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Disquiet over NLNG Act amendment

By on May 5, 2017

The National Assembly is set to pass a bill seeking to amend the Nigeria Liquefied Natural Gas (NLNG) Act to compel the NLNG to pay 3 percent of its total annual budget to the Niger Delta Development Commission (NDDC) Fund.

The bill, sponsored by Minority Leader, Leo Ogor (PDP, Delta) has generated disenchantment among industry players.

Many stakeholders, including the Nigeria National Petroleum Corporation (NNPC), have vehemently kicked against the passage of the bill.

Titled the NLNG Fiscal Incentives, Guarantees and Assurances Act (Amendment) Bill, it was first introduced on the floor of the House on February 24, 2016.

A report on the bill laid on December 6, 2016 is before the House of Representatives, awaiting consideration. Although it was listed on the Order Paper of last Thursday, its consideration was stepped down.

The bill went through second reading on March 17 and was referred to the committee on gas resources, chaired by Rep Fredrick Agbedi (PDP, Bayelsa) on the same day.

It was gathered that before the public hearing, the committee went through intense pressure from both within and outside the House on the bill.

When the report is eventually considered and adopted by the House, it will then pass through third reading after which it will be transmitted to the Senate for concurrence.

As soon as the Senate concurs with the contents of the bill, it will be transmitted to President Muhammadu Buhari for assent.

The Bill to Amend the NLNG (Fiscal Incentives, Guarantees and Assurances) Act proposes that the Act be amended by adding Section 7(b) to the Principal Act, to read as follows:

“7(b) Notwithstanding Section 7 or any other provisions of this Act, the Nigeria Liquefied Natural Gas Limited shall pay 3% of its total annual budget to the Niger Delta Development Commission (NDDC) Fund, as required by Section 14 subsection (1) and (2) (b) of the NDDC Establishment Act, 2000.”

NLNG, owned the Federal Government, represented by the Nigerian National Petroleum Corporation (NNPC) 49 per cent; Shell Gas (25.6 per cent); Total (15 per cent) and Eni (10.4 per cent), was incorporated in 1989 to produce liquefied natural gas as well as natural gas liquids for export. It commenced production in 1999.

The bone of contention has been the part of the NLNG Fiscal Incentives, Guarantees and Assurances Act, the section pertaining to assurances and guarantees which the country, through the law, committed to investors that it will honour the Act and not change it without recourse to, and agreement by all the shareholders.

Section 9(2) of the Act for instance, states among other things that, while the venture (NLNG) shall be subject to fiscal regime, such fiscal regime, it “shall not be amended in anyway, except with the written prior agreement of the Government, the Company and each of the Company’s shareholders.”

It is this agreement structure that enabled the shareholders to invest over $16 billion in the NLNG which has generated $95 billion as revenues as at 2016; paid $15.7 billion as dividend and over $5 billion as taxes to Nigeria as well as committed and reduced gas flaring from 65 per cent to about 25 per cent now.

Billions of dollar investments at stake

Experts say all of the achievements by the NLNG company are now in jeopardy; that if the proposed amendment by the House sails through it could result in immediate loss of investor confidence.

“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),” Managing Director of the company, Tony Attah, said at a recent oil conference in Abuja.

“Another impact will be the potential loss of about 18,000 jobs required for the construction activities of Train 7,” he also said.

Industry stakeholders have expressed concern over the plan and cautioned against the proposed amendment.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, also described the move by the lawmakers as “very disturbing and is sending wrong signals to investors about how business is done in the country.”

Oil unions led by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) also kicked against the amendment which they considered as anti-investment.

Speaking to Daily Trust, the National Industrial Relations Officer of PENGASSAN, Comrade Nduka Ohaeri, said they would use whatever mean possible to resist the amendment including protest and strike.

He said the unions have already made their position known to the lawmakers that there was no need for such process at a time the oil industry was facing a lot of challenges and low investments.

“Instead of wasting energy on amending this law, why not concentrate on enacting laws that ensure that proposed OK LNG and Brass LNG come to fruition.

“Let them use that energy to pass laws that will encourage investment in the sector not to chase away investors like this one,” Ohaeri said.

Some lawmakers react

Some lawmakers, who spoke to Daily Trust, said the bill would not see the light of the day, while others said it was brought out of “mischief.”

Rep Mohammed Musa Soba (APC, Kaduna) said: “This is not something that anybody should argue about. NDDC derives its funds from the Consolidated Revenue, and anything that has to do with Consolidated Revenue is a constitutional matter.

Another lawmaker, who did not want to be named, said: “It’s all joke. This isn’t something we should even talk about. It’s all mischief. You know this is a House of 360 members who represent different constituencies with different interests. For me, this is one of those interests. It’s just to score a political point.”


[Daily Trust]