NDDC Act amendment may have preserved NLNG

Recent comments by Bukola Saraki, Senate president, via his Twitter account over the Bill passed by the Nigerian Senate for the Amendment of Niger Delta Development Commission (NDDC) Act, is a pointer that there is indeed a silver lining waiting for the Nigerian Liquefied National Gas (NLNG) Limited over the issues bothering the amendment of its Act, writes FRANK UZUEGBUNAM.

The Senate on November 29, 2017, passed a Bill for the Amendment of the Niger Delta Development Commission Act. The amendment of the NDDC Act, specifically in Section 14, provides that 3 percent of the total annual budget of any gas processing company operating in the Niger Delta area, “excluding the cost of feed gas shall be paid to NDDC.

“The amendment to the NDDC Act as passed would put to rest the earlier proposed amendment to the NLNG Act, preserve the NLNG Act and a strong message would be sent to Nigeria’s development partners that the country respects the sanctity of agreements it has entered into.

“We need to provide the source of funding for the Niger Delta Development Commission. In the past the gas companies have not contributed to the funding, the amendment of this Bill will bring more funds into the Niger Delta Development Commission (NDDC)” and mentioned that the Senate might send the Bill to the House for concurrence in the coming weeks,” Saraki stated via his Twitter account, @bukolasaraki.

This development and the comments by the Senate President are quite noteworthy.

The Nigeria LNG (NLNG) Limited was incorporated as a limited liability company on May 17, 1989, to harness Nigeria’s vast natural gas resources by producing Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) after over 30 years of unsuccessful efforts by successive Nigerian administrations to attract foreign investors to the LNG sector.

The enactment of the NLNG Act (then Decree) effective April 24, 1989 was the comfort investors needed to invest. The Act provided such vital regimes necessary for the take-off of the project like the stabilization provision, which the Shareholders relied upon to bring in technology and huge capital ($6bn initially from investors including $2.5bn from the Nigerian government through NNPC).

From the initial investment of $6 billion, the Company which has grown from one to a six-train operation with a nameplate capacity of 22 million tons per annum (mtpa), now has an asset base of over $11billion and has generated over $90 billion in revenues. NLNG is also on the verge of achieving a seventh train to bring the production capacity to approximately 30mtpa.

The NLNG currently manages 16 long-term LNG Sale and Purchase Agreements (SPAs) executed with 11 buyers on a Delivery Ex-Ship (DES) basis. The Company’s buyer countries include Spain, France, Portugal, Italy, Turkey, Mexico and the United States of America.

Although it has been set up as an export company, NLNG responded to a chronic supply shortage of LPG in Nigeria by embarking on a Domestic LPG Supply Scheme. Under this scheme, NLNG has currently executed 21 Sales and Purchase Agreements (SPAs) with domestic off-takers and has committed to supplying up to 350,000 tons of LPG to the Nigerian market annually.

The NLNG Act, was originally ratified by the Constitution as an Act of the National Assembly, has as its basis, a contract between the Federal Government of Nigeria and the Shareholders of Nigeria LNG Limited (“NLNG”). This contract includes Incentives, Concessions, Guarantees and Assurances which were provided for and also reaffirmed in Letters of Assurance to lenders for the Nigeria LNG Trains 4 and 5 expansion by the then Minister of Finance, Minister of Justice and Attorney-General of the Federation, and the Central Bank Governor.

The main thrust of the Guarantees and Assurances are to assure the foreign Investors that their investments would be protected by the non-amendment of the NLNG Act. It is instructive to note that the Act has been protected by all administrations from inception, in recognition of its sanctity.

It is also noteworthy that the financial incentives, concessions, guarantees and assurances contained in the NLNG Act are not uncommon in the global LNG industry. It has been used to good effect for the development of LNG capabilities by other countries with similar historical experience as Nigeria such as Qatar, Oman, Malaysia, Angola, etc. These incentives have been a veritable tool to support and grow their LNG plants.

Qatar, a country, which like Nigeria, relies heavily (55 percent of the its Gross Domestic Product) on Oil and LNG as the cornerstone of its economy, put in place tax incentives to create an enabling environment for growth, development and utilization of resources. , By so doing, Qatar succeeded in ensuring the ability of the LNG Industry to make immense contributions to its economy. In fact, Qatar today, earns about $60billion annually from LNG alone, with the country being acknowledged as the world’s leading supplier of LNG.

The House of Representatives on May 9, 2017 passed a Bill for the amendment of the NLNG Act. This generated significant concern in business circles, both within the country and internationally. The conveyance of the Bill to the Senate was watched with great concern because of the grave implications that would arise from the passing into law of a bill that removes the guarantees and incentives granted in the NLNG Act.

It is useful to note that previous attempts to amend the NLNG Act in 2008, and later in 2013 by past sessions of the National Assembly were halted when the import, significance and attendant implications of such efforts became apparent.

The views as expressed by the Senate President, in effect halting the amendment of the NLNG Act, both on the floor of the Senate and via Twitter, upon the passage of the NDDC Act, clearly demonstrates the sincerity and resolve of Government to secure Nigeria’s future. This resolution is unique in that it has benefits for all stakeholders, NDDC, NLNG, the Niger Delta, investors, shareholders, as well as, Nigeria and Nigerians. No winners or losers, just a win-win.

Through its operations, NLNG has contributed more than $15 billion to the Nigerian Government in Dividends over the last 12 years. The Company has also paid a total of over $5.5 billion in taxes comprising Companies Income Tax, Tertiary Education Tax, Withholding Tax, Value Added Tax; and other payments to Government including PAYE, state and local government taxes, as well as regulators’ levies and fees totalling over N51 billion.

The NLNG is, therefore, a shining light and an inspirational business model and demonstration that given the right atmosphere and support, big businesses can and will survive in Nigeria. This laudable and bold move by the National Assembly under the leadership of the Senate President, Bukola Saraki, reinforces NLNG’s determination to attain its vision of being “a global company helping to build a better Nigeria.”