With a given mandate to harness Nigeria’s vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for national income, the Nigeria Liquefied Natural Gas Limited has deepened its relevance in the country’s gas sector, 35 years after, MUYIWA LUCAS writes.
On May 17, 1989, a mustard seed sown offered a lot of hope for the global gas market. But that seed, silently nurtured did not make its first headway until a decade later. From this very humble beginning, 10 years later, the first two trains were completed, paving the way for the export of its first Liquefied Natural Gas (LNG) cargo on October 9, 1999. This feat signified the start of one of the most successful stories in the LNG industry worldwide.
It was the loading of its first cargo of Liquefied Natural Gas (LNG) produced from its first operational train, Train 2, leaving the shores of Bonny Island Rivers State, on October 9, 1999, to Montoir, France.
Today, the NLNG has a total production capacity of 22 Million Tons Per Annum (mtpa) of LNG and 5mtpa of Natural Gas Liquids (NGLs) from its six-train plant complex. The company has 20 long-term Sale and Purchase Agreements (SPAs) with nine buyers.
NLNG began its intervention in the supply of Liquefied Petroleum Gas (LPG), otherwise known as cooking gas, to the domestic market in 2007 under the NLNG DLPG Scheme. The supply has stimulated growth in the industry, guaranteeing LPG supply, availability, and affordability. This has also inspired the development of different parts of the DLPG value chain.
In 2019, NLNG shareholders took the Final Investment Decision (FID) on its 7th train and awarded the Engineering, Procurement, and Construction (EPC) contracts for the plant expansion in 2020. The long-awaited expansion will increase production capacity by 35 percent from 22mtpa to 30mtpa and enhance NLNG’s competitiveness in the global market. The Train 7 is at a 67 percent completion stage.
This year, after 35 years, NLNG stands out as Africa’s largest liquefied petroleum gas plant and a top-six player globally. It was once the world’s fastest-growing LNG Plant. With its campaign slogan: “It is time for gas”, the company straddles the path of the energy transition.
The company’s first domestic propane cargo was also delivered in 2022, just as the NLNG commenced plans for the supply of liquefied petroleum gas within the Nigerian domestic market in support of the Federal Government’s Decade of Gas Initiative, which is expected to stimulate industrial growth in the sector, with conditional SPAs already executed with Nigerian companies as counterparts in the domestic LNG scheme.
The company has also expressed support for the reforms of the current government, aimed at repositioning the country’s oil and gas sector.
Promoting/positioning gas for revenue, energy security
The Managing Director of the Nigeria Liquefied Natural Gas Limited (NLNG), Dr. Philip Mshelbila, stated that the recent executive order signed by President Bola Tinubu would be crucial in unlocking the development of non-associated gas (NAG) in Nigeria, thereby driving domestic gas utilisation and ensuring a stable gas supply for NLNG’s growth project – Train 7.
Mshelbila, highlighted the significant impact of the Executive Order on the gas industry, emphasizing that the Order would incentivise much-needed investments, addressing specific challenges hindering ease of business and attraction of investment in the oil and gas sector.
He stated, “Nigeria holds somewhere about 38 percent of the reserves in Africa. However, we have only been able to attract about five percent of investment in oil and gas. This means we are punching way below our weight when attracting investment.
“And there’s a reason for this. Part of it is that when people want to invest, they look for certain things – returns, low risks, and ease of business. If you focus on the fiscals in the Executive Order, what the government has done is (to) look at areas that have not been addressed by the Petroleum Industry Act (PIA) or other fiscal laws that are in existence. One of those areas is what we refer to typically as Dry Gas or Non-Associated Gas (NAG).
Mshelbila maintained that one of the things that the presidential directive had done was to enable those who want to develop NAG to get the benefit of tax credits over the first 10 years of the project, after which it becomes a tax allowance.
“From here, they can recover their investment in NAG through those tax credits. We haven’t had this before. There are a lot of NAG fields, both onshore and in the shallow waters that have not been developed. Hopefully, this incentive will unlock the investments within this area,” he stated.
Mshelbila noted that a deliberate investment will unlock the nation’s gas potential and go a long way in tapping opportunities offered by the energy transition. He said this is because of the recognition of gas as a transition fuel and the quest for clean energy to increase its gas investment and harvest the gains from gas.
According to him, failure to address the root causes of these issues would perpetuate the country’s struggle with energy poverty and result in a significant loss of revenue from the monetisation of valuable resources.
He stated further that a pivotal starting point for remedying these industry challenges lies in a concentrated effort in the gas sector.
“As we embark on the journey to complete Train 7, we are on the precipice of achieving a remarkable milestone – a capacity of 30 Million Tonnes Per Annum (MTPA). This accomplishment will not only position us as one of the largest single-site operations globally but potentially among the top three worldwide in terms of such capacity at a single site. It is an achievement that elevates Nigeria’s standing, placing us among the top six nations in this crucial industry.
“However, the world is evolving at an unprecedented pace, and recent events, such as the Russian/ Ukraine conflict, have ushered in a wave of new developments in the LNG sector. This surge in activity underscores the robust demand for liquefied natural gas, a demand recognized by nations worldwide as integral to the global energy transition. Considering these dynamic changes, our position in the rankings is likely to shift rapidly, as other countries make substantial investments in LNG production.
This is why we believe it is important for us to conclude Train 7 and begin to look beyond that for further expansion.
“Our commitment to harnessing the immense potential of natural gas will not only restore Nigeria’s reputation as a major energy powerhouse but also propel us towards a cleaner, greener future. With innovation, collaboration by a wide array of stakeholders, including the government, and unwavering determination, we can shape the energy landscape of tomorrow, driving economic prosperity, creating jobs, and mitigating environmental challenges through gas.,” he said.
For over a decade, NLNG’s intervention in the supply of Liquefied Petroleum Gas (LPG), otherwise known as cooking gas, to the domestic market under the NLNG Domestic LPG (DLPG) Scheme has helped to stimulate growth in the industry by guaranteeing LPG supply, availability, affordability and enabling the development of a value network for a sustainable ecosystem towards a better Nigeria.
NLNG cumulatively supplied over 1,452kt of LPG to the domestic market, spurring a steady rise in annual domestic consumption in a market that was below 50kt per annum in 2007 to over 600kt per annum in 2018.
Presently, the NLNG’s annual production of LPG, popularly called cooking gas, has increased to over 1.5 million metric tonnes; translating to the whole 1.5 million tonnes production being sold in Nigeria. It is worthy of note that the company had started supplying LPG in naira, as against the usual sale of gas in the United States dollars.
At a panel session during the 7th Nigeria International Energy Summit in Abuja earlier in the year, General Manager, Finance, NLNG Limited, Fatima Adanan, said the multi-billion dollar firm had ramped up its LPG production to 1.5 million metric tonnes and was supplying all of it to the Nigerian market. NLNG is selling LPG in naira,” to deepen cooking gas penetration across the country.
“When we started we were producing 70,000MT, today we are producing upwards of 1.5 million MT of LPG and for this LPG, our sole designated distribution point is Nigeria. So, part of our vision as a company is to make sure that we make Nigeria a better place. As a people, we are the ones to make our country better and for us, we are starting with LPG and we are campaigning to move it into the market. The 1.5 million MT is our own production as of 2023,” she said.
Adanan continued: “But as NLNG we will work harder to provide more LPG in such a way that the people who are using charcoal and biomass to cook, we have a trajectory that in the next two, three years we should have at least 40 percent penetration by changing the energy mix in Nigeria from coal, biomass to using gas, which is cleaner.
“In the long run, that will address some of the climate goals. Our intention may not be to alleviate the climate goals, but rather to make Nigeria better. But in doing that we are going to also impact the climate goals which is important,” Adanan stated.
Its DLPG market deepening strategy yielded some further dividends with the commencement of deliveries to Stockgap Terminal in Port Harcourt, as part of deliberate moves to encourage growth of the sector beyond Lagos and reduce the impact of congestion of the Lagos ports on deliveries into the market.
NLNG has committed to delivering 100% of its LPG production to the domestic market through Nigerian companies with whom it has signed Sales and Purchase Agreements (SPAs).
Revenue impact
With assets worth about $17.5 billion with 51 percent equity stake by international oil companies (IOCs) and the remaining 49 percent belonging to Nigeria through the Nigerian National Petroleum Company Limited (NNPCL), the company impacts Nigeria’s growth
Available records show that over the years, the NLNG has paid out dividends of about $18 billion to the Federal Government as returns on its shareholding in the business held on the government’s behalf by the NNPCL. This is aside from its payment for feed gas, which from inception till date stands at about $15 billion.
Besides, NLNG has also remitted about $9 billion in taxes to the federal government. This is aside from its contribution to the economic well-being of states in which it operates as it also pays all applicable taxes and tariffs to such states.
The NLNG, through its operations, has equally brought in a huge quantum of Foreign Direct Investment (FDI) for the country through its plant construction.
Interestingly, since 2008, the company has contributed about four percent of Nigeria’s annual Gross Domestic Product (GDP). With the rebasing of the GDP in 2014, NLNG’s contribution to the GDP is estimated at one percent.
Economic enabler
According to the National Bureau of Statistics (NBS), report released last February, Nigeria’s unemployment rate surged to 5.0 percent in the third quarter of 2023 from 4.2 percent in the previous quarter. And for a country with a high unemployment rate, the NLNG has been contributing its fair share in tackling this menace.
For instance, over 12,000 direct jobs were generated during the construction phase of Train 7. A combined employment figure by the major sub-contractors employing over 18,000 Nigerians in technical jobs in the Base Project (Trains 1 and 2) was also attained.
The inclusion of a local content plan or clause in its contracts to vendors, it is believed, has made it possible for Nigerians to be gainfully involved in the NLNG operations, thereby being able to promote the development and employment of Nigerian manpower thus helping to create employment for the populace.
Over the years, the NLNG has supported the development of community and Nigerian contractors to enhance their capacities and capabilities thereby enabling them to achieve standards of excellence. Through the initiative to empower local contractors via the Finima Legacy Project, the company said indigenous contractors have made capital investments in their companies thereby expanding their operating capacity.
It is also attested that the capabilities of local vendors have also been developed through mentoring and partnerships between more established Nigerian vendors and community vendors.
According to the company, the Nigerian Content commitment in the acquisition of six new technology DFDE ships by NLNG’s subsidiary, Bonny Gas Transport, led to major achievements such as a feasibility study for the establishment of a drydocking and ship-repair yard in Nigeria, the training and development of Nigerians (both in Nigeria and Korea) in various aspects of ship design and construction, and export of Nigerian goods for use in construction of BGT ships in South Korea.
For the Train 7 project, with a total contract sum of $4.3billion and presently at 67 percent completion, 55 percent of both engineering activities and procurement will be carried out in Nigeria and by Nigerian vendors.
With the incorporation of its first subsidiary, Bonny Gas Transport (BGT), in 1989, the LNG shipping industry in Nigeria was born. Currently, NLNG, through NLNG Ship Management Limited (NSML), another of its subsidiaries, is the biggest employer of Nigerian seafarers on board its 13 BGT-owned ships. The company has trained hundreds of sea-going officers, some to the level of captains and chief engineers.
Support for manufacturing
Recognising that funding is a major challenge for local manufacturers, NLNG, in 2013 launched the $1 billion NLNG Local Vendors Finance Scheme (NLVFS). This was increased to $1.2 billion in June 2017 with the introduction of an additional participating bank to the scheme making a total of six participating banks.
With this, the company said, the scheme facilitates access to funds from six participating banks to NLNG-registered vendors (suppliers of goods or contractors of services). Under the scheme, vendors can get quicker access to finance at fairer terms for their NLNG-related business operations by leveraging on NLNG’s relationships with the banks.
Environmental sustainability
The Nigeria LNG Limited has helped to protect the environment from the effects of gas flaring and contributed to the reduction of gas flaring in Nigeria from 65 to about 20 percent. The company is also protecting the environment by the significant reduction in the felling of trees for use as fuels. Additionally, NLNG has contributed to a healthier nation by encouraging the use of cleaner energy through its domestic LPG supply programme.
Last year, NLNG Shipping and Marine Services Limited (NSML), launched its Clean Water Initiative, a programme to raise awareness of the dangers of plastic pollution and to advocate for action to address the issue.
The Chief Executive Officer of NSML, Abdulkadir Ahmed, noted the detrimental effects of the plastic crisis on economic activities, human health, and the environment.
Accolades
The recent commendation of NLNG Limited by President Bola Tinubu, for its steadfast commitment to excellence and immense contributions to the GDP, acknowledging the critical role the company plays in Nigeria’s economy gave credence to NLNG as the growth engine of the country in the last 35years.
In recognition of the company’s role in the economy, President Tinubu assured the NLNG Board that all encumbrances to the progress and development of Nigeria’s industrial citizens as well as any further impediment to the business practice in the oil and gas sector would be swiftly removed.
Similarly, the Minister of State for Gas, Ekperikpe Ekpo, said the federal government will continue to encourage engagements amongst stakeholders to resolve gas supply and security issues and restore plans to compete with peers in the world.
He stated that NLNG stands as a leading light to Nigeria’s quest to become an energy-efficient country where clean energy, including gas, utilized. He stated further that all hands must be on deck to stop the loss of revenue in the sector and missed opportunities, adding that the Federal Government is engaging with investors to tap into the huge gas reserves in Nigeria.
The Nigerian Content Development and Monitoring Board (NCDMB), has not failed to commend the initiatives and support being given to local content by the firm. It described the initiatives as a “remarkable success at promoting Nigerian Content in the country.”
NCDMB’s former Executive Secretary, Simbi Wabote, an engineer, at the Nigerian Content Stakeholders Retreat in Bonny, Rivers State, hosted by NLNG, in demonstration of its unwavering commitment to the advancement of local content in Nigeria, lauded the firm for its remarkable success at promoting Nigerian Content, recalling that at the inception, the company’s management level had 90 percent expatriates and 10 percent Nigerians.
“However, the table has now turned the other way, with the entire Management now consisting of Nigerians,” he said.
The immediate past Chief Executive of the NLNG, Tony Attah, hailed the NLNG’s contribution to the gas markets, describing the 1.5million metric tonnes LPG production by the firm as a “worthy milestone.”
