NLNG records giant strides in 30 years amidst challenges

Nigeria Liquefied Natural Gas Limited (NLNG) was incorporated as a limited liability company on May 17, 1989 to produce liquefied natural gas (LNG) and natural gas liquids (NGL) for export. Its first train came into operation in 1999 and its first export was recorded in October that year.

NLNG operates six liquefaction units (LNG trains) producing 22 million metric tonnes per year (mmtpa). This amounts to roughly 10 per cent of the world’s LNG consumption. 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 base project (Trains 1 and 2) which cost $3.6 billion, was financed by NLNG’s shareholders. The third train (expansion project), including additional storage, cost $1.8 billion and was funded by shareholders as well as reinvested revenue from the base project. The NLNG Plus project (Trains 4 & 5) cost $2.2 billion and was funded with a combination of internally generated revenue and third party loans amounting to $1.06 billion. Train 6 (NLNG Six project) cost $1.748 billion; financing was handled by shareholders. The total cost of building six LNG trains was $9.348 billion.

The company has a wholly–owned subsidiary set up in 1989, called Bonny Gas Transport (BGT) Limited, which provides shipping services for NLNG. Another wholly owned subsidiary of NLNG is Nigeria LNG Ship Manning Limited (NSML), which was set up in 2008 to give dedicated attention to providing, developing and managing high calibre personnel for NLNG’s maritime business.

Challenges

NLNG has faced several challenges in its 30 years of business in Nigeria, but the most important is the challenge of ‘sanctity of contract’ when parties to an agreement fail to honour the terms of contracts for certain reasons.

NLNG is one of the prime beneficiaries of the pioneer status policy of the Federal Government on gas monetisation and flare reduction. In fact, Section 2 of the NLNG Act provides the company tax waivers and other incentives for its investment in the project to harness Nigeria’s gas resources for exports.

A protracted dispute occurred between NLNG and the Nigeria Maritime Administration and Safety Agency (NIMASA) as a result of perceived conflict in the enabling Acts of both organisations, namely the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 1990 on the one hand; and Nigerian Maritime Administration and Safety Agency Act 2007, Merchant Shipping Act and Coastal and Inland Shipping Act on the other hand.

The dispute centered on whether or not the NLNG ought to pay 2 per cent Cabotage Surcharge and Sea Protection Levy and 3 per cent freight levies for shipping undertaken by Bonny Gas Limited, a subsidiary of NLNG.

While the case subsists in court, a cross section of legal experts stressed that when two laws that confer rights contend, the first in time takes precedence and consequently overrides the latter. By implication, it means NLNG Act 1990 supercedes NIMASA Act 2007.

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NLNG’s contributions

NLNG which is jointly owned in the following proportions: Nigerian National Petroleum Corporation (NNPC) 49 per cent, Shell Gas B.V.  25.6 per cent, Total LNG Nigeria Ltd 15 per cent and Eni International 10.4 per cent, has contributed over $30 billion as dividends to its shareholders and over $6.5 billion in taxes to the government since 2009.

NLNG currently runs a $1 billion NLNG Local Vendors Financing Scheme (NLVFS) which facilitates access to funds from participating banks by NLNG-registered vendors. This way, vendors get speedy access to finance for their contracts, or procurement orders, at competitive rates.

LNG commenced the supply of liquefied petroleum gas (LPG) otherwise known as cooking gas to the domestic market in 2007 when refineries became challenged and supply was grossly inadequate. Since then, the issue of inadequate supply has become a thing of the past.

The intervention, which is in line with company’s vision of helping to build a better Nigeria, has significantly contributed to the stimulation and development of the domestic LPG market in Nigeria and has effectively brought down the price of cooking gas from over N7,000 in 2007 to less than N3,500 per 12.5kg cylinder today.

NLNG is committed to delivering 350,000 tonnes of LPG into the Nigerian market annually and has signed Sales and Purchase Agreements (SPAs) with 15 off-takers (all Nigerian companies) for the lifting of LPG for the domestic market.

NLNG has converted about 119 bcm (billion standard cubic metres) or 4.2 tcf (trillion cubic feet) of associated gas (AG) to exports as LNG and natural gas liquids (NGLs), thus helping to reduce gas flaring by upstream companies from over 60 per cent to less than 15 per cent. Flares are only permitted in order to eliminate waste gas which cannot be converted to any further use. Flares also act as safety systems for non-waste gas and are released via pressure relief valves, when required, to ease the strain on equipment.

NLNG contributed about four per cent of Nigeria’s gross domestic product (GDP). As a good corporate citizen, the company also contributes immensely to national wealth and to the wellbeing of states in which it operates, by paying all applicable taxes and tariffs.

NLNG’s Train 7 project to create 40,000 jobs

The execution of the NLNG Train 7 project will at its peak create over 40,000 direct and indirect jobs, according to the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. SimbiWabote.

Wabote said “the NLNG Train-7 will deliver 100 per cent engineering of all non-cryogenic areas in-country. The total in-country engineering man-hours is set at 55 percent which exceeds the minimum level stipulated in the NOGICD Act, in line with our resolve to push beyond the boundary of limitations.”

The Managing Director of NLNG, Engr. Tony Attah said that “Train-7 will move from Front End Engineering Design (FEED) to detailed design, construction, commission and delivery and this phase will attract almost $7bn with an addition of the upstream scope of $10bn which will boost the foreign direct investment profile of Nigeria.”

He pledged the company’s commitment to achieve the project within four to five-year period and hoped that it would sign the Final Investment Decision (FID) by the end of October 2019.

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