HOW OBASANJO ORDERED NNPC TO RETAIN NLNG
DIVIDENDS TO FUND NEW TRAINS
• Concerns mount over sharing of $7.3bn in dividend
account
Following the controversy surrounding the retention
of dividends paid by the Nigeria Liquefied Natural
Gas (NLNG) Company Limited to the Nigerian
National Petroleum Corporation (NNPC), it has
emerged that the initial directive to retain its 49 per
cent share of dividends was actually given by former
President Olusegun Obasanjo when he was in office.
Arising from this is another brewing controversy as
to whether the dividends belong to the Federation
Account for sharing amongst the three tiers of
government, or just to the federal government, in
this case the NNPC.
The previous management of NNPC when Obasanjo
was in office had argued successfully that while the
taxation revenues of NLNG belong to the Federation
Account, the dividends belong to NNPC, which
needed the dividend payments to reinvest in the new
trains of NLNG.
It was on this basis that Obasanjo ruled in their
favour and the Jackson Gaius-Obaseki-led NNPC then
ring fenced the dividends in a special (investment)
account and used it to successfully reinvest in NLNG
Trains 3 to 6 without recourse to the federal
government, according to officials familiar with the
transaction.
But with the state governors seeking more revenues,
they are today insisting that they were short changed
by the Goodluck Jonathan administration in not
paying the dividends to the Federation Account for
sharing amongst all tiers of government.
In reinforcing the narrative of state governors, the
Nigerian Extractive Industries Transparency Initiative
(NEITI) also recently disclosed that NNPC had failed
to remit $11.6 billion to the Federation Account,
which was paid by NLNG and called on President
Muhammadu Buhari to recover the amount.
NLNG was set up as a joint venture company
comprising NNPC with 49 per cent equity, Shell,
which serves as its operator - 25.6 per cent, Total
LNG Nigeria Limited - 15 per cent and Eni - 10.4 per
cent, as its shareholders.
However, it is not clear if NNPC's equity in NLNG was
paid for by the "federation" or the "federal
government" as this was done during the military
regime of the late General Sani Abacha when it was
basically a command unitary government.
A Final Investment Decision (FID) was taken on NLNG
by its shareholders in November 1995, while the
construction of the gas transmission system, and
second and first trains were completed in September
1998, August 1999 and February 2000 respectively.
Since then, it has built four more trains between
November 2002 and December 2007 to bring the
total number of trains to six.
The base project (Trains 1 and 2) which cost $3.6
billion, was financed by NLNG's shareholders. The
third train (expansion project), including additional
storage, cost $1.8 billion and was funded by
shareholders as well as reinvested revenue from the
base project.
The NLNG Plus project (Trains 4 and 5) cost $2.2
billion and was funded with a combination of
internally generated revenue and third party loans
amounting to $1.06 billion.
Train 6 (NLNG Six project) cost $1.748 billion and
financing was handled by shareholders, bringing the
total cost of building six LNG trains to $9.348 billion.
The FID for Train 7, however, has still not been taken
despite efforts by NLNG to get the federal
government to give NNPC the green light for the next
train.
But THISDAY checks revealed that NNPC currently
has some $7.3 billion dollars in the investment
account with which it intends to fund its share of
NLNG Train 7, Brass LNG (in which over $1 billion has
already been invested) and OK LNG, which is still
troubled by economic and investment hurdles.
But governors at the last National Economic Council
(NEC) meeting determined that the dividends belong
to the Federation Account and must be shared
amongst all tiers of government.
It is not clear what the final decision of Buhari will be
but oil industry experts and NNPC officials have
cautioned that should the funds be shared and spent,
there will have no funds to reinvest in gas at a time
when the future of oil revenues is uncertain and oil
prices are at an all time low.
Providing insight on Obasanjo's directive, a retired
senior executive of NNPC confirmed that the
corporation was asked to retain the dividends paid by
NLNG in order to meet its share of investment after
FIDs had been taken to build subsequent trains of
NLNG.
"As you are aware, from the Abacha days, Nigeria
was already having problems funding its share of
cash calls for the joint venture oil contracts with the
oil majors.
"So in order to avoid a situation whereby NLNG's
expansion was impeded by the same problem,
Obasanjo directed that we retain the dividends paid
by the company for its expansion programme," he
said.
He added that the former president's directive was
implemented to the letter because it was in the
interest of Nigeria to continue to harness its gas
resources, as gas is the future, and today it is saving
the country in the depressed crude oil environment.
"Besides, Nigeria is more of a gas producer than an
oil producer, so we deemed the directive as a life
saver for NLNG and Nigeria's future," he explained.
Officials of NNPC also confirmed THISDAY's
investigations that the corporation currently has
about $7.3 billion from NLNG dividends but the
money has been kept aside for investment in NLNG
Train 7, Brass and OK LNG.
Another official also expressed concern that at the
last NEC meeting, the governors had insisted that all
funds from NLNG should be paid into the Federation
Account, adding: "If we do not reach a compromise
with the governors, when we have to fund our share
of Train 7 and other LNG projects, we will encounter
the same difficulties we encountered with the JV cash
calls, but we believe the issues will be resolved as
NNPC becomes more transparent with its operations
and opens its books to scrutiny."
Given its pioneer status in 1999 when it commenced
production, NLNG was granted a tax holiday for
several years by the federal government and did not
start to pay taxes until 2014.
According to the information on its website, in 2014,
it paid N220 billion (about $1.375 billion using N160/$
as exchange rate) to the Federal Inland Revenue
Service (FIRS) while its second tax payment of $1.6
billion was in June this year and shared by the three
tiers of government in July. It was this payment in
July that opened the eyes of state governors to
NLNG's revenue and are thus seeking more than the
tax revenue from the company.
NLNG tax payments so far make it the highest
taxpayer in Nigeria and sub-Saharan Africa.
In terms of dividends to its shareholders, the
company has paid $30 billion between 2004 and
2014, putting NNPC's share of dividends at $14.9
billion to date.
-thepanaceareports

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