The Nation Newspaper

Tag: NLNG Act

  • ‘Reps’ attempt to amend NLNG Act without shareholders’ involvement illegal’

    •House must carry everybody along, says Na’Abba

    AN amendment to the Nigeria LNG Limited (NLNG) (Fiscal Incentives, Guarantees and Assurances) Act without following the laid down process stipulated in the Act for any amendment would be contrary to the Rule of Law.
    This was the reaction of the General Manager, External Relations, NLNG, Dr. Kudo Eresia-Eke,yesterday in Abuja.
    Eresia-Eke spokewhile responding to the sponsor of the NLNG Act Amendment and member of the House of Representatives, Leo Ogor, during a live television programme, Focus Nigeria, on African Independent Television (AIT).
    Ogor had earlier stated that the Guarantees and Assurances in the Act were not tampered with, adding that the only amendment contained in the Bill as passed by the House of Representatives was to include the payment of three per cent levy to the Niger Delta Development Commission (NDDC) to make the Act compliant with the NDDC Act.
    But Eresia-Eke expressed surprise that the amendment as passed by the House explicitly inserted the NDDC levy and deleted the Guarantees and Assurances contained in Paragraphs 1, 2, 3 and 6 of the 2nd Schedule of Act, contrary to Ogor’s claim.
    He remarked that the unilateral amendment would easily result in the loss of Train 7/8 and further jeopardise similar projects requiring investor confidence such as Brass LNG and OK LNG.
    He reiterated that with a rating of 169th out of 190 on the Global Ease of Doing Business Index, Nigeria would further weaken its position to attract foreign investments by worsening the already bad situation through an amendment of the NLNG Act outside of due process.
    Adding his voice to the debate during the AIT programme, the former Speaker of the House of Representatives, Alhaji Ghali Umar Na’Abba, remarked that it would be ‘dishonourable’  for the House to amend the NLNG Act without first duly consulting the shareholders, including the Federal Government, as stipulated in the Act.

  • NLNG chief to lawmakers: Don’t tamper with NLNG Act

    NLNG chief to lawmakers: Don’t tamper with NLNG Act

    The Managing Director, Nigeria Liquefied Natural Gas (NLNG), Mr. Tony Attah, has urged the National Assembly to stop the proposed amendment to the LNG Act.

    The amendment seeks to impose a three per cent Niger Delta Development Commission (NDDC) tax on the company. But Attah said the proposal was at variance with the NDDC Act.

    He argued that the amendment will stifling investment and dampen investors’ confidence.

    Attah told reporters that the company planned expansion project- Trains 7 and 8 might be hampered by the proposed amendment.

    He said: “Since 2007 we have been making efforts to build Train 7 and 8. It is very imminent now that it is time for gas and it is time for Nigeria to have Train 7 and 8 but things have to be right. A fiscal element around the LNG Act amendment proposed, we think that is not helpful. We think that will not help Nigeria, it will not help us and Train 7 and 8. We think that has to be stopped.”

    Attah warned that if the amendment was left to go on, it  will erode the guarantees and assurances which had inspired the confidence of foreign investors that their investment has been protected.

    “ In addition, any amendment could result in loss of income of between $53million- $124 million being amount attributable to the Nigerian Government in form of dividends, and related withholding tax,“ hr warned.

    Attah said: “Speak as a Nigerian; this amendment, if done will stiffen investment and dampen investors ‘ confidence without any doubt.”

    He also added that the imposition of the three per cent tax will amount to double taxation since those they buy gas from have already paid the tax to NDDC.

    “The NDDC Act says we don’t qualify. We buy gas just like the power producers, like the fertiliser companies etc. The people from whom we buy gas have already paid the three per cent tax upstream. So for us it is double taxation and it is not real,” he said.

    He queried the rationale behind singling out the company out of all other buyers of gas in the country. “Other organisations such as power companies, fertiliser companies, and petrochemical industries which buy gas as feedstock, same as NLNG are not liable to the NDDC Act and are not being asked to pay this additional three per cent tax.”

    NLNG chief did not exenorate the NDDC in the proposed amendment which he claimed the government agency had earlier came up with the idea which the company outrightly objected and also won the case at the law court when NDDC board took the matter to court.

    He saw the amendment as another attempt by the government agency to reintroduce the tax through back door.

    He warned that should the law makers go ahead, the company will have no choice but to abide, however, he said the consequences might be too grievous for the nation.

    He said the company will continue to engage the lawmakers and other stakeholders to see reason why the amendment should not be allowed to go on as it will not be helpful to the country.

    “But I must emphasis that we are a responsible company. If it gets so hot and it becomes a law, we will comply. But it must be on record that we actually warned the nation about the potential damage and negativity this move can make and that is where we stand,” he said.

  • Union canvasses input to NLNG Act, others

    Union canvasses input to NLNG Act, others

    Oil workers have called on the Federal Government and the National Assembly to ensure that stakeholders in the oil and gas industry are engaged in the  implementation of the new Joint Venture (JV) Cash Calls, passage of the Petroleum Industry Governance Bill (PIB) and  amendment of the Nigeria LNG (NLNG) Act.

    The workers, under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), made the call after their National Executive Council (NEC) meeting in Abuja. In a communiqué issued after the NEC meeting, the senior staff trade union commended the Federal Government’s efforts at exiting the JV Cash Calls that led to its indebtedness to the International Oil Companies (IOCs) and the attendant challenges associated with the system.

    The communiqué read in part: “The NEC-in-Session appreciates the Federal Government efforts in the payment of arrears of Joint Venture Cash Calls, particularly the establishment of a roadmap to clear outstanding Cash Calls arrears.

    “The NEC-in-Session reiterates the need for the Federal Government to engage the labour unions in the implementation of the proposed new Joint Venture Cash Calls structure which is scheduled to commence in January, 2017.”

    Expressing its observation on a recent attempt to amend the NLNG Act (Fiscal, Guarantees, Assurances and Incentives) by the House of Representatives, PENGASSAN said the consequences of the proposed amendment, which among several things, will impinge on the continued existence of the nation’s most productive public corporation.

    It also noted that the proposed amendment will discourage inflow of foreign investment, lead to loss of $25 billion investment, loss of 18,000 potential jobs, reverse gains in gas flaring reduction and constrain NLNG’s development initiatives in the Niger Delta region.

    The association, therefore, advised the House of Representatives to seek wider stakeholders’ inputs before commencing the proposed amendment of the NLNG Act.

    While commending the recent efforts by the National Assembly to start the speedy passage of the PIB, the PENGASSAN noted that the delay in passage of the bill has been a disincentive to investments in Nigeria’s oil and gas industry.

    The trade union, particularly, commended the thoughtfulness of the Senate Joint Committee on Petroleum for facilitating the public hearing held between December 7 and 9; but demanded that an all-inclusive industry Stakeholders’  Summit be convened to ensure that various stakeholders’ input, especially NUPENG and PENGASSAN positions with regards to labour matters are adequately represented in the bill.

  • NASS and the NLNG Act

    For over 30 years, many administrations struggled to attract foreign investors in the LNG sector. The enactment of the NLNG Decree (now an Act of the National Assembly) in 1989 eventually did the magic. Shareholders were so much at ease with its provisions that they quickly mobilised $6billion for the realization of what has now become a major force in the global liquefied natural gas market.

    The $6b of several years ago has led to an asset base of over $11billion. The Nigeria Liquefied Natural Gas (NLNG) Limited has also generated over $90billion in revenues. Over $15billion has been paid to the Federal Government as dividends in the last 12 years. The company has also paid over $5.5billion as Companies Income Tax, Tertiary Education Tax, WHT, VAT and PAYE. Regulators’ levies and other fees have led to the company coughing out over N51billion.

    The NLNG has grown from one to a six-train operation, with a capacity of 22million tonnes per annum (mtpa). Its seventh train, which will bring up the production capacity to approximately 30 mtpa, is also in the works.

    The NLNG now manages 16 long term LNG Sale & Purchase Agreements (SPAs) entered into with 11 buyers on a Delivered Ex-Ship (DES) basis.  These buyers include Spain, France, Portugal, Italy, Turkey, Mexico and the United States of America.

    But, the success story of the NLNG is under threat, a very serious threat, if not stopped in its tract like previous ones. Today, the National Assembly is taking a vital step on the future of the Nigeria Liquefied Natural Gas (NLNG) Limited. It is set to take a major decision on its move to amend the NLNG Act. This move of the National Assembly is not new. Past sessions of the National Assembly also tried but the efforts were halted when their negative implications became apparent.

    The Act is a contract between the Federal Government and the NLNG shareholders. The thrusts of this contract include incentives, concessions, guarantees and assurances. All these were reaffirmed in Letters of Assurance to lenders for the Nigeria LNG Trains 4 and 5 expansions by the Ministry of Finance, Ministry of Justice and the Central Bank.

    The incentives, concessions, guarantees and assurances are common in the global LNG industry. Qatar, Oman, Malaysia, Angola and others have used them to support and grow their LNG plants.

    The essence of the guarantees is to assure foreign investors that their investments will be protected. But, all these guarantees are now under threat. Also threatened are the Bilateral Investment Treaties (BITs) entered into by Nigeria with France, The Netherlands and the United Kingdom. Soon, Nigeria will become a promise-breaker who is not fit to be considered for foreign investment. This is tragic coming at a time the company needs over $1bn investment every year to guarantee steady gas supply for its six trains. It is also sadly coinciding with the firm’s need of foreign investment of $25billion for its Train 7.

    If care is not taken, we may soon find the country being dragged before the International Centre for Settlement of Investment Disputes (ICSID) Tribunals as a result of breaking international treaties. The alterations the National Assembly plans will certainly lead to breach of contract and expose the country to the risk of huge awards at the tribunal. Not long ago, Venezuela was ordered to pay an award of $1.6billion to ExxonMobil. Ecuador also had to pay Occidental.

    You may wonder why I am being alarmist. Well, you will understand my drift when I enumerate what the National Assembly is trying to do with the NLNG Act. After enumerating this, I will get back to the other disadvantages of this move, which our lawmakers are portraying as being in the country’s interest.

    From available information, the National Assembly seeks to end the company’s status as dollar denominated, which was agreed on to protect the company against Naira’s flip-flop. Its clients are abroad and doing business in Nigeria could be topsy-turvy.

    The National Assembly also seeks to make its subsidiary, Bonny Gas Transport Company pay tax in Nigeria. It also plans to make NLNG pay three per cent of its annual revenue to the Niger Delta Development Commission (NDDC), three per cent of gross freight on international inbound and outbound cargo to NIMASA, two per cent of contracts performed by companies engaged in cabotage and one per cent of any contract award upstream to the government.

    Those championing these amendments have forgotten that the NDDC levy is aimed at upstream oil and gas producers from whom the NLNG buys the gas it now liquefies. It does not produce gas and common sense should make it clear that it should not be affected by this. Making it pay amounts to the government taking money twice for the same purpose; one from the producer and two, from the client. Companies involved in fertilizer production, power generation and petrochemical industries, which buy gas just like the NLNG, are not made to pay the NDDC levy. More so, this is a matter the NDDC had pursued up to the Supreme Court and it lost. Favouring NDDC, NIMASA and others by getting them what they could not get in court smacks of discrimination against a private limited liability company.

    Also, these alterations, I must emphasise, to the NLNG Act are not in line with the guarantees and assurances Nigeria entered into with the United Kingdom, the Netherlands and others. Apart from what I mentioned earlier, the amendments have the capacity to result in loss of income of between $53m and $124m which the Federal Government gets as dividends and withholding tax. Also threatened are the 18,000 jobs required for the construction activities for Train 7.

    The impression given by the National Assembly is that the NLNG is enjoying a rare privilege. This is far from the truth. Firms operating in free trade zones enjoy better privileges. They enjoy absolute exemptions from taxes and levies. No federal, state or local government gets a dime from them as taxes. NLNG only enjoys partial exemptions and at least one of them, that is, the Companies Income Tax, is time-bound. Its exemption from this expired in 2009.

    The question that may come to the mind of some people is whether or not NLNG does not want to contribute to the development of the Niger Delta through the NDDC. Facts suggest that the firm has spent nearly $200m on providing roads, water, electricity, schools and scholarships for the local communities in Bonny, its base. It has offered to support the government with N60bn for the completion of the Bonny-Bodo Road. It has committed N3bn annually for 25 years for the development of the Bonny Kingdom, with a view to turning the Island into Nigeria’s Dubai.

    Many federal universities have also benefitted from the firm. Its CSR efforts are almost unparalleled in the country. So, the issue at stake is not about not wanting to spend money on the Niger Delta but retaining shareholder confidence and ensuring that government maintains its integrity by keeping its promises to investors. If we do this, investors will be assured that their money is in good hands and the country’s reputation as an investment destination will remain intact.

    The NLNG is our national treasure and we must protect it. It is a model of how a company should be run. Its credit rating among international financier is even better than Nigeria’s. This sort of alterations to its enabling law will castrate it. And we will be the loser for it.

     

    • Nelson, a public commentator, sent this piece from Abuja.
  • ‘NLNG Act, governance structure key to success’

    ‘NLNG Act, governance structure key to success’

    The Managing Director of Nigeria LNG Limited (NLNG), Tony Attah, said yesterday that the NLNG Act,  shareholding and governance structure were key factors responsible for its success story.

    Attah spoke at a technical session, chaired by Dr. Maikanti Baru, group managing director of Nigeria National Petroleum Corporation (NNPC), at the 22nd Nigeria Economic Summit (NES) in Abuja, with the theme: “Creating a Global Champion from Made in Nigeria: The NLNG Story”.

    Attah, in his presentation, remarked that the NLNG Act provided incentives, assurances and guarantees, which significantly encouraged investment, adding that experience showed that countries cannot legislate investments into existence without addressing issues relating to accompanying incentives, guarantees, and assurances.

    “These incentives made it attractive for international investors and financiers to invest even during a period Nigeria was perceived to be a pariah state. Those investments grew and they resulted in an inspirational Nigerian success story that the company is today, with assets now worth over $13 billion.”

    Attah’s presentation took a position on the undesirability of some developments, 18 years after the major breakthrough which NLNG represents, where certain stakeholders continue to make attempts to undermine the Act. He added that the courts have been firm on the Act in instances where court cases were instituted by third parties to compel the company to pay levies.

    “These attempts are apparently continuing outside the courts, but we are hopeful that the country’s leadership will protect its commitment through the Act as well as avoid the portrayal of the country as one that does not honour agreements.”

    He drew attention to the fact that these enablements have allowed Nigeria LNG to generate $85 billion in revenue, pay $5.5 billion in taxes as well as to commit more than $200 million to corporate social responsibility projects, especially in the areas of capacity building and infrastructure development.

    “The ownership mix, with the government, through the National Oil Company owning just 49 per cent, and having international companies owning 51 per cent, has brought tremendous benefits. Most importantly, it has allowed significant funding through international banks required for the construction of both the plants and the ships.

    ‘’Secondly, such a mix has ensured that the international companies bring to bear on the company, international standards and best practices.

    ‘’Thirdly, with a significant shareholding, the government, through NNPC, has been able to drive the national agenda for social and nationalistic causes, such as the Nigerianisation plan. That plan has directly resulted in a corps of well-trained Nigerian professionals, many of whom have had the opportunity to understudy and eventually succeed expatriates over a period of time,” he said.

    Attah added that as an independent Incorporated Joint Venture, Nigeria LNG has an independent board, comprising nominees from the shareholders.

    “With the governance structure, decisions are faster as they are not subjected to the bureaucracy in the upstream sector,” he said.