Final investment decision on US$25 billion LNG Train 7 expected in 36 months

… Renegotiate terms with NLNG partners rather than executive fiat, analysts tell lawmakers
… Baru calls for quick passage of PIB

The Final Investment Decision (FID) on Nigerian Liquefied Natural Gas (NLNG) train 7 will be taken in about  36 months’ time says Maikanti Baru,  group managing director of the Nigerian National Petroleum Corporation (NNPC).
Baru said all the fundamental issues delaying the FID including; supply certainty, pricing and legal and commercial frameworks have almost been completed. He disclosed this on a monitored interview on the Nigerian Television Authority (NTA) on March 13.
“Train 7 is very likely because all the indications for having the various parameters to be able to move forward with investments are there. We are finalising the major stumbling blocks in terms of gas supply, in about 36 months we should be able to take FID on Train 7,” said Baru.

NLNG management and top officials of the NNPC have always maintained that a final investment decision on the project was close. This is however the first time a major stakeholder is putting a timeline to achieving this goal.

Baru urged the National Assembly to pass the Petroleum Industry Bill (PIB) into law to dispel the air of uncertainty around fiscal terms. He also said that the recent move by the National Assembly to amend the NLNG Act had dampened the optimism of investors in the industry.

Meanwhile, a $25billion investment is required to complete construction  on NLNG’s train 7 and 8 according to NLNG boss, Tony Attah. If the both trains are completed, Attah says it could unlock three times as much gas as currently produced by the country and create thousands of jobs.

Currently, early site preparation work has been initiated and sales and purchase agreements (SPAs) have been sealed with five buyers, including Suez LNG and BG Gas Marketing, among others for the project.

On completion of LNG Train 7, it will lift total production capacity of the plant to 30 metric tonnes per annum (mtpa) of LNG from a present 22 million tonnes per annum, mtpa capacity from six NLNG trains.

The implications for the economy are massive. “Train 7 investment is capable of generating 18,000 jobs, enabling Nigeria resolve youth restiveness in the country,” says Tony Attah, the managing director of NLNG, at a recent meeting with lawmakers.

Over the years, the company has paid $28bn as tax income to the Federal Government and provided 12,000 construction jobs each year. The NNPC GMD described the Bonny NLNG as one of the biggest success stories of the Nigerian oil and gas industry since it came on stream in 1995, affirming that the project has generated $90 billion revenue, $30 billion dividends and contributed 4 per cent to the country’s Gross Domestic Product since inception.

Baru said  lack of security in gas supplies had been a major impediment to the take off the project, as LNG market operates a forwards contract where supplies are guaranteed for over 10 year period.

But analysts say the issues are deeper than that. They cite the current moves by lawmakers to amend the NLNG Act without recourse to negotiations with the foreign partners.

The Senate and House of Representatives committees on oil and gas say that since inception, NLNG has contributed nothing to both the Niger Delta Development Commission (NDDC) and the Ecological Fund Office, which statutory provisions for oil and gas companies are operating in Nigeria.

However, sections 2 and 3 of the NLNG Act, states, “The venture shall be subject to the fiscal regime contained in the provisions of this Act. Such fiscal regime shall not be amended in any way, except with the prior written agreement of the government, the company and each of the company’s shareholders.”

But the lawmakers do not have the patience for legal minutiae.

“This is a wrong signal going to the international community that you cannot do business with Nigerians because they will change the rules midway into the game,” says Alex Neyin, the CEO of Gacmork Nigeria Limited, and a former Operations Manager for Chevron Oil Company Nigeria.

He further said, “There is nothing bad, 20 years of business, you go back to the drawing table and negotiate as civilised people, rather just coming to demand things, it sends wrong signals. We should be a little bit refined in how we go about these things, so that people will have confidence,” he said.
Baru informed that the Federal Government would do everything to ensure the take-off of Bonny NLNG Train 7 and the Brass LNG in the months ahead, after which the Olokola LNG would come on board if the fundamentals were strong.
He stated that the NNPC was refocusing on the Brass LNG and rebuilding the confidence of investors on the project after the exit of Conocophillips a few years ago, adding that Nigerians and the Federal Government would gain a lot from the project in terms of taxes, royalties and profits.

 

  ISAAC ANYAOGU