Multinational Oil Companies (IOCs) operating in Nigeria would need improved incentives to resume activities in the multi-billion dollar Olokola Liquefied Natural Gas (LNG) project and Brass Liquefied Natural Gas (BLNG) project, Country President, International Association of Energy Economists (IAEE), Prof Wunmi Iledare, has said.
A review of incentives by the Federal Government, he said, is important to bring investors including the oil majors back to the projects. The firms include British Petroleum (BP), Shell, Chevron, ConocoPhillips, Eni Group and Total.
Oil majors operating in the country pulled out of the projects due to the government’s inability to get Final Investment Decisions (FIDs) for the projects years ago.
In an interview with The Nation on phone, Iledare said liquefied natural gas projects are very expensive to implement, adding that investors, who have signed agreements to execute the projects, would be happy to see the government meeting their needs in terms of providing improved incentives for them.
According to him, investors in key gas projects are more interested in enhanced and improved facilities, before they implement them.
Iledare said: “In my own opinions, industry governance and transparency are key to the issue of bringing investors, namely international oil companies, back to the Olokola Liquefied Natural Gas (OKLNG) and Brass Liquefied Natural Gas (BLNG). That is number one factor that can encourage investors to invest in a more critical project such as LNG.
“Secondly, stakeholders, including the government, need to look at what allows Nigeria Liquefied and Natural Gas (NLNG) to compete with other sources of natural gas at the initial stage, which were fiscal incentives. When this happens, it would be easier for the government to decide on the incentives required for the growth of investors and the nation’s gas industry.”
Market environments, which underlined investment in LNG in the 1980s and 1990s, Iledare noted, have changed, arguing that there must be a an environment that is in tandem with the developments in 2010 and beyond.
“This simply means that market strategies for Olokola and Brass Liquefied Natural Gas projects must change to record desired growth,” he added.
However, NLNG’s former Chief Executive Officer, Mr. Godswill Ihetu, said it would be difficult to bring investors back to Olokola and Brass Liquefied Natural Gas projects in view of the manners in which they pulled out of the arrangements.
LNG project, Ihetu said, is capital intensive and therefore, requires total commitment of investors, who are participating in the project. He said the commitment lies in the area of bringing resources together for the growth of the sector.
He noted that the conception and development of NLNG as a company that generates huge revenues for the country took years, adding that Olokola and Brass LNG would follow similar direction.
The Federal Government, he said, has a lot of issues to contend with, stressing that the government does not have enough money to invest in LNG projects.
Ihetu, who is Petroleum Club Chairman, Ikoyi, said it sounds presumptuous to say activities in the two projects would be revitalised soon in view of the huge capital sunk into them by the Nigerian National Petroleum Corporation (NNPC) and its partners. Brass LNG is located in Bayelsa while Olokola is located in Ogun-Ondo axis respectively, and the two projects were abandoned following the decision by investors to pull out of the projects.