… Renegotiate terms with NLNG partners rather than executive fiat, analysts tell lawmakers
Maikanti Baru, group managing director of the Nigerian National Petroleum Corporation (NNPC) has said that a Final Investment Decision (FID) on Nigerian Liquefied Natural Gas (NLNG) train 7 will be taken in about 36 months’ time.
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 the first time a major stakeholder is actually putting a timeline to achieving this goal.
A $25billion investment is required to complete construction 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.
Baru said that lack of security in gas supplies had been a major impediment to 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 house committees on oil and gas say that since inception NLNG have contributed nothing to both the Niger Delta Development Commission (NDDC) and the Ecological Fund office, which are statutory provisions for oil and gas companies 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, twenty years of business, you go back to the drawing table and negotiate as civilised people rather just coming to demand things, it sends wrong signal, we should be a little bit refined in how we go about these things so that people will have confidence,” he said.
Also Yemi Oke, professor of energy resources law at the University of Lagos argues that NLNG Train 7 and Brass LNG trains have been affected by personalising business decisions based on who is the president or GMD of NNPC.
“Investment decisions should not be about the origin of the president or where the GMD of NNPC comes from, these considerations do not make for a successful and viable investment decisions,” he said.
Gaius Obaseki, former GMD of NNPC, who was also on the programme called on the federal government to prioritise the LNG Train 7 investment and later come to Brass while Olokola LNG should be put on hold for a later date.
