Disagreement over amendment of NLNG Act deepens

….As NLNG remits $15.7bn to FG, $672.4m VAT in 13 years

By Prince Okafor

STAKEHOLDERS in Nigeria’s oil and gas industry have disagreed over the amendment of Nigeria Liquefied Natural Gas, NLNG, Act expected to compel the Nigeria Liquefied Natural Gas Limited to remit three per cent of its budget for the development of the Niger Delta through the Niger Delta Development Commission, NDDC.

Simon Yakubu Arabo, Kaduna State, member of committee on gas in the House of Representatives, noted at the just concluded conference of Association of Energy Correspondents of Nigeria in Lagos that, “NLNG did not come into being through an Act of parliament, it was incorporated as a company in 1989.

He said, “Schedule 2 of the Military decree, National Assembly, NASS, has a duty to bring it in conformity to the National Assembly. There is no law in perpetuity. We are a sovereign nation and duty bound to review agreements that short change our common patrimony. What we are doing is in the interest in the country, we can amend the percentage in the NDDC Act if it is high. You cannot say investors will be driven away because we are reviewing contracts. That is the main thrust of the amendment.”

Opposition

Reacting, Executive Director, Socio-Economic Rights and Accountability Project, SERAP, Mr. Tokunbo Mumuni, noted: “What my organisation stands for is the best interest of Nigerian citizens. We prefer to be neutral. But in this instance, we want to look at the amendment. The question that can be asked is:  So many percentages that have always been contributed all these years to NDDC, where are they?”

Also, Head of Energy Research, Ecobank, Dolapo Oni, stated that the timing is wrong, adding: “This is the time when Nigeria is negotiating with international companies to build another LNG trains 7 and 8. It’s sacrosanct that we get our gas monetised. NLNG has proven to be the best vehicle. We have tried many projects in the past which did not work out before NLNG. But NLNG, for the past few years, has made about $15.5 billion in dividends paid to the government.

“For the past six years, NLNG has paid over $5 billion in taxes and employed 2,000 Nigerians directly and another 18,000 through vendors and contractors. NLNG contributes four percent to Nigeria’s GDP.

Biggest tax paid on the continent

If Nigeria now amends the law as the House of Representatives has done, if the Senate also amends it and give NDDC three percent of NLNG budget, then all the other business partners that would have brought money to finance LNG trains 7 and 8 pulled out; 18,000 jobs will be lost and $25 billion worth of investment. Does it make more sense than foregoing the payment of three percent to NDDC and we have this investment? Nigerians should choose which one is more important.”

General Manager, External Relations Division of NLNG Limited, Dr. Kudo Eresia-Eke, stated that all the incentives that were granted to NLNG have all virtually elapsed. He said, “The biggest of them was the payment of taxes; we paid the biggest tax that has ever come out of Nigeria, the biggest tax paid on the continent of Africa.

“Nigeria as a sovereign nation cannot be said to be a 419 country. When it pledges with the international community, it keeps such pledges. This is what’s our responsibility should be. Fertilizer companies are gas processing, GENCOs are gas processing, some parts of the NNPC are gas processing even the refineries are gas processing, why are they not after those ones? It’s NLNG that they are after.”

However, the company noted in its latest report that it remitted $15.7 billion to the Nigerian National Petroleum Corporation, NNPC, and $672.4 million Value Added Tax to the Federal Government between 2005 and 2016. The NLNG stated that, between 1999 and 2016, it also made a capital investment of $16.6 billion, and purchased $12.6 billion worth of gas from the NNPC.

NLNG and Nigeria’s economy

According to Nigeria LNG Limited, it remains the most significant arrow-head of the Federal Government’s quest to eliminate gas flaring and derive value from the country’s 187 trillion cubic feet of proven gas reserves.

It indicated that the company has converted about 119 Bcm (billion standard cubic metres) or 4.2 Tcf (trillion cubic feet) of Associated Gas (AG) to exports as LNG and Natural Gas Liquids (NGLs), thus helping to reduce gas flaring by Upstream Companies from over 60 per cent to less than 25 per cent.

It said: “With its plant construction, the company has generated considerable Foreign Direct Investment (FDI) for the country. NLNG contributed about four per cent of Nigeria’s Gross Domestic Product (GDP). As a good corporate citizen, the company also contributes immensely to national wealth and to the well-being of states in which it operates, by paying all applicable taxes and tariffs.

“Through each Nigerian Content plan for its contracts, NLNG has promoted the development and employment of Nigerian manpower. For instance, six hundred (600) Nigerians will be trained in Nigeria and at the contractors’ (Hyundai and Samsung) shipyards in Korea as part of the Nigerian Content deliverables tied to the construction of six new LNG vessels by Bonny Gas Transport (BGT), a wholly owned subsidiary of NLNG.

“Those 600 Nigerians, with enhanced skills in welding, hull assembly, pipe fitting, electrical, mechanical, painting and ship design will join the country’s workforce, providing a support base for technology transfer and industrialization. Thirty-five of the Nigerian trainees are currently in Korea for participation in the ship construction and six Nigerians are already working as ship managers (two Production Managers, two QA/QC Managers and two HSE Managers) in the ship construction at the shipyards in Korea.

“NLNG supports the development of community and Nigerian contractors to enable them achieve standards of excellence. In our host community, through the initiative to empower local contractors via the Finima Legacy Project, local contractors have made capital investments in their companies thereby expanding their operating capacity. The capabilities of local vendors have also been developed through mentoring and engineering of partnerships between the more established Nigerian vendors and the community vendors.”

 

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