The media have quoted the report of the Petroleum Revenue Special Task Force alleging that Nigeria LNG Limited purchased gas from Nigeria at cut-down rates and thatthe countrywas short changed to the tune of USD $29 billion.
This report is inaccurate and the allegation grossly erroneous.
We ordinarily would have considered them unfounded speculations had the chairman of that task force, Mallam Nuhu Ribadu, not confirmed to journalists that they were true reflections of his committee's report.
We therefore feel obliged to issue the following clarifications:
• The Task Force neither met with NLNG management nor visited the company in course of its work. One would have taken for granted that a fact finding committee would get the views of all companies and stakeholders on relevant issues or clarifications on any of the assumed finding before rushing off to have reports leaked to the international press. This leaves us wondering the purpose ofthe inquiry.
• Fundamentally, it is an error to compare the price of raw material (natural gas feedstock) to that of finished product (regasified LNG). It is even worse to declare the difference as losses or cut down rates. This sort of comparative economic analysis is simply bizarre. It fails to recognize the intensive production/liquefaction costs, the shipping costs, the regasification costs, taxes and levies and other ancillary charges.
• Nigeria LNG Limited buys gas from local producers just like other companies such as Nigerian Gas Company (Power Holding Company of Nigeria), Independent Power Producers, Cement Companies and industries. It however needs to be clearly stated that contrary to the Ribadu Report, Nigeria LNG Limited bought gas at over 300 percent of the going rate of gas in Nigeria during the period under review.
• The price that NLNG buys gas from the producers is a "netback price" which since 2008 has been between 26 - 36% of the weighted prices it obtains from the sales of all its products in various regions in the world. This price level compares well across LNG plants globally and reflects the capital intensive nature of liquefaction process, shipping costs, etc.
• It is entirely flawed to cite international price of gas for the simple reason that there is no single international price of gas. However, gas (unlike oil) has regional prices - Europe, North America and Asia. These regional prices vary significantly.
• Indeed the Far East countries such as Japan, Korea, Taiwan command highest values in the world market - several times the multiple of gas prices elsewhere in the world. North America has the cheapest gas prices today with the advent of shale gas. The price of gas in the United States (Henry Hub) today is about the same as the price NLNG buys feed stock gas in Nigeria.
• It is wrong to compare feedstock gas prices with LNG prices. LNG is value added gas that has been purified, chilled, compressed to 600 times its actual size and turned to liquid at minus 160 degrees Celsius to ensure transportation over long distances. Costing elements of LNG include feedgas, liquefaction, transportation, regasification and other ancillary charges.
• It is important to note that 51% of the feedstock gas that NLNG buys from local producers would have been flared and would have been of no benefit to Nigeria! Gas found while exploring for oil had been flared every day in Nigeria from as far back as 1957 when commercial oil exploration began in Nigeria.
• In 55 years of oil and gas exploration, only Nigeria LNG Limited and its shareholders (49% owned by Nigeria via NNPC) have brought in any worthwhile revenue into the country's coffers from gas. Indeed over USD $51 billion revenue has been realized due to the operations of NLNG and its shareholders.
• As a result of the success of Nigeria LNG Limited, successive Nigerian Governments had pursued a policy of ensuring that gas revenue equaled oil revenue using Nigeria LNG Limited as arrowhead. This was to ensure that Nigeria ceases to be a mono-product economy shackled by OPEC quota and vagaries in the oil market. For the avoidance of doubt, majority of the members of the Board of Directors of Nigeria LNG Limited are Nigerians. Its senior management is 100 percent Nigerians and staff 94 percent Nigerians. These are patriots who cannot stand idly by and see thelr motherland robbed of her precious resource. They are similarly irked by disparaging remarks and circulation of falsehoods made from airbrushed facts.
Nigeria LNG Limited is considered a major success story for the following reasons:
• It is a world class company operating to the highest global standards and transparency; submitting audited accounts to relevant authorities annually.
• It was, until recently, the fastest growing LNG facility in the world and today accounts for 8% of the world's LNG production.
• It has a shipping subsidiary that owns 13 LNG vessels and has trained over 500 sailing officers, some of them to the ranks of captains and chief engineers
• It has trained over 18,000 Nigerians in various disciplines since 1995.
• NLNG's financials are solid and credit rating impressive with assets worth over USD$13 billion.
• NLNG contributes overfour percent of Nigeria's GDP. Nigeria LNG Limited has contributed to significant reduction of flaring from 65% to 25% of total gas produced.
• Its current feedstock gas intake is 51% associated gas. At the moment, NLNG remains the arrowhead in Nigeria's efforts for a cleaner environment and flare stoppage.
• It has single handedly revived Nigeria's domestic - cooking gas - gas industry and the shipping industry
• NLNG currently pays over N500 million in various taxes to Rivers State monthly and over USD $2billion to the Federal Government yearly and regularly pays dividends to the government through NNPC.
• It maintains a beneficial relationship with its host communities. For example, Bonny Kingdom has enjoyed uninterrupted electricity supply for over 15years.
• It gave Nigerian scientists and writers Africa's most prestigious prizes - The Nigeria Prize for Science and The Nigeria Prize for Literature with a cash value of USD$100,OOO each.
Lastly, flawed as it is, we do not wish to completely dismiss Ribadu's Report. We agree with his recommendation that more LNG trains (including NLNG train seven) should be established to monetize Nigeria's gas resource and provide additional revenue for the Federal Government that would be used in providing infrastructures urgently required to accelerate the development ofthe country and create employment. We also believe that efforts should continue to be made to encourage investment in the domestic gas sector, gas to power plants and industries. Nigeria still flares about 25% of gas produced! Successful takeoff of these projects will bring greater value to Nigeria and Nigerians. That will be more beneficial than the current show of acrimony, controversy and finger pointing.
Finally, it is uncharitable to treat history with such levity and to disparage the heroic efforts of the past. It took more than 35 years, many false starts, some initial partners withdrawing, and delicate negotiations with concessions, before the NLNG project finally took off.
The project was re-launched several times and international investors encouraged with incentives (tax holiday period, government guarantees sealed in an Act, etc) to bring the significant financial investments (billions of dollars) required for the projects, without which more gas will still be flared today and not a cent of the several billions of dollars revenue that has accrued to Nigeria would have come.