VENTURES AFRICA – The African economic resurgence narrative turned a new chapter this week with the confirmation of Nigeria as Africa’s largest economy. With a population of over 170 million, a $510 billion GDP and economic growth projection of 7.3 percent, not many will argue against the country’s growth potentials. And with increased calls for diversification of Nigeria’s economy, the country is finally starting to look beyond oil exports. However, revenues from Nigeria’s Liquefied Natural Gas project is on the up. Babs Omotowa, Managing Director/Chief Executive Officer of Nigeria LNG Limited and Vice President Bonny Gas Transport Limited, literally sits atop a corporate estate which contributed $1.3 billion to the country’s federal account last year. Omotowa chats with Ventures Africa about Nigeria’s controversial PIB, marketability of NLNG products and NLNG’s impact on host communities:
VA: What do you feel about Nigeria’s PIB?
BO: The objectives for PIB are very laudable: to harmonise and modernise petroleum laws of 50 years, to increase the country’s take of hydrocarbon revenue, to commercialise the national oil company, etc. However, as an omnibus law, it has understandably attracted diverse opponents. It would have been better if it were split into two separate laws — fiscals and administration — such that the fiscals can be quickly passed and investments continue to flow to the industry so we do not kill the goose that lays the egg, whilst we can continue the debate on the administrative and housekeeping matters, such as the structure our national oil company, how to share revenues, including the host communities’ take etc.
At the cross road that we are, the oil industry is starved of investment…the current dilemma will have significant impact on government revenues and this may take us over 10 years to recover. We need stronger leadership from both the executive and the legislature to move the PIB forward. This will however be a challenge at the moment with the elections imminent.
VA: What does the Nigeria economy stand to benefit from functional NLNG operations?
BO: Nigeria[‘s] economy has indeed already benefited from NLNG in terms of revenue as well as contracts and services. Nigeria has earned $13 billion as dividend from NLNG: $11 billion from purchase of Feedgas and over $10 billion from purchase of goods, services and salaries. In June 2014, NLNG will pay N220 billion ($1.3 billion) to Nigeria Federation Account, the highest company income tax in Nigeria and in the Sub-Sahara Africa. It will continue to pay similar amounts every year.
VA: How does the recent shale gas revolution impact NLNG in the global market?
BO: Initially in the 1990s, 35 percent of NLNG products were sold to the United State for 25-year contracts, however, since 2010, this has reduced to zero. Thus our entire market in North America has disappeared. We have been able to divert these volumes to Asia (Japan, Korea, China, etc) but the US shale is also being developed now for export and this will also compete for our current market in Asia. The shale gas has had a significant impact on our operations.
VA: What steps have been taken to deal with the environmental impact of operations in host communities?
BO: NLNG is indeed itself an environmental solution as NLNG was set up to help stop gas flaring and we have mopped up 4 trillion cubic feet of gas that would have flared since 1999, when we commenced production. We have converted this erstwhile waste to revenue for the government. We have been a force for good in reducing gas flaring from over 60 percent in the country when we started to just over 20 percent now.
VA: How is NLNG supporting agriculture and enterprise in host communities?
BO: We have had several agriculture schemes supporting host community for over a decade, Our N-Agenda programme (a short hand for NLNG Agro –Enterprise Development) is an example how we support agriculture cooperatives with financial and educational support. We work in partnership with the Central Bank on this scheme and over 600 farmers have today benefitted. We are taking this to the next level by trying to link these farmers to commercial buyers and export market, to improve their earnings. We are looking at an even bigger agriculture agenda as part of our Bonny Sustainability program, which is being developed currently.