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NLNG generated $30bn in 25 years – MD

By on October 24, 2014

Since its incorporation in 1989, the Nigeria LNG Limited has generated over $30bn revenue for the country, the Managing Director and Chief Executive Officer of the company, Mr. Babs Omotowa, has said.

The NLNG initiative has made it possible to generate income from gas that would have been flared.

Omotowa said the achievement was in line with the motives for incorporating the company, which are to help end gas flaring and also monetise Nigeria’s vast natural gas resources.

He revealed this in a paper presented at the 46th Annual Conference of the Chartered Institute of Personnel Management, which was made available to our correspondent on Wednesday.

NLNG is owned by four shareholders: the Federal Government of Nigeria, through the Nigerian National Petroleum Corporation (49 per cent); Shell (25.6 per cent); Total (15 per cent) and Eni (10.4 per cent).The company has two wholly-owned subsidiaries: Bonny Gas Transport Limited and NLNG Ship Management Limited.

NLNG, Omotowa noted, had since its incorporation converted over 4.2 trillion cubic feet of associated gas that would have been flared to Liquefied Natural Gas and Natural Gas Liquids exports, thus helping to reduce gas flaring by Upstream Companies to less than 25 per cent and “generating over $30bn that would have been flared.”

The NLNG boss explained, “In the 1950s, the discovery of crude oil in Nigeria also led to inadvertent discovery of gas, which was seen as a waste product at that time as there was no market or infrastructure for it. It is estimated that the amount flared initially was 2.5 bcf/d, that is 75 per cent of produced gas and the rest were re-injected into the wells.

“Nigeria has reaped significant benefit from NLNG in terms of its 49 per cent dividend, 30 per cent Company Income Tax, Feedgas Purchases, among others. To give you a perspective, the company’s income tax payment this year represented about five per cent of the total revenue projections of the government for 2014.”

According to him, putting together an LNG value chain anywhere in the world is a major challenge; finding the gas, selling it, funding, constructing, operating the plant and shipping to customers are no easy feats.

He added, “Launching a project of this complex dimension in a business environment like Nigeria would even be more difficult if not near impossible and many critics initially believed that the NLNG project would not get past the starting line; others thought that even if we passed the starting line, we could not finish on time and within budget, or even if built, the plant would not be operated to international standards.”

Omotowa said in spite of the abundant potential that Nigeria had, there had been fundamental challenges preventing it from maximising the potential. These challenges, he noted, included poor power supply, poor transport infrastructure, overlapping legislations and aggressive regulators seemingly more focused on rent collection, and so on.

He explained, “Shortage of electricity is one of the biggest challenges facing businesses in Nigeria; our power stations generate just 4,000 megawatts of electricity, which is quite meagre compared to a national need of over 40,000MW.Transport bottlenecks make supply chain unstable and erratic.

“Above all, the rules of the game for business can change quickly and thus cause grave uncertainties as regards creating an enabling environment to attract investments, technology and people.”

He said an investment of $7.5bn in the NLNG dream, had now yielded revenue of $85bn to date, with a $13bn asset base.

He said, “NLNG’s business has strong impact on key macroeconomic variables – NLNG’s contribution to the Gross Domestic Product has increased to four per cent in 2008.

“In addition, we currently supply over 80 per cent of cooking gas (Liquefied Petroleum Gas) in Nigeria and recently increased our dedicated volumes by 67 per cent and are prepared to increase it by 1000 per cent to get more Nigerians to switch to cooking gas rather than continue to use firewood and kerosene, alternatives that have environmental and health disadvantages.”

NLNG said uncertainty in regulatory policies was a big challenge for the business, and that, “As more LNG projects come on stream, new sources of gas are discovered, with our plant starting to age and a growing complex business environment, the future headwinds are strong.

“We are therefore already looking at our strategies to achieve even beyond these boundaries as the window of opportunities closes.

He said NLNG was analysing global trends including Shale gas competition, new mega LNG plants in Australia and East Africa threats to its business. For example, the technological improvements to Shale gas extraction have doubled the world reserves in LNG.

It had led to the United States changing from being an importer to a likely exporter, and Henry Hub gas prices have fallen by more than 85 per cent from $15/mmbtu in 2005 to less than $4.50/mmbtu today.

These global challenges, the NLNG boss explained, were not made easy by the local challenges from the uncertainties of policy changes, delayed passage of the Petroleum Industry Bill, gas developments for domestic use, sustaining feed gas supply, ageing plants and ships, and continued tension between a Nigerian culture and a world-class culture.

“So we are already looking at what we need to do differently from growing our volumes by the addition of a seventh train so we can compete with volume in the global market and use that to offset any reduced prices,” he said.

He said the NLNG Train 7 would allow the company to add eight million metric tonnes or 40 per cent to its current production capacity, while also enabling it to attract over $12bn investments, create over 18,000 construction jobs and yield additional $2.5bn revenues.

Having come to the end of the company’s tax holiday period, Omotowa says about 70 per cent of value generated in NLNG today goes to the government and people of Nigeria. “So, a Train 7 is a big value to Nigeria and together with shareholders we are continuing to work on this,” he added.

 

[Punch]