Three decades after, NLNG waxes stronger

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A BRIEF INSIGHT INTO THE JOURNEY.

T

he Nigeria Liquefied Natural Gas (NLNG) recently marked 30 years of operations at the palace of the King of Bonny and flagged off what it called ‘Next 30 Years’ highlighted by a N75 billion development fund to be released at the rate of N3 billion per year.

Why NLNG Ltd was born

It is important to interrogate the reasons that led to the birth of NLNG. Prior to its birth, there was large-scale gas-flaring, which have continued for decades, and have been the source of major concern for environmentalists on account of its notable potentials for large-scale environmental pollution, climate-change and health implications in the host communities.

Hence, the need for a gas-using project – from which the host communities of natural gas-utilising projects and invariably the country at large could equally benefit – arose. The Nigerian Liquefied Natural Gas (LNG) project is strategically designed to utilise the abundant gas resources of the nation, which were paradoxically being wasted through decades of flaring and associated with adverse consequences on the regional and invariably international climates.

The existing cleared plant site and residential area on Bonny Island were allocated to the NLNG. The subsequent on-site activities involved the relocation of Old Finima by the federal authorities and a purpose-built new town was provided. The relocation to New Finima town took place in 1991, after which the site was levelled and covered with hydraulic fill to raise the site to the correct levels for construction. The relocation of indigenous populations and confiscation of coastal areas, especially known to be breeding grounds for marine species, portends major ecological danger and cultural trauma to man and loss of vital habitat used for centuries by animal species.

All over the world, gas extracting and processing facilities are springing up. The number of LNG projects has increased faster than crude oil refineries, as crude oil reserves dwindle across the globe. The environmental, socio-economic and health implications are not presently adequately known as is the case of crude oil refineries worldwide.

NLNG, a successful model to attract FDI

In the face of dwindling income from crude oil and falling tax revenues, which are causing the federal government to miss its targets, Nigeria needs to explore creative models to fund huge infrastructure required to revamp a broken economy.

One of such proven models is the NLNG. Since 1999, the NLNG has fully paid the $5.45 billion taken from its shareholders to build its six existing LNG trains. The company has also paid as much as $36 billion to its shareholders as dividends over the years, in addition to paying joint venture (JV) gas suppliers $28 billion for feed gas supplies.

Much of its success is derived from its unique structure. The government, represented by the Nigerian National Petroleum Company, owns 49 percent of NLNG while Shell owns 25.6 percent, Total Gaz Électricité Holdings owns 15 percent and Eni owns 10.4 percent.

The ownership structure makes it an independent incorporated joint venture, guaranteeing an independent board of directors, effective decision-making as well as funding for its projects. NLNG is run based on international best standards with all the parties carefully scrutinising every decision to ensure benefits are maximised.

NLNG’s unique ownership and operating model has also made it difficult for the National Assembly to amend the Act that established it; because of its incorporation charter, with companies and their countries being represented, the NLNG Act has been elevated almost to the status of a treaty and all parties are required to amend it.

NLNG could not kick off after it was first proposed in 1968 because of the huge capital investment required which Nigeria did not have. Investors wanted assurances and guarantees that they would recoup their investments. In 1990 Nigeria granted the investors a ten-year pioneer status as well as generous concessions that prohibited further taxation and levies. The charter came with strong terms involving joint agreement before any amendment.

Therefore, to finance big infrastructure projects like road networks, rail lines and airports we encourage partnerships and funding, ownership and management structures like the NLNG.

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