Stories by Adewale Sanyaolu

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The recent disclosure by the Senate President, Dr. Bukola Saraki, announcing the stoppage to the amendment of the Nigerian Liquefied Natural Gas (NLNG), Fiscal Incentives, Guarantees and Assurances Act, has received applauds from operators in the country’s oil and gas sector.
Regrettably, for the period that the debate on whether or not the NLNG Act should be amended raged, investments worth about $25 billion were locked up in the woods, thus stagrating progress on the Final Investment Decision (FID) for Train 7.
The Senate President had on his Twitter handle stated that the amendment to the Niger Delta Development Commission (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 contracts it has entered into.
The Nigerian Senate had on the November 29, passed a Bill for the amendment to the NDDC Act. The amendment to 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.
Though, some stakeholders are still worried that the amendment which would now see NLNG and some other gas processing companies pay 3 percent of its annual budget to the commission, was an unfair one to NLNG, on some stakeholders also see it as a win-win situation for the industry.
It is germane to note that the Schedule 2, Subsection 7 of the Nigeria LNG Act which deals with fiscal matters restricts the government from modifying, suspending or amending same, without the mutual agreement of the government, and the shareholders of the NLNG.
How NLNG came into being
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).
The Company was established 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 stabilisation provision, which the shareholders relied upon to bring in technology and huge capital ($6 billion initially from investors including $2.5billion from the Nigerian Government through NNPC).
Main thrust of the NLNG Act
The NLNG Act which was originally ratified by the Constitution as an Act of the National Assembly, has as its basis, as 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 and Angola. These incentives have been a veritable tool to support and grow their LNG plants.
For his part, Partner, Bloomfield Law Practice, Mr. Ayodele Oni, said had the National Assembly not put a stop to the proposed amendment of the NLNG Act, any attempt to modify the provisions of Schedule 2 of the Act could have sent wrong signals to international investors and the international business community, generally.
‘‘If anything, removing the provisions of Guarantees and Assurances could discourage foreign investment into the sector, especially due to concerns on statutory and regulatory instability. This is, generally speaking, the problem of the obsolescing bargain which occurs in international (energy) investment law in particular,’’ he said.
Contributions to the economy
From the initial investment of $6 billion, the company which has grown from one to a six-train operation with a name plant capacity of 22 million tonnes per annum (mtpa), now has an asset base of over $11 billion 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 30 mtpa.
Additionally, NLNG currently manages 16 long term LNG Sale & 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.
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 $5.5billion 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 totaling over N51 billion.
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 executed 21 Sales and Purchase Agreements (SPAs) with domestic off-takers and has committed to supplying up to 350,000 tonnes of LPG to the Nigerian market annually.