By Adewale Sanyaolu
Moves to amend the Nigerian LNG (Fiscal Incentive, Guarantees and Assurances) Cap. N87, Laws of the Federal Republic of Nigeria 2004, which has already been passed by the lower chamber of the National Assembly, stirred fresh debate last week among oil and gas stakeholders in Lagos.
The event was the 2017 Association of Energy Correspondents of Nigeria (NAEC) Conference where stakeholders rallied to examine the theme, “PIGB: Prospects and Challenges to Nigerian Oil and Gas Industry.”
But beyond the theme, a team of discussants had x-rayed the topic, “Implications of the Bill to Amend the NLNG Act”. The panelists included the Chairman/CEO, Mentor Energy Consulting Limited, Mr. Victor Eromosele, as the lead paper presenter; Member, House of Representatives Gas Committee, Mr. Simon Arobo; Head, Energy Research, Ecobank Transnational, Mr. Dolapo Oni, and Executive Director, Socio-Economic Rights and Accountability Project (SERAP), Mr. Tokunbo Mumuni.
The session gave insights into the contributions of NLNG to the economy and why such efforts by NLNG should be encouraged in order to spring more of such company while warning that the country should learn to adhere to the sanctity of contracts.
Some of the gains recorded by NLNG remained its significant contribution to the domestic LPG industry, supplying about 40 per cent of cooking gas to Nigerian homes and businesses with a gradual increase from 300,000 to 350,000 tonnes yearly. This intervention continues as part of strategies and initiatives aimed at deepening the availability and usage of cooking gas in the country.
But while all members of the panel cautioned that the country should be careful not to be tagged as a promise breaker among the comity of nations, Arobo reasoned otherwise, saying the National Assembly under Section 2 of the Constitution of the Federal Republic of Nigeria is vested with the powers to review laws, highlighting that no law can be forever.
The controversial amendment
It is no longer news that despite several warnings by oil and gas stakeholders, including the Nigerian National Petroleum Corporation (NNPC), civil society groups and the labour movement on the implications of the amendment of the “Nigerian LNG (Fiscal Incentive, Guarantees and Assurances) Cap. N87, Laws of the Federal Republic of Nigeria 2004”, which they said will cost the country to lose about $25 billion investments, the House of Representatives has gone ahead with its passage.
The amendment apart from seeking to ensure that NLNG pays 3 per cent of its annual budget to the Niger Delta Development Commission (NDDC), the bill also seeks to end the company’s status as dollar-denominated, which was part of the incentives to protect the company and its shareholders against the naira’s flip-flop.
The National Assembly also plans to use the contentious bill to make NLNG’s subsidiary, Bonny Gas Transport Company, pay tax in Nigeria. If the bill becomes law, the NLNG will also pay 3 per cent of gross freight on international inbound and outbound cargo to the Nigerian Maritime Administration and Safety Agency (NIMASA). The widely-condemned bill will also mandate the NLNG to pay 2 per cent of contracts performed by companies engaged in cabotage and 1 per cent of any upstream contract to the government.
But the most controversial aspect of the bill is a new provision – Section 7(b) – added to the original NLNG Act, which now provides that “Notwithstanding Section 7, or any other provisions of this Act, the Nigerian Liquefied Natural Gas Limited shall pay 3 per cent of its total annual budget to the NDDC Fund as required by Section 14, Subsection 1 and 2(b) of the NDDC Establishment Act, 2000”.
The bill, which has scaled through third reading at the lower chamber of the National Assembly, has now been forwarded to the Senate for concurrence and the President for assent to become a law.
Stakeholders kick
But despite its passage by the lower chamber, the bill has continued to generate widespread criticism among stakeholders.
Mumuni said though as an advocacy group, the body tries to remain neutral on some issues but cannot afford to do so in this instance because national interest is at stake, adding that he still remains at crossroads as to what ailment the amendment seeks to cure.
“In international law, there is what is called adverse effect. If at a particular point in time, foreign investors were invited to come and invest and certain assurances and guarantees to secure their investments were agreed upon, coming around to say otherwise or upturn such agreements could bring about credibility issues for the company and government.
“The question I would want to ask is, what are we going to use the 3 per cent for? What has the so many percentages that have been deducted over the years been used for? Has it really impacted on the fortunes of the common man,” he queried.
For Oni, he said the timing for the amendment was just not right, considering the fact that this is a period the country needs more of Foreign Direct Investment (FDI) to turnaround the economy through job creation, saying such was capable of scaring investors. He explained that as soon as the news of the amendment started filtering into the media, it put the NLNG partners who are mostly International Oil Companies (IOCs) on the defensive.
According to him, the deletions to the Assurances and Guarantees of the NLNG Act to compel NLNG to commence payment of 3 per cent of its budget to the NDDC have somewhat put on hold investments for NLNG Trains 7 and 8.
“If not paying the 3 per cent to NDDC will ensure that Trains 7 and 8 come on stream, then I think it will be better for the country to tow that line in the interest of growing the economy.
“We have tried all other forms of developing our gas, but they have all failed but NLNG has been a success factor having paid about $15.5 billion in dividends and equally paid taxes in excess of $5.5 billion. So we should be careful in taking a decision whether we want to grow this asset or stagnate it,” he said.
In his contribution, a board member of Petroleum Club and Managing Director of Chorus Energy, Dr. Godwill Sunday Ihetu, warned against the amendment of the Act because of its dire consequences.
He said twice from 1960, Nigeria tried to have an LNG company but failed, adding that he was one of those that drafted the current NLNG Act after members of the parliament during former President Shehu Shagari’s regime cancelled a similar Act and the investors ran away.
“As at that time when the NLNG was about to be floated, the investors insisted that unless they have Guarantees of Assurances, they will not put their money down. This is not a foreign company but a private company in Nigeria with 49 per cent owned by NNPC. Paying 3 per cent to NDDC means the dividend of NNPC would be reduced and channelled to NDDC.
He corrected the statement by Arobo, which claimed that NLNG is a gas producing company, saying the company never was, but rather a gas processing company, adding that the law mandating gas companies to pay 3 per cent to NDDC was for gas producing companies.
He said the shareholders of NLNG, which include Shell, Eni and Total, were all oil and gas producing companies and are already paying 3 per cent of their annual budget to NDDC, saying another payment would amount to double taxation. This, he said, does not make common sense.
We did the right thing
But while the bill is being met with outrage and condemnation, Arobo maintained that the House of Representatives has done the right thing by amending the NLNG Act. He explained that lawmakers in any country are vested with the powers to amend any law, adding that there is no law that remains forever.
“Those saying we should not tamper with the NLNG Act should realise that the law cannot be there forever. We are a sovereign nation and there is nowhere in the world that you have laws for eternity; absolutely not. The decree only granted a pioneer status. What NLNG wants is an everlasting protection but we won’t allow that. Our own position in the House of Representatives is for NLNG to comply with the law.
“If we can amend the constitution of the Federal Republic of Nigeria, what is so special in amending the NLNG Act. Yes, it has been passed by the Reps and I equally expect the Senate to concur to that before it gets to the President for accent.
“What we are doing is in the interest of the country. But if the percentage in the NDDC Act is too high, it can equally be amended. But for NLNG to say they won’t comply, we won’t allow that. NLNG cannot say our wanting to review a law amounts to chasing away investors; that cannot be so. Law and contract reviews are done in other countries. NLNG cannot tie our hands forever. NLNG has had tax holiday for 16 years. So what else are they looking for?”
However, Kudo Eresia-Eke, General Manager, External Relations, NLNG, refuted this assertion, saying that NLNG has been paying taxes for the past six years.
Implication for the country
Managing Director of NLNG, Mr. Tony Attah, had told journalists during the presentation of the company’s Facts and Figures contained in NLNG 2017 publication, a compendium of the NLNG business in Lagos, that if the amendment is passed, the NLNG expansion project will be jeopardised and Nigeria will lose investments of $1-3 billion annually in the upstream.
“It means an immediate loss of foreign investment totalling $25 billion in respect of Train 7 and 8 investments. Another impact will be the potential loss of about 18,000 jobs required for the construction activities of the trains. An amendment or change in the NLNG Act portrays Nigeria as a promise breaker and untrustworthy, damaging the country’s reputation and hamstringing its ability to attract foreign investment,” he added.
Citing the Qatari example, Attah said, “Qatar started to ship LNG in 1997, two years before Nigeria. But you have to be awed by what the country has achieved since then. Today, oil and gas, and principally LNG is the foundation of Qatar’s economy and accounts for more than 70 per cent of total government revenue, and more than 60 per cent of GDP, as well as roughly 85 per cent of export earnings. Qatar has LNG capacity of about 77MTPA and generates revenues of about $91 billion per year. Gas was the catalyst for transformation of a small emirate to a global economic powerhouse. This will give you a feeling of what can happen when you focus on gas.”