spent over N25 billion on community projects over the years; over N2.0 billion in building world-class engineering laboratories in six Nigerian universities under its University Support Programme, and another N63 billion in counterpart funding for the construction of Bonny-Bodo road in Rivers State.

The NLNG Limited was incorporated as a limited liability company on 17 May 1989, to produce LNG and natural gas liquids (NGL) for export. The plant was built by TSKJ consortium, which was led by former Halliburton’s subsidiary KBR. Other participants of the consortium were Snamprogetti, Technip and JGC Corporation. The first train came into operation in 1999.

In September 1999, the Bonny plant started production and was expected to send its first shipment in October. It started with sales contracts with Enel for 3.5 billion bcm/y, Enagás for 1.6 bcm/y; BOTAŞ 1.2 bcm/y and Gaz de France for 500 million cu m/year. The feed gas was provided by Shell, Elf Aquitaine and Agip.

In 2013, the company signed an agreement with Samsung Heavy Industries and Hyundai Heavy Industries for the delivery of 4 LNG carrier ships that cost US$1.2 billion and that brought NLNG’s total fleet to 23 ships.

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In 2015, NLNG reported a 36.6% drop in its revenue due to declining oil and gas prices (US$6.84 billion in 2015, US$10.8 billion in 2014). 2015 was the year that NLNG reached the threshold of US$85 billion of LNG exports in 15 years of business.

In July 2016, Tony Attah was named managing director and CEO of Nigeria LNG. He replaced Babs Omotowa who led the company for five years and returned to Shell International in the Hague, Netherlands. In August 2016, Shell declared Force majeure on most of its feed gas to the facility after a gas leak on Shell’s Eastern Gas Gathering System (EGGS-1), but production kept going due to alternative sources of gas supplies.

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