Hopes for economic and industrial growth will be dashed if inhibitors such as the removal of legislative frameworks like the Nigeria LNG Limited (NLNG) Fiscal Incentives, Guarantees and Assurances Act, are permitted in the Nigerian gas industry, the Managing Director of NLNG, Tony Attah,has said.
Speaking at the ongoing 2017 Nigeria Oil and Gas Strategic Conference and International Exhibition in Abuja, he said: “It is time for gas. We need deliberate decisions and policies to decouple oil from gas and attract investment. We need to do that now. Investments in the gas and LNG industry are declining. It is already difficult as things stand to find Foreign Direct Investment (FDI) and growth in the gas industry has been cautious after the recent down-beat global crude oil price. In addition to this, Nigeria is ranked 167 of 189 countries in the ease of doing business index.”
The conference is titled: “Nigeria’s Gas Sector – The Catalyst for Economic and Industrial Growth?”
Explaining further the MD according to a statement issued by General Manager, External Relations Division, Kudo Eresia-Eke: “Yet, experts maintain that there is the strong likelihood of increased gas demand in future and that is where the silver lining is. However, if we continue with the self-inflicted barriers in our gas industry, we might miss the opportunity to make this country a major player in the global energy mix,” he said.
“The industry has benefited the economy, diversifying the revenue and export base as well as channelling FDI into the country, creating jobs and contributing significantly to the local manufacturing capacity in the country, but all that would be laid waste if we continue shift policies and renege on international agreements that put some framework into the business and generated investor confidence. We need to be creative with incentives that will attract investments and preserve the sanctity of contracts and agreements for all of this to come together in our national interest.
“Take Nigeria LNG for instance. Only recently, the House of Representatives began moves to amend the NLNG Fiscal Incentives, Guarantees and Assurances Act, a key enabler responsible for the success of the company. NLNG is a successful Nigerian company, with an asset base of $11 billion as well as the fourth largest LNG plant in the world. It has generated $90 billion in revenues as at 2015, paid $5.7 billion in taxes as well as committed more than $200 million to corporate social responsibility projects especially in the areas of capacity building and infrastructure development. All these were achieved with a management staff entirely made up of Nigerians, with 95% of the total workforce made up of Nigerians.
“In addition, NLNG has contributed significantly to the domestic LPG industry, supplying some 40% of cooking gas. This intervention continues as part of strategies and initiatives aimed at deepening the availability and usage of cooking gas in Nigeria. The company has helped strengthen in country manufacturing capacity through several projects such as the recent acquisition of six new LNG ships built by Samsung and Hyundai Heavy Industries of South Korea. Courtesy of that single initiative, several Nigerian companies were able to export goods worth more than $10 million to Korea for use in the construction of the six ships. There is also the N2 billion University Support Programme where the company supports capacity building in universities among others.
“But all of these achievements are in jeopardy with the proposed amendment by the House. The amendment will result in immediate loss of investor confidence. This is especially pertinent in view of the imminent requirement of over US$1 billion investment every year in the upstream for the next few years in order to guarantee steady gas supply just to ensure that NLNG’s Trains 1 – 6 can be kept full over the contracted life of the plant. If shareholder confidence is negatively impacted, it would mean that those funds will not be forthcoming, and this would clearly constrain even the basic survival of NLNG’s current operations and Nigeria’s opportunity for gas development.
“It also means an immediate loss of foreign investment of US$25 billion in respect of Train 7 investment (USD$15 billion by the upstream and USD$10 billion for construction). Another impact will be the potential loss of about 18,000 jobs required for the construction activities of Train 7,” he said.
Attah pointed out that an amendment or change in the NLNG Act portrays Nigeria as a promise-breaker and untrustworthy, sending a wrong signal to the investment community regarding Nigeria’s sincerity in keeping to agreements with investors and the international community.
Other factors responsible for the success at NLNG, he said, were the shareholding and governance structure of the company which made the company an independent Incorporated Joint Venture, guaranteeing an independent Board of Directors, minimal interference by the government, effective decision making as well as funding for its projects.
He stated that the Federal Government should focus on how to grow the NLNG model in the industry and get moving on the Natural Gas Policy, implement fiscal reforms in Joint Ventures, Production Sharing Contracts and Service Contracts as well as embed adequate institutional reforms while ensuring that the Petroleum Industry Bill is passed into law without delay.
