Nigeria LNG Act of 2004 focus of Nigerian Senate wrangle

24 May 2017 13:22 Source:ICIS

The consortium behind Nigeria’s 22mtpa LNG export plant on Bonny Island is fighting a change to a domestic law which would discourage foreign investment in Nigeria LNG (NLNG), according to the group’s page on social media website Facebook.

The Nigerian House of Representatives on 9 May passed a bill which threatens the NLNG Act of 2004, a series of protections that many claim has allowed NLNG to grow into one of the world’s largest LNG exporters.

Among the proposed amendments to the Act is a 3% Niger Delta Development Commission (NDDC) levy to NLNG, and the end of NLNG’s dollar-denominated status, which would expose it to currency risk of the Nigerian Naira.

The country’s National Assembly also plans to make NLNG’s subsidiary, Bonny Gas Transport Company, pay tax in Nigeria.

NLNG and its shareholders are meeting with the Nigerian Senate in a bid to overturn the bill, the Facebook post said.

But an analyst source suggested that NLNG’s period for investment had passed.

“NLNG managed to get a lot of investment a few years ago, but in the last three years oil prices have fallen and so has investment in LNG,” said the source.

Upstream investment issues mean that Nigeria has not been producing cargoes at the same rate as several years ago.

The source also pointed out that Nigeria’s security risks made it a less attractive investment than comparable projects. “Given the security risks in the Niger Delta, would you rather invest in Nigeria or in Australia?”

But NLNG hopes to expand to liquefaction capacity of 30mtpa with a seventh LNG train.

With proven cash flows from its six performing trains, the expansion could be financed by corporate loan rather than project finance, analysts said ( see GLM 16 November 2017 ).

On NLNG’s Facebook page, the consortium said it would proceed with its plans for a seventh train until it was clear whether the amendments to the NLNG Act of 2004 were passed. However, if the amendments took place it would also make it likely that a final investment decision would not be taken on Train 7.

NLNG cautioned that changing the Act would damage international trust in Nigeria, as the incentives were intended to last the life of the project.

The majority of NLNG’s exports go to Europe under long-term contract, with the second-largest market Asia.

NLNG is made up of Nigeria’s state energy company NNPC, and international oil majors Eni, Shell and Total.

By Josie Shillito