The Federal Government yesterday initiated a bailout package for states owing their workers. The bulk of the money which makes up the N400 billion package is said to have come from proceeds from the Nigerian Liquefied Natural Gas (NLNG) Limited, based in Bonny Island, Finima, Rivers State. OLUKOREDE YISHAU tells the story of this cash-cow.
It was incorporated 26 years ago. Its first cargo of Liquefied Natural Gas (LNG) did not leave the Bonny Port in Rivers State until ten years later. And once it took off, it appeared there was no stopping it. It rose so fast that it became the fourth largest supplier of LNG. The Nigerian Liquefied Natural Gas (NLNG) Limited, whose six-train plant produces about 22 Metric Tonnes Per Annum (mtpa) of LNG for export and five MTPA of natural gas liquids (NGLS), has made over $25 billion from a $2.6 billion investment.
The NLNG has six-train plant worth over $15 billion and contributes four per cent of the country’s Gross Domestic Product (GDP).
It operates six liquefaction units (LNG trains) producing 22 million metric tonnes of LNG per year (mmtpa). Trains 1, 2 and 3 have production capacities of 3.2 mmtpa, whilst trains 4, 5 and 6 have capacities of 4.1 mmtpa each. The Final Investment Decision (FID) on the train 7 has not yet been made.
The NLGN owns 24 ships and six additional ships are underway from Samsung and Hyundai dockyards. The six new ships will increase NLNG fleet to 30 ships. There are spiraling effects to this as the facilities will need more seafarers and ship officers to man them.
Through its second subsidiary, the NLNG Ship Manning Limited (NSML), the NLNG is the biggest employer of Nigerian seafarers on board its 13 LNG carrier ships.
Also, the company has a wholly-owned subsidiary set up in 1989, Bonny Gas Transport (BGT) Limited, which provides shipping services for NLNG. The BGT was set up in Bermuda with an ordinary equity holding from NLNG Limited and preferential equity holding from the sponsors, NLNG’s shareholders. Another wholly owned subsidiary of NLNG Limited is the NSML, which was set up in 2008 to provide, develop and manage high-calibre personnel for NLNG’s maritime business.
Former Coordinating Minister of Finance and Coordinating Minister for the Economy Dr. Ngozi Okonjo-Iweala visited the NLNG Plant on Bonny Island, Rivers State on November 15, 2013.
She described the NLNG as an asset to Nigeria, a shining example of a successful company and a beacon of hope for a better Nigeria.
The minister alluded to the fact that NLNG’s financial book was an enviable balance sheet and that told the success stories.
“I came after looking at your books and saw that you have been commercially viable and successful. The Nigeria LNG is an asset to the country,” she said, adding that not much was in the public domain despite the very impressive performance of the company.
Dr. Okonjo-Iweala described the NLNG as the most successful Nigerian company with 49 per cent government ownership, which she described as a distinguishing feature among companies in the public and private sector.
The NLNG is an incorporated joint venture owned by four shareholders, namely, the Federal Government, represented by the Nigerian National Petroleum Corporation (NNPC) — 49 per cent, Shell Gas BV (SGBV) — 25.6 per cent, Total LNG Nigeria Limited—15 per cent and Eni International—10.4 per cent.
The other side of the story
So far, the company’s story reads well, but it could be better if its expansion plans are approved. The failure to take the final investment decision on its Train Seven has made it lose its pre-eminence in the global LNG market. There are imminent fears it will still dip further if its expansion plans are not concretised soon.
As at the time it celebrated the export of its 3000th cargo on January 6, last year, a large expanse of land, close to its Train Six in Finima, Bonny Island, was waiting for further action to house the Seventh Train of the plant. But years after work began on sand-filling of the site, there is no definite decision on when real construction work would start.
As a result of this, the NLNG, once the fastest growing facility in the world, has lost grounds to Qatar and Australia. Qatar has moved its output from 20 million metric tonnes to 80 million metric tonnes. Australia, from its previous 20 metric tonnes, now churns out 81 metric tonnes annually. NLNG is stuck at 22 million metric tonnes. Australia has 10 LNG projects, with 20 trains and $215 billion worth of final investment decision. Yet, Australia has only 60 percent of Nigeria’s gas reserves. Nigeria has gas reserves estimated at over 160 trillion cubic feet.
The United States (U.S.), formerly a major LNG export destination, plans to become a net LNG exporter by 2016, with 1.1 billion cubic feet per day, projected to rise to 2.2 billion cubic feet per day in 2019.
China, with an estimated gas reserve of 1,275 trillion cubic metres, is also planning big for the LNG market. Mozambique too is set for a fair share of the market, with plans to build a two-train facility at advanced stage.
NLNG Train Seven project will raise the liquefaction capacity of the Plant to 30mtpa, consolidating Nigeria’s position as one of the largest producers and exporters of LNG.
What really is the problem?
Some have wondered if the company, which contributes 4 per cent of the country’s Gross Domestic Product (GDP), does not have the financial wherewithal to see the project through.
But checks have revealed that the company’s challenge with expansion has nothing to do with money. Industry sources say for this Train Seven to become a reality a FID has to be taken.
The only person who can take this decision is President Muhammadu Buhari. His predecessor, Dr. Goodluck Jonathan, failed to take this all-important decision. Former Rivers State Governor Rotimi Amaechi once quoted Jonathan as telling him that NLNG’s expansion has to wait until the Brass LNG in Bayelsa State takes off.
Instructively, seven years ago, the NLNG signed sales and purchase agreement for its seventh train. Observers are of the view that building the seventh train of the NLNG plant will bring in Foreign Direct Investment (FDI) estimated at over $8 billion and help reduce flared gas, and improve the country’s revenue profile.
With Train 7, the NLNG, said industry watchers, would provide about 10,000 jobs. Since it opened shop in Bonny, NLNG Limited has provided over 2,000 jobs each construction year and 18,000 jobs at the peak of construction. The government, they said, will also reap an additional $2.2 billion annually in dividend.
