NLNG Vows to Fight Surcharge Bill

Nigeria's national assembly has passed a draft bill, requiring the Nigeria LNG to contribute 3% of its earnings to the Niger Delta Development Commission (NDDC), a federal government organisation to invest in the economy, health and environment of the delta region.

Nigeria LNG, a joint venture of state NNPC with Shell, Total and Eni, has promised it will legally challenge the surcharge move if the draft becomes law: "NLNG wishes to state that, should the need arise, it shall seek that protection under the law." In the past, it has fended off a similar challenge.

The National Assembly agreed May 9 to amend the Nigeria LNG Fiscal Incentives, Guarantees and Assurances Act. 

The bill, sponsored by minority leader, Leonard Okuweh Ogor, provides that: "Notwithstanding section 7 or any other provisions of this Act, the Nigeria Liquefied Natural Gas Limited shall pay three per cent of its total annual budget to the NDDC as required by section 14 sub-section one and 2b of the NDDC Act establishment Act, 2000.

Draft has yet to become law

However the bill, which has passed the second reading as at March 2017, remains a draft bill as it has yet to be discussed by joint committees of Nigeria's Senate and the House of Representatives.  

Ogor has said that the bill which requires NLNG to remit 3% of earnings to NDDC is a way to ease the suffering of the Niger Delta people directly affected by gas flaring, past and present, by Shell, Eni, Chevron, Exxon Mobil and many other oil producing companies in the region and which have caused serious environmental degradation to the region and there is a need for restitution. However the US firms are not however NLNG shareholders.

The Nigeria LNG complex at Bonny Island by night (Photo source: NLNG)

NLNG argues that adoption of the bill would adversely affect its business operation. 

Reacting to the draft bill, Nigeria LNG told NGW May 10 that it does not believe the move is made in the interest of Nigeria as the requirement will render Nigeria unsuitable for foreign direct investments. It also said it would reduce funds needed for the $1bn operational expenditure needed annually over the next three years to guarantee the current operation of six existing NLNG trains.

NLNG external affairs chief Kudo Eresia-Eke said the amendment violates assurances and guarantees granted to the company's investors, which have been reinforced by successive governments, and have paved the way for the huge international investment that enabled the company to succeed.

But the National Assembly will have to send the bill to the Senate for enactment before the 3% surcharge on NLNG can be legally made.

Section 14 (2)(b), of the NDDC establishment act, stipulates that 3% of the total annual budget of any oil producing company operating onshore and offshore in the Niger Delta area, including gas processing companies like NLNG, shall pay the said percentage into the funds of the NDDC.

However Ogor says that in 27 years, NLNG has yet to contribute any monies in this regard to the NDDC. But NLNG says it is not bound by the act. Moreover NLNG does not produce gas, but instead buys from producers who themselves already pay the 3% NDDC levy.

In the past, NLNG had been a target for cash from Nigeria's maritime border protection agency, but managed to fend off any legal attempts to collect such direct levies. It says it is already committed to social projects in the Niger Delta, and that if the levy became law, it might not be able to fund these. 

NLNG also says it directly funds provision of a 24-hour power supply on Bonny Island, a water supply, roads, schools and scholarships.

Omono Okonkwo