The Nigeria Liquefied Natural Gas Company is currently in dispute with the Niger Delta Development Commission over insistence by the latter that NLNG must pay three per cent annually to commission as provided under its establishment Act. But in this interview, with Chineme Okafor, Kudo Eresia-Eke, General Manager, External Relations, NLNG warns the attempt, including the amendment to the NLNG Act, is wrong and could be counter-productive. Excerpts:
What is the attitude of NLNG to the proposal to amend the enabling Law?
The attitude of Nigeria LNG is that of defense of Nigeria because we see the amendment of this Act as one that is inimical to the economy and the progress of Nigeria. NDDC had taken Nigeria LNG to court and this case had gone through all the layers of court up to the Supreme Court of the land and all the judgements have been in favour of Nigeria LNG. So, what is happening here is that having failed at the Supreme Court, the NDDC now goes to the National Assembly to get the National Assembly to change the law. This is a dangerous precedent for Nigeria.
What was the substance of the litigation?
Exactly the point, that three per cent of our annual budget should be paid to the NDDC. Our argument is simple. First of all Nigerians should be aware that Nigeria LNG does not flare gas. Nigeria LNG is a cleaner of the environment and not a desecrator of the environment in any way; which is great. Now the spirit of the NDDC Act is to ensure that those who produce oil and gas from Niger Delta recompense in some form. Nigeria LNG doesn’t produce anything in the Niger Delta.
All it does is buy gas from the upstream production companies. It buys gas that would have been flared and liquefies and exports it thereby converting waste into wealth. And it is important to note that we buy this gas in the same way that petrochemical companies buy gas. It buys gas in the same way that fertiliser companies buy gas. It buys gas the same way that electricity companies buy gas. So, it is being singularly targeted for reasons that are not obvious to us at least.
How specifically would an amendment of the Act hurt your business?
It took Nigeria 30 years of struggle to get Nigeria LNG Limited, 30 years since the late 50s’. It was not until 1989 when an Act was enacted that investors had the confidence to invest. It took them only three weeks after the Act was put in place for the investment to be made, to show you that the back bone upon which the company rests is indeed that Act. Government actually gave guarantees and assurances which have been validated over several administrations to say that those guarantees and assurances will not be tampered with.
Indeed the Central Bank Governor wrote letters of reassurance. The Minister of Finance wrote letters of re-assurance. The minister of Justice and the Attorney General of the Federation wrote letters of re-assurance. Those are the strengths upon which these investments were made. Now, our worry is what if Nigeria becomes a promise breaker, a desecrator of sovereign agreements, non-abider with agreements it promised to preserve? We need investments in our nation, and cannot be breaking confidence of existing investors. This is Nigeria’s most successful company. If we can do this to our most successful company, what signals then are we sending to potential investors and the rest of the world?
In addition to that I would just like to say that if we allow this to go, this is the beginning of the end of Nigeria LNG because you really are hitting at the foundation of the company at the time when world oil and energy prices are low, and there is uncertainty in the global business environment. This is a time when everybody is supporting their own oil and gas companies to prosper. We find that happening in the United States; we find that happening in Malaysia; in Oman; in every part of the world, but here in Nigeria, we are digging at the foundation of our representation in the world as far as that is concerned.
What was the substance of the Supreme Court decision about the proposal on NLNG’s payment of three per cent to NDDC?
Basically, it was to confirm that these guarantees have been given and that there ought not to be any amendment to it. So, if Nigerians begin to witness the demise of NLNG it is because of this. At this time, we need at least an investment of $1 billion annually to keep NLNG running full. Now the money is going to come straight again from investors, but with this kind of behaviour, with this kind of attitude, this kind of amendment, obviously that kind of money would not come.
Now we need $25 billion from investors because we are expanding; this kind of amendment will drive all of those away.
Why are you averse to the amendment knowing that it is in the interest of your primary area of operation, the Niger Delta region?
If we go into Train 7 projects, 18,000 jobs will be created. Now, I want you to imagine the level of security and peace that these would provide and that is what we are kicking away because of this amendment; but I believe that all hope is not lost because the Senate is there and they are listening and most of them have business persuasions.
The enabling Act made a proviso for an amendment at the expiration of the tax holidays after 10 years or when the cumulative sales price of gas attains $3 and other incentives that were contained in it. What is the challenge with this proposal to amend the NLNG Act?
Let me state clearly that Nigeria LNG is now paying tax, which is the reason Nigeria LNG is the highest tax paying institution in Nigeria today. Majority of the pioneer status incentives being referred to have expired. As at today, we have paid $5.5 billion in taxes, provided $15 billion in dividends and paid N51 billion in terms of taxes and levies.
Where else in the world does an LNG company enjoy such operating conditions?
Qatar enjoys similar incentives; Oman supported by government enjoys similar incentives. Malaysia enjoys similar incentives. Angola next door enjoys similar incentives. Indeed the United States now is supporting its own gas company to do virtually the same. So, there is no question that nations that have interest in the development of their oil and gas sector have to invest. Qatar now earns $61 billion annually from LNG alone. Nigeria has earned $15 billion and more could still be earned if we keep to our promises and support the growth of the company.
Let me also say this, what Nigeria invested was $2.5 billion. What it has earned as at today is multiples of that, $15 billion in terms of dividends. The company has generated $90 billion in terms of revenues. It has paid through gas purchase $23 billion. It has paid in terms of taxes; it ranks the highest, $5.5 billion. What else do you expect a good company to deliver?
How would you address agitations by NLNG host communities about your CSR initiatives?
There are no agitations. We live in one of the most peaceful host communities in Nigeria, and that is Bonny. This is a community we have provided 24 hours electricity. We have more fidelity of electricity in the average house in Bonny more than anywhere else in Nigeria. We have invested deeply in our host communities. As at today we have also promised the community in a new Memorandum of Understanding, three billion naira every year into a development fund to be managed by that same community, for 25 years. So, questions about community development, if there is an example, an epitome, one to show as a successful model, it is Nigeria LNG.
NLNG seems to be appealing to sentiments rather than addressing the obvious devastation of the region where you operate. What can you say to that?
Yes we have to appeal to sentiments but we also have to appeal to facts. We cannot run from facts. Facts are stubborn. The reality and we shall continue to say so by the way is that NLNG is being targeted. NLNG buys gas. My question is why is petrochemical not being charged the same? Why are those who are involved in using gas to generate electricity not being charged the same? Why are those involved in using gas to produce fertiliser not being charged the same? Why is NLNG being singled out?
Does this proposed amendment have any potential of affecting your Train 7 project?
Yes, it has a great impact on Train 7and 8; the moment we pass this amendment and essentially abrogate the Act; because without the assurances and guarantees, the Act is actually just hollow. Then investors’ confidence is totally destroyed. They are the ones we are relying upon to provide the $25 billion required. Let me also say that the shareholder company upstream operators are already paying the NDDC levy. Shell pays the NDDC levy, Total pays the NDDC levy, ENI pays NDDC levy. Now Nigeria LNG goes and buys gas upon which all the NDDC levies have been paid, and then you ask Nigeria LNG to pay another three per cent. What are you doing, double taxation?
Your insistence that the NDDC levy of three per cent on your annual budget will hurt NLNG’s operations is not clear. Can you explain how that is possible given how big the company is?
Let me illustrate this in a very simple way that you can understand. Liken the guarantees and assurances to an egg; now it doesn’t matter whether you puncture a little hole in that egg, or crack it, it is broken. It is the guarantees and assurances that we are trying to protect, that is what the rule of law has given. Now the moment we violate the rule of law by puncturing the guarantees and assurances, it is finished.
Enabling Acts like the NLNG Act with lots of incentives and exemptions are usually put in place to enable investors recoup their investments. How much has the NLNG Act served that purpose?
I already had reeled out some figures here. I have also told you how much we invested as a nation and what we have got back in return. How did we do that? We did that because we were reinvesting. We grew from a two train operation to a six train operation. That is how much Nigeria LNG has developed.
Now let me also say that much of what is coming out from NLNG now, 70 per cent of it goes to the government. So, how else do you want to be repaid? This 70 per cent includes 49 per cent of the dividends plus all the taxes that we have mentioned. We have said already that we are no longer enjoying any tax holidays. That has long expired. We are paying fully in accordance with regulation and the law.
All we are saying is that the rule of law needs to be obeyed in the interest of our country otherwise investors will think that we are lawless and if they think so, then investments will not come. This is the main argument. In terms of supporting our local communities, we have already voluntarily, no one asked us; we set aside N60 billion to support the federal government towards the construction of a road linking Bonny community to capital city of Port Harcourt.
Should all the arms of government ratify the proposed amendment, what will be NLNG’s reaction?
There are provisions within the Act today that have recommended how any amendments should be done and they are pretty simple and straightforward. All we are saying in effect is let us do it that way. That is what I am saying. But the devastation on the Nigerian economy should be very obvious.
Now we have NNPC representing the Federal Government on this venture. NNPC is positive on the side of Nigeria LNG because it understands the business of oil and gas. The honourable minister of petroleum is positive on the side of Nigeria LNG, because he understands the business of oil and gas. PENGASSAN, the foremost group in the oil and gas industry, made up of largely Nigerians, is supportive of Nigeria LNG, because they understand the business. We have patriotic Nigerians who understand the implications of this amendment on the nation’s economy.
Eventually, I would say that this is in the hands of Nigerians now to support the Nigeria LNG brand which has become known as Nigeria’s success story; a company that has unwavering commitment to the actualisation of its vision as a global LNG company, helping to build a better Nigeria.