Financial Energy Review
…………..by Ben Ndubuwa………….
The Nigeria Liquefied Natural Gas Limited (NLNG) has in the past 35 years blistered the path way in buoying the Nigerian economy and has indeed been a global competitive LNG company, helping to build and develop the oil and gas industry in particular. It was incorporated as a Limited Liability Company on May 17, 1989, to harness Nigeria’s vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export.
The impact of the NLNG on the Nigerian economy in the past three decades cannot be overemphasized. The NLNG is considered one of Nigeria’s most important economic projects when it started operations in 1999 and shipped its first LNG cargo. In revenue, the federal government has over these 35 years received about $18 billion as dividends having 49 percent in equity through the Nigerian National Petroleum Company (NNPC). As a good corporate citizen, NLNG also contributes to national wealth and the economic well-being of the states in which it operates, by paying all applicable taxes and tariffs. The company has paid the Federal Government of Nigeria about $9 billion in taxes. Also about $15 billion has been paid by NLNG for feed gas since inception.
When NLNG came on stream 35 years ago it generated huge Foreign Direct Investment (FDI) for the country in assets (i.e. property, plant and equipment) worth about $17.5 billion with 51 percent stake by international oil companies (IOCs). In Gross Domestic Product (GDP) NLNG since 2008, has contributed about four percent of Nigeria’s annual GDP. With the rebasing of the GDP in 2014, the gas company’s contribution to the nation’s GDP was about one percent. In Job creation, NLNG provided more than 12,000 jobs at the peak of construction of each plant. Overall, the major sub-contractors employed over 18,000 Nigerians in technical jobs in the Base Project (Trains 1 and 2).
Through its Nigerian Content plan for its contracts, NLNG has promoted the development and employment of Nigerian manpower. Over 12,000 direct jobs are expected to be generated during the construction phase of Train 7.
NLNG over the years has supported the Local content policy of the federal government by engaging Nigerian contractors to enhance their capacities and capabilities thereby enabling them to achieve standards of excellence. Even the company’s host community has benefitted from some initiatives that empower local contractors. For instance, the Finima Legacy Project has enabled indigenous contractors to make capital investments in their various companies thereby expanding their operating capacity. The capabilities of local vendors have also been developed through mentoring and partnerships between more established Nigerian vendors and community vendors.
Recently, NCDMB and the NLNG, set up a tactical team comprising nominees from both organizations to drive closer collaboration on projects, ensure compliance with Nigerian Content obligations, and promote other strategic alliances for the good of the nation’s economy. The Managing Director of NLNG, Philip Mshelbila led his management to NCDMB head office in Yenogoa, Bayelsa State. Mshelbila said that NLNG and NCDMB have special partnership that is beyond operator and regulator relationship.
“We started this relationship when we signed a Service Level Agreement (SLA) a few years ago and it put in place standards by which we would work together and ensure compliance and guard against surprises,” Mshelbila said.
He said the current plan is to take the relationship further and beyond complying with the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.
“NLNG has a vision not just to be a globally competitive NLNG business, but to help build a better Nigeria. To do that we have to work closely with the NCDMB and raise our partnership to a new level, and that includes human development, research, and other areas.” He said.
Mshelbila recalled how NCDMB supported the NLNG in various ways to enable the take-off of Train 7. He said: “the Final Investment Decision (FID) was taken successfully with the help of NCDMB and the project is now under construction, making good and safe progress. We are looking at potentially 5000 to 10,000 persons being employed on different phases of the project. We already have thousands working on the ground. It is employing various contractors across different areas. This is a true example of how local content should be.”
The NCDMB part commended NLNG for its impressive compliance with the provisions of the Nigerian Content Act, adding that the Board has continually fulfilled its obligations on the Service Level Agreement.
For over 10 years now, 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 reduce the use of dirty fuel sources for cooking. It has also stimulated 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.
Between 2007 and 2018, 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. To ensure a steady supply of products, deliveries are made through NLNG’s dedicated vessel chartered for the DLPG Scheme.
The ongoing 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.
In continuous demonstration of its commitment to its vision of “helping to build a better Nigeria,” NLNG has committed to delivering 100 percent of its LPG production to the domestic market through Nigerian companies with whom it has signed Sales and Purchase Agreements (SPAs).
“Since 2007, we were exporting the LPGs but then later in 2007, we started domesticating the LPG and we have been increasing the volume we have been domesticating into the Nigeria market since then.” Mshelbila said.
As the need to ensure energy security heightened, the NLNG introduced the Domestic LPG Supply Scheme in 2007 and in 2022 pledged to domesticate 100 per cent of LPG production.
As of February 2024, the NLNG said it is producing upwards of 1.5 million metric tons of LPG.
“In 2022, we took a decision that we were actually going to domesticate 100 per cent of our production. We have succeeded in doing that at least for butane because there is a huge market for butane. We have ranged between 30 and 40 per cent of the overall supply into the Nigerian market.
“Propane has been a bit more difficult not because we are not willing to supply it into the domestic market, but because the infrastructure and the facilities to receive that propane is not fully in place and so we do send as much as we can but from time to time, we have to actually export some propane.
“This is something that we are working with partners in the market to try and put in place the infrastructure that is needed so that we can fulfil our own commitment to domesticate 100 percent and that is our aspiration.” The NLNG boss said.
According to NLNG its Social Responsibility is anchored on sustainability, stake holding, and partnership. The company insists it is guided by conviction based on sound business principles that businesses must as a matter of course continuously strive to be a force for good within society.
It believes that strategically implementing projects at both national and local levels will positively impact the lives of citizens. For example, in its host communities—Bonny Kingdom and the contiguous pipeline communities—NLNG supports the improvement of infrastructure, health and educational facilities, and encourages local enterprise, facilitating knowhow and building capacity in the sustainable use of resources.
On education NLNG remains focused on education and human capital development as areas of special significance, because these two areas are intrinsic and fundamental to national development.
Because NLNG understands the importance of education it has put in place three main levels of scholarship schemes: Post Primary, Undergraduate and Post Graduate to encourage academic excellence and support human capital development in Nigeria.
The company has also placed a premium on three other areas. These include: NLNG’s University Support Programme, launched in 2014, is part of its commitment to develop education and complement government and stakeholders’ efforts. NLNG spent about USD12 million (USD2 million per university) to build modern engineering laboratories and/or furnish them with cutting-edge engineering equipment to aid teaching and research in six universities across Nigeria’s six geopolitical zones. The six universities and regions are University of Ibadan (South-West); University of Ilorin (North-Central); University of Port-Harcourt (South-South); University of Maiduguri (North-East); Ahmadu Bello University, Zaria (North-West); and University of Nigeria, Nsukka (South-East).
Secondly, NLNG established the Bonny Vocational Centre in 2004 in line with specific agreements with Bonny Kingdom. BVC is a vocational enterprise institution approved and accredited by relevant agencies and awarding bodies such as the Rivers State Ministry of Education, National Board for Technical Education (NBTE), National Business and Technical Examination Board (NABTEB), Federal Ministry of Labour and Employment, City and Guilds of London Institute, and the Institute of Leadership and Management, London.
Since its inception, the Centre has trained 2102 beneficiaries in electrical installation, fabrication, welding and pipework, mechanical fitting, metal machining, painting, and decorating, among others. . Six hundred and ninety-four (694) of these have completed and graduated with the Level 3 IVQ Advanced Diploma of the City & Guilds of London Institute. More than 91% of the graduates are currently either in employment, work placement, or pursuing further education.
And thirdly NLNG; in 2021, launched the NLNG Science Quiz Competition in partnership with the Rivers State of Education and the Science Teachers Association of Nigeria (STAN) for secondary schools in the Company’s host communities in Rivers State.
The objective of the quiz is to encourage healthy competition in science and technology among students and schools in the state to instil a solution-driven innovative thought process among youths that would inspire the search for solutions to developmental challenges plaguing the country.
The competition is also a human capital development initiative that will positively impact science and technology-based industries and teachers’ capacity to deliver qualitative science education that will groom future capacity in science and technology.
NLNG Science Quiz Competition is a two-stage competition and involves computer-based testing and quiz applications to test students’ knowledge in Mathematics, Integrated Science and Computer Studies for junior secondary students, and Mathematics, Physics, Chemistry, Biology, and Computer Science for senior secondary students.
NLNG is also the proud sponsor of three of the biggest and most prestigious prizes in Africa for science, literature, and literary criticism: The Nigeria Prize for Science and The Nigeria Prize for Literature, each worth USD100,000 in award money, and The Nigeria Prize for Literary Criticism with an N1 million cash reward.
The Nigeria Prize for Literature and The Nigeria Prize for Literary Criticism are aimed at bringing Nigerian authors and literary critics to public attention and celebrating literary craftsmanship in the nation. The Nigeria Prize for Science aims at celebrating excellence in scientific breakthroughs and honours scientists from anywhere in the world who help find solutions to a local or ‘Nigerian’ problem as defined and advertised by the Advisory Board for the prize.
The Nigeria Prize for Literature is one of the 10 richest and most prestigious literary prizes in the world.
The Nigeria Prize for Literary Criticism complements The Nigeria Prize for Literature by rewarding excellent literary critics of Nigerian literature.
The Managing Director of NLNG said “We chose to sponsor the Nigeria Prize for Science and the Nigeria Prize for Literature with monetary awards of US$100,000 each. The Nigeria Prize for Literary Criticism historically had an award of N1m. The overall intent of and shun mediocrity in creativity and innovation” these significant prizes is to place a high bar of excellence
The NLNG boss in 2022 had said that the Nigeria Prize for Science, speaks to food security. “The United Nations’ Committee on World Food Security defines it as a situation wherein all people, at all times, have physical, social, and economic access to sufficient, safe, and nutritious food that meets their food preferences and dietary needs for an active and healthy life.
“From the mangroves of the Niger Delta, through the rain forests, to the grassy plains and savannah terrains, our nation pitifully boasts of poverty, yet it is bountifully endowed with arable lands and agricultural treasures, including its aquatic wealth. This is a wake-up call! We must take responsibility for food sustenance at the very least, and scale up to foreign exchange revenue drive from food and agricultural export once the needs of our people are secured. What’s more, we have an obligation to shun wastage, arising from poor handling, preservation, and transportation of agricultural produce” he had said.
For this year 2024, the Nigeria Prize for Science recorded a 53 percent Surge in Entries. The Advisory Board announced that 153 entries were received for the 2024 cycle of the Prize for Science, about 53 percent increase over the last year 2023 and a 20-year high record.
The number of entries was revealed at a ceremony in Lagos to hand over the entries to judges for the commencement of the adjudication process. The entries came through the secretariat which is managed by the sponsor of the prize, NLNG.
The NLNG’s General Manager for External Relations and Sustainable Development, Andy Odeh, handed over the entries to the Chair of the Prize’s Advisory Board, Professor Barth Nnaji, marking a major milestone in the prize cycle.
This year, the entries will vie for recognition under the theme “Innovations and Technologies for Reducing the Effect of Climate Change,” a choice reflecting the urgency of addressing environmental challenges.
Odeh underscored the critical importance of this year’s theme, emphasizing that combating climate change is not only vital for Nigeria’s future but also essential for the survival of humanity.
“You can agree with me that the theme of this year’s prize will be of unquantifiable monetary value to the nation as you know that climate change, arising from green gas emission, remains a major setback to the development of humans,” he said.
He stated further that 2024 was a special year for both The Nigeria Prize for Science, and its sister prize, The Nigeria Prize for Literature, as the prizes celebrate their 20-year anniversary.
Andy emphasized that the Nigeria Prize for Science was an annual prize aimed at stimulating the advancement and application of science and technology, adding that the quest for a prestigious prize in science is expected to improve science and technology in Nigeria, resolve issues that are germane to the development of the country and help improve the standards of living.
Other members of the Advisory Board are Chief Dr Nike Akande, a two-time minister and former President of the Lagos Chamber of Commerce and Industry; and Professor Yusuf Abubakar, a professor of Animal Breeding and Quantitative Genetics and the
Coordinator of Agriculture Group, R & D Standing Committee, at the Tertiary Education Trust Fund.
As the world grapples with the escalating climate crisis, initiatives like the Nigeria Prize for Science play a crucial role in driving innovation and fostering solutions to mitigate environmental degradation.
“The increased participation in this year’s cycle signals a growing recognition of the imperative to address climate change through scientific ingenuity and collaborative efforts.
“The Nigeria Prize for Science is arguably the most prestigious science prize in Africa and one of NLNG’s biggest social investment projects,” Odeh said.
On behalf of NLNG, the Advisory Boards for Science and for Literature, made up of reputable and distinguished Nigerians, administer the prizes on behalf of Nigeria LNG Limited. Winners are announced in October to commemorate the first export of LNG cargo by NLNG on October 9, 1999.
Winners of the prizes are usually announced at a world press conference and rewarded in October during the Nigeria LNG Grand Award Night, a key national event for rewarding and honouring winners of the Science and Literature Prizes.
Going forward, the immediate future plan for expansion of the NLNG plant is the Train 7. The NLNG plant complex has grown from a two-train plant in 1999 to a six-train plant nine years after startup. This earned NLNG the reputation of being the fastest-growing LNG Company in the world.
NLNG has delivered over 5,000 LNG cargoes to buyers around the world by engaging in the best production practices, earning the company accolades as one of the most reliable plants in the world.
According to NLNG having made great strides in the past, the company’s focus is now on future growth. “We are fully committed to our expansion programme: NLNG Train 7 Project which will increase our production capacity by 35 percent from the current 22 Million Tonnes Per Annum (mtpa) to 30mtpa.
“This expansion will ensure that Nigeria, with its significant gas reserves (202 tcf of proven gas reserves, the 9th largest in the world) remains a top, reliable, and preferred supplier of LNG in the ever-expanding energy world. On 27th December 2019, NLNG’s Shareholders took the Final Investment Decision (FID) for the Project and on 13th May 2020 awarded the Engineering, Procurement, and Construction (EPC) Contracts for the Project to SCD JV Consortium, comprising affiliates of Saipem, Chiyoda, and Daewoo” NLNG officials said.
According to them Train 7 means growth for the Nigerian oil and gas industry. Over USD10 billion is expected to be invested in Train 7 and the upstream scope of the LNG value chain which will open up new development opportunities in the industry and boost Nigeria’s Foreign Direct Investment (FDI) profile as well as the confidence of foreign investor.
The Project is anticipated to create more than 12,000 new jobs during the construction stage, and on completion, it will help to further diversify the revenue portfolio of the Federal Government. It will also increase its tax base. The Project will also support the development of local engineering and fabrication capacity.
Meanwhile, Mshelbila has expressed optimism regarding the recent Executive Order on Oil and Gas Reforms signed by Present Bola Ahmed Tinubu.
According to Mshelbila, this executive action will be crucial in unlocking the development of non-associated gas (NAG) in Nigeria, thereby driving domestic gas utilization and ensuring a stable gas supply for NLNG’s growth project, Train 7.
In an interview on the Global Business Report programme on Arise Television, Dr. Mshelbila highlighted the significant impact of the Executive Order on the gas industry.
On Train 7, he stated that the project was progressing well at 60 percent completion status.
“We are more than halfway through the project’s engineering, procurement, and construction. It has been a safe construction, and the progress has been evident. At the site, you can see most of the big and heavy structures already in place. We are now focusing on ensuring that when the midstream project is in place, the gas supply is also there. One of the directives in the Executive Order is one of the things that will help us unlock the gas supply into Train 7,” he noted.
Over USD10 billion is expected to be invested in Train 7 and the upstream scope of the LNG value chain which will open up new development opportunities in the industry and boost Nigeria’s Foreign Direct Investment (FDI) profile as well as the confidence of foreign investors. The project is anticipated to create more than 12,000 new jobs during the construction stage, and on completion, it will help to further diversify the revenue portfolio of the Federal Government.
It will also increase its tax base. The project will also support the development of local engineering and fabrication capacity.
On local content delivery, in March 2019, NLNG and the Nigerian Content Development and Monitoring Board, NCDMB signed off the Nigerian Content, NC Plan for NLNG’s Train 7 project which will ensure the delivery of value and benefits to the Nigerian economy.
The MD emphasized that the Executive Order would incentivize the much-needed investments, addressing specific challenges hindering ease of business and attraction of investment in the oil and gas sector.
“Nigeria holds somewhere about 38 percent of the reserves in Africa. However, we have only been able to attract about 5 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 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).
“When natural gas occurs in the reservoirs, typically and very often, it occurs together with oil or other liquids like condensate. So, when you produce them together, you can sell the oil or the condensate and make enough money to cover your spending on developing the gas. Where you have non-associated gas, the gas is occurring alone, and you don’t have the benefit of the revenue from the condensate or the crude oil.
“You need to invest more to develop that gas because you don’t have that offset. So, one of the things that the presidential directive has done is 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.
On the directive by the government to suspend exports of LPG, Mshelbila said NLNG domesticated LPG supply in 2022 when the company’s Board of Directors decided to supply 100 percent of its LPG production to the domestic market, two years before the government’s announcement.
NLNG’s shareholding and governance structure is the first of its kind in the Nigerian oil and gas industry. The company is an Incorporated Joint Venture owned in the following proportions: Nigerian National Petroleum Company Limited (NNPC) (49%), Shell Gas B.V. (25.6%), TotalEnegies Gaz & Electricité Holdings (15%), and Eni International N.A. N.V. S.àr.l (10.4%).
The Company’s structure guarantees an independent Board of Directors at the pinnacle of its governance structure, which enables effective business decision-making for the company. This structure has supported the achievement of the company’s vision of being a global company, helping to build a better Nigeria, as well as other critical success factors such as funding, transparency, accountability, sustainability, reliability and growth in the company, making NLNG arguably the most efficiently run Nigerian business in the industry.
