By Chineme Okafor
The Nigerian National Petroleum Corporation’s (NNPC’s) bid to divest 19 per cent of its equity interest in the $8.5 billion Brass LNG project has been put on hold by other partners in the project, THISDAY has learnt.
Accordingly, NNPC is seeking to cut down its equity from the present 49 per cent to 30 per cent in the Brass LNG project, with the twin objective of reducing its cash contribution to the project as well raise funds to cover its equity.
Towards this end, the NNPC had sold the 19 per cent interest to various interested parties; the Bayelsa state government (10 per cent), LNG Japan (4 per cent), Itochu Corporation (3per cent) and a joint venture between Nigerian indigenous firm Sahara and US-based firm Sempra Energy with 2 per cent.
A source close to the Brass LNG project told THISDAY at the weekend in Abuja that the equity composition of the project which Final Investment Decision (FID) is expected to be taken within the second quarter of 2012, is still intact irrespective of NNPC’s desire to divest some of its fraction.
“The equity status is still as it is; NNPC with 49 per cent, then the rest with the remaining however, I believe the NNPC has in the course of time given out some of its equity but they cannot bring those it ceded its shares on the board of Brass LNG because the shareholders agreement precludes NNPC from doing so at this point in time.
It is after the FID has been taken that it can now announce its divestment of shares to the board for notation, but that is an arrangement just purely between the NNPC and the people that it brought with it to share in its shareholding but note that none of them have up to 10 per cent shareholding in the company and as such they cannot be represented on the board; so it is still NNPC that will represent them on the board of brass,” the source stated.
The source equally explained: “All of the companies that you hear NNPC bring on are just there due to NNPC’s interest in different things either in gas or anything, there are different things that the NNPC brought them for, but yes, we have heard something like the divestment plan but they are yet to announce to the board until after the FID because the shareholders agreement definitely preclude them from doing that but even at that they cannot sit on the board of the company.”
Commenting on the planned FID within the second quarter of 2012, the source said, “As you are aware, the GMD of NNPC has said recently that the FID will come in the second quarter of the year; I think he is of more authority to speak in that sense.
But you must understand that most of the deliverables that are needed for the FID have been exceeded, we have far exceeded most of the deliverables except for some issues that are not significant but I think they are finding a way around it.”
The source further said: “The GMD of NNPC said that by the second quarter of this year; that is around April and June 2012 and this time, we are more optimistic that the FID will eventually be taken. The deliverables which include the early site works entailed that we now have to open up access roads to areas where the tank farms will sit on, sand-pile them; that was supposed to be done for nine months but it has gone on for two years now but those remote areas where the tank farms will be situated have been laid out and we have acquired the land at the island of Brass.
“Then we have developed policies and procedures as well as a governance structure in place for every aspect of our operations; the environment, human resource and safety, Nigerian Content Act and Department of Petroleum Resources (DPR) requirements. We have in excess of 30 approvals from the Nigerian Content Board on our activities; social and economic.”
“We have done the front end engineering which was one of the first major things we did in 2005 as well as optimisation. All of that we have done and so everything is in place to see the company coming into reality with the FID even though we are an offshoot of four companies,” the source noted.
The Brass LNG project was flagged off in 2002 but progress has since then been slow. Its completion has been shifted from previous date of 2012 to 2014.
According to the implementation plan for the project, each of the shareholders will be required to pay money for the construction of the project into an Escrow account within 10 days after the FID had been signed.
NNPC originally holds 49 per cent equity in the liquefied natural gas project sited in Brass area of Bayelsa state. ConocoPhillips, Eni and Total are the other partners in the project with 17 per cent equity each.