Nigeria LNG Sale is Stalled by Parliament
A long-running plan to auction the state-owned oil company's 49% interest in Nigeria LNG has stalled in the lower house of the National Assembly.
Nigeria's federal House of Representatives this week called for the suspension of the proposed sale of NLNG shares that was proposed in 2016.
Budget and national planning minister Udo Udoma had previously said that the sale of some national assets, including the NLNG stake, could raise enough funds for Nigeria's infrastructural development. The government had earlier said that the 49% interest - owned by the Nigerian National Petroleum Corporation - could generate between $10bn and $15bn.
It is tough, however, to argue that selling off the largest single shareholding, en bloc, in the country's most lucrative gas venture would be in the country's long-term interests. If the entire state 49% stake were sold, Nigeria would lose its annual NLNG dividends although it would still have a right to taxes on the venture.
Randolph Oruene-Brown, a member of the House of Representatives, certainly doesn't favour a sale. He moved a motion against the NLNG shares sale that was carried by the House. "It is not in any conventional economic reality for any nation to resort to selling off its assets during challenging times, as this exhibits leadership laxity and policy myopia," he said.
An earlier attempt under the previous president Goodluck Jonathan to divest a 9% or 10% stake in NLNG was never finalised.
If the gas sector is to flourish, clear policies are needed to attract foreign direct investment, and President Muhammadu Buhari has yet to sign the final copy of the harmonised version of the petroleum industry governance bill (PIGB), which is supposed to guarantee clear outcomes for the oil and gas sector, and which was passed by parliament earlier this year.
On May 9 LNG expert Olufola Wusu wrote, while suggesting alternatives to the sale of NLNG shares, that it could be beneficial to convert the contractual joint ventures into an incorporated joint venture (IJV) companies, just like the NLNG, so those IJVs can raise funds to do business and build their human capital base.
He also wrote that as opposed to selling the shares, the focus should be drawn to facilitating stalled LNG projects. In Wusu's opinion, the NLNG Train 7 (T7) project - first proposed over a decade ago - has the capacity to attract $25bn worth of foreign direct investments and could increase NLNG capacity by about 40%.
Total has said that the NLNG T7 project could be developed at a relatively low-cost, as it would be a brownfield venture. However to date, the foreign partners in NLNG (Shell 25.6%, Total 15% and Eni 10.4%) have been slow to put their hands in their pockets to invest in such an expansion - either as part of the core NLNG or as a standalone venture. All three have several alternative LNG export projects planned elsewhere, such as Eni in Mozambique, and Shell in Tanzania, Canada or Russia.