The Nigeria Liquefied Natural Gas (NLNG) Limited has been a remarkably successful business model in Nigeria’s oil and gas space and keen observers of the sector have wondered how this can be replicated.
At the ongoing BusinessDay’s Energy Series with a focus on gas as the fuel fo the future, Tony Attah, managing director and CEO Nigeria LNG attributed this to a robust system of governance, which ensures transparency and accountability.
In the case of the upstream, the average equity holding is 57 percent from the government. There are some that have 60 – 40 percent ratio or 60 – 20 – 20 percent. In the case of some Special Purpose Vehicles, it common to find 55 percent for the Nigerian National Petroleum Corporation.
But the NLNG model is different. NNPC is the single largest shareholder at 49 percent, but there are three International Oil Companies, Shell with 25.60 percent, Total 15 percent, and Eni with the remaining. The IOCs have a combined majority.
READ ALSO: Oil majors could divest $100bn worth of assets, but are indigenous companies ready?
“When it comes to funding which has been a major issue upstream, every partner will have to contribute its equity fund. In the case of the entire upstream JVs government is required to contribute 57 percent of the cost of running the business. If you look at the current realities of government funds, you see that the upstream continues to struggle,” Attah said.
The NLNG is an incorporated joint venture unlike the traditional unincorporated joint ventures in the upstream. The incorporated joint venture is both the company and the business, unlike the traditional joint ventures where the companies are different from the joint venture.
Another factor responsible for the NLNG model’s success is that the company is licensed to fund itself. It goes out to the financial and capital markets to raise funds for its operations, unlike the traditional joint ventures where equity contributions fund the business.
In the early days the shareholders put in $5.50 billion but this was a loan and has been paid back. The company is independent today.
“We do not cash call issues because we are self-funding. We have a standalone balance sheet, a standalone profit and loss account. We have published all monies earned in last 20 years in the fact and figure book. Transparency and accountability are key factors in the success of the NLNG model,” Attah said.
The model is immune to external influences. The senior executives report to the board of directors, the ultimate governing body of the company. There is little interference in terms of the day to operations of the business.
