Raising Investor Appetite in Nigerian LNG

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The House of Representatives recently acceded to the demand of the oil-producing communities to pass a bill to amend the Nigerian LNG Act. Ejiofor Alike writes that should the Senate concur, the federal government should put in place more generous incentives and guarantees for future LNG projects to allay the fears that the amendment could jeopardise investments

Apart from the contentious Petroleum Industry Bill (PIB), which gathered legislative dust for 16 years without passage, following the disagreement between the operating companies and the federal government over the bill’s fiscal regime, the next controversial bill in Nigeria’s oil and gas industry is the bill to amend the Nigerian LNG (Fiscal incentive, Guarantees and Assurances) cap. N87, laws of the Federal republic of Nigeria 2004, which was recently passed by the House of Representatives.

The bill seeks to mandate NLNG Ltd, “to make its statutory contribution to the Niger Delta Development Commission (NDDC) and for other matters connected therewith.”
Specifically, the bill seeks to end NLNG’s status as dollar-denominated, which was designed to protect the company and its shareholders against the Naira’s flip-flop.

When the Senate concurs, NLNG will also pay three per cent of gross freight on international inbound and outbound cargo to the Nigerian Maritime Administration and Safety Agency (NIMASA).

Of all the provisions in the bill, the most contested is a new provision – Section 7(b), which now provides that “Notwithstanding Section 7, or any other provisions of this Act, the Nigerian Liquefied Natural Gas Limited shall pay three per cent of its total annual budget to the Niger Delta Development Commission Fund as required by Section 14, Subsection 1 and 2 (b) of the NDDC Establishment Act, 2000”.
The bill, which has scaled through third reading at the lower chamber of the National Assembly, would be forwarded to the Senate for concurrence.

Controversy trails the bill
Expectedly, NLNG and its shareholders – NNPC, Shell, Total and Eni have kicked against the amendment as it will force them to contribute more into the government coffers for the benefit of the oil-producing communities, thus reducing their dividends.

NLNG had stated that the direct consequence of the passage of the bill by the House of Representatives would be to project Nigeria as a sovereign-state promise breaker and an unsuitable destination for investments.
NLNG’s General Manager, External Relations of the company, Dr. Kudo Eresia-Eke, had argued that the main thrust of the guarantees and assurances was to assure the foreign investors that their investments would be protected by the non-amendment of the NLNG Act.

On his part, the Managing Director of Nigeria LNG, Tony Attah, had also argued that the proposed amendment would hamper the present administration’s ease of doing business agenda and in the current administration’s determination to attract direct foreign investment to Nigeria.
Attah argued that investments are unlikely to flow into an environment where contracts and agreements are flagrantly violated as is imminent in this instance.

But the oil –producing communities in the country, through the Traditional Rulers of Oil Mineral Producing Communities of Nigeria (TROMPCON), have also countered NLNG’s argument, insisting that “there can be no greater guarantee, assurance or incentive for investment in the Niger Delta or elsewhere, than a practical demonstration of concern for the people”.
TROMPCON, through its National Chairman and paramount ruler of Ngbirichi in Imo State, Eze Akuwueze Ikegwuruka, said the host communities were worried that the “NLNG continuously canvasses a crooked capitalist-inspired view on the amendment of the Nigeria LNG Act.”

According to TROMPCON, NLNG has described the removal of the guarantees and assurances as a huge error, inimical to the growth of Nigeria and a direct collision with the federal government’s drive to attract Foreign Direct Investment (FDI).

“This argument depicts NLNG as an organisation that idolises economic concerns amidst the groundswell of global transition from pure to conscious and creative capitalism. This argument also depicts NLNG as an irresponsible corporate citizen. We find it extremely exploitative of the NLNG to keep canvassing solely economic concerns, with scant regards for the wellbeing of the Niger Delta and its people,” TROMPCON said.
According to the oil-producing communities, the new norm among big business organisations worldwide is to accord as much concern to profits as to people and the planet.

TROMPCON argued that there is a growing consensus among top leaders of big businesses, especially in developed countries, that inordinate economic concerns will do humanity no good.

“It is important to note that Heads of States and Governments heralded the celebration of the 70th anniversary of the United Nations by making a commitment to achieving sustainable development in its three dimensions-economic, social and environmental-in a balanced and integrated manner. The duplicity of NLNG is highlighted by the fact that the governments of The Netherlands, France and Italy, home countries of its major shareholders, were among those that endorsed Agenda 2030, which encapsulates the abovementioned commitment,” TROMPCON added.

The traditional rulers condemned what they described as the deceitful attempts by NLNG to blackmail the federal government “by dangling the carrots of growth and FDI in a bid to perpetuate guarantees and assurances that have actually expired”.

“We strongly disagree that the removal of the guarantees and assurances in the Nigeria LNG (Fiscal, Guarantees, Assurances, and Incentives) Act 2004, was a huge error. We believe that the huge error, which the House of Representatives has graciously corrected, was the special exemption granted in perpetuity to NLNG by Section 9 of and Clauses 2, 3, 6 and 15 of the 2nd Schedule to the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 2004,” the traditional rulers added.

“It saddens us to hear the kinds of argument being advanced by the NLNG Ltd. How can it claim that it is not subject to any new laws, taxes, dues or other obligations enacted or prescribed in Nigeria after 1993, except such laws, taxes or obligations are generally applicable to all companies registered in Nigeria? The special exemption granted to NLNG Ltd by virtue of Section 9 of and Clauses 2, 3, 6 and 15 of the 2nd Schedule to the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 2004, previously Decrees Nos. 39 of 1990 and 113 of 1993, cannot be in perpetuity,” TROMPCON said.

The traditional rulers argued that the NLNG Act violated the laws, public policy and national interest of Nigeria in several other ways.
“NDDC’s direct interest is in highlighting the unconstitutionality of the above cited provisions of the NLNG Act, which the Act purports cannot be amended (by the National Assembly) except with the prior written consent of NLNG Ltd and each of its shareholders. NLNG Ltd’s defiant posture is an unlawful and gross impediment to the fulfillment of the development objectives spelt out in the NDDC Act,” the traditional rulers added.

Raising investor appetite
Rather than insisting that the incentives and guarantees should be perpetual, NLNG’s shareholders should collaborate with the federal government to develop more generous incentives to woo investors to sign the Final Investment Decision (FID) for Train 7 of the plant.

The damaging campaign that the amendment of NLNG Act could kill investments in Nigeria has been described as a misconception by the oil communities and this is capable of eroding investor confidence if not discouraged.
Speaking recently in Channels TV programme, the Group Managing Director of NNPC, Dr. Maikanti Baru identified some concessions and incentives approved by the late Head of State, Gen. Sani Abacha to incentivise investors to build the NLNG plant at Bonny Island plant.

Baru said the shareholders had demanded that NNPC’s stake in NLNG should not be up to 55-60 per cent as in the joint ventures but 49 per cent, and Gen. Abacha approved their request.
According to him, the foreign shareholders had also demanded that the NNPC should pay its 49 per cent contribution to the building of the plant upfront, which the late head of state also approved.

NNPC, Shell, Total and Eni should collaborate with the federal government to work out generous incentives similar to late Gen. Abacha’s concessions, to encourage investors to part with their money for Train 7, instead of the ongoing campaign that the amendment of NLNG Act would kill future investors.

Also speaking on the TV programme, the Chairman of Brass LNG and former Group Managing Director of NNPC, Dr. Jackson Gauis-Obaseki said the federal government should sit down with investors to find out why they were relocating to other countries.

“They are sanctioning projects even around us. I was reading in the papers that Exxon just bought gas field in Mozambique and that is just around us. So, there is something wrong here. The people who are there need to sit down and ask: What is it that we are not doing right? You need to talk. I repeat in every forum, I find myself, I say, enough of lamentation. Let us now sit down. Why should Eni leave here and go and sanction a project in Mozambique? They have been here for 60 years. They were the first joint venture partner we have. Why should ExxonMobil go and buy gas field in Mozambique? Why should Total be looking for what to do in Ivory Coast when they are established here? There is something wrong,” Obaseki explained.

Obaseki argued that if the government had sat down to implement the Brass LNG project, OKLNG should have just followed.
“Yes, it is true that I chaired but I can tell you that nobody has ever asked me: what do we need to do? Yes, I can say that; I am alive,” Obaseki added.
He noted that it took almost 30 years for Nigeria LNG to come on stream but added that it was not unusual with LNG projects, stressing that what is important is to maintain a focus.