What new initiatives is Nigeria LNG currently involved in?
OMOTOWA: Nigeria LNG currently has a number of ongoing initiatives. In our shipping division, we recently acquired 6 LNG ships that we have put under contract with Korean yards and by 2015 those ships will add 12% to our capacity. So we are growing our shipping fleet. Another initiative Nigeria LNG is undertaking is looking at our assets, the plant itself, and the rejuvenation of the plant. We started our first plant in 1999, which means that in 2019, the first set of trains will be 20 years old. Between 2019 and 2027, all of our 6 trains will be over 20 years old, so we will need to rejuvenate them to keep them in operation for another 20 or 30 years. We are already starting that work now. Of course, our Train Seven is still on the plate and we are working with our stakeholders looking at new initiatives around Train Seven and looking at new creativity around that as well. So those are a few of the initiatives that NLNG is currently working on.
What kind of financial commitment do these new investments represent?
OMOTOWA: For the ships, we recently signed contracts with the Korean yards for about $1.6bn worth of financing. For the asset rejuvenation, we are still in the early days, but based on the experience of other plants, this would be several billion dollars. For Train Seven, when we finally construct the train itself, as well as all of the supporting infrastructure that goes with that and the shipping capacity that goes with that, we would be looking at about $10bn to $12bn.
How did the company perform financially in 2012? What are your expectations for 2013?
OMOTOWA: Actually, in 2012, the financial performance of NLNG was the best ever in the history of the company. In terms of revenue, the company delivered $11.5bn, which is 20% above what has ever been delivered in the past. In terms of our EBIT and NIAT, we did over $5.6bn and $3.6bn respectively. This year, 2013, we have had a very difficult start because we have had a force majeure situation that lasted over 8 weeks because of the upstream gas supply situation we had with one of our suppliers. This means that we are starting off in a very difficult position this year, but we are still optimistic about our business plan. Our target this year is over $8bn in revenue and we are still optimistic that we will meet that revenue projection.
What are Nigeria’s proven gas reserves?
OMOTOWA: In terms of our gas reserves in Nigeria, today the country has 187 tcf of proven gas reserves. But I must mention that in Nigeria, our reserves have only come in recent times by accident. Nigeria has never pursued gas exploration. Since 1956, we have only pursued oil exploration. All of the gas reserves in Nigeria today were found in the pursuit of oil. I think the international and Nigerian agencies estimate that we have over 600 tcf of gas. So Nigeria has huge gas reserves. I am also aware that the government is now starting to look at the possibility of shale gas in Nigeria. So who knows what else we might find with those exploration activities.
In what ways is Nigeria LNG working with Korean entities?
OMOTOWA: The activities we have with the Koreans right now are shipbuilding and ship financing. Through KEXIM, K-Sure, and other banks, we have received over $1bn in terms of financing. So there is a lot of activity with the Koreans. In terms of our product, we do have, once in a while, spot cargo that does go to Korea. So the relationship is building up and I see that relationship continuing to grow in the future.
What is your future outlook for Nigeria’s energy sector? Which indicators are showing the most positive trends and which challenges remain?
OMOTOWA: I think in terms of the whole energy sector in Nigeria, if you look at recent developments in terms of trends, one trend that we see is that a lot of local Nigerian companies are now starting to acquire fields and are starting to produce and we are starting to see some of them actually inching up to 100,000 barrels of oil mark and growing. Recent acquisitions of fields from Shell and other international oil companies are starting to enable local companies to grow. I think that is a positive trend in itself.
Nigeria has never pursued gas exploration. Since 1956, we have only pursued oil exploration. All of the gas reserves in Nigeria today were found in the pursuit of oil. I think the international and Nigerian agencies estimate that we have over 600 tcf of gas. So Nigeria has huge gas reserves.
In terms of challenges that face Nigeria’s energy sector, one is of course the regulations. Currently, there is a Petroleum Industry Bill that is in front of the National Assembly. It is going through public hearing at this stage. Hopefully, that bill will be passed and that will enable a clearer fiscal and business environment for investors. The other challenge in Nigeria is funding. We have had quite a big issue over the last couple of years, especially with the joint ventures upstream and the PSC in terms of funding the projects, the exploration, and the highly capital intensive activities that are required. Overcoming this funding challenge will continue to be an issue. I think the other big challenge to overcome in Nigeria is the security situation, which has improved since the Niger Delta Crisis a few years back. But the country still continues to see a lot of bunkering and sabotage of pipelines. This has had a lot of impact on gas supply and also in the production of oil. I think the Petroleum Industry Bill, funding resolution, and security are the three big issues in the energy sector in Nigeria.
What makes NLNG a good investment right now?
OMOTOWA: I think in terms of investors, the future for NLNG and LNG in general is bright. The demand is growing internationally for LNG. We have seen huge demand, especially in Asia. The projections are that China and India in the next 20 to 30 years will have growing demand. I think estimates indicate that we shall see demand exceed 500m tons per annum for LNG. So I think the future is bright for LNG generally worldwide. Of course, there is also a lot of supply coming into the market with shale gas projects across America, Australia, East Africa, and all of that. But I think investing in NLNG is a very good thing. We have a track record of being a hugely successful organization with a strong balance sheet, and a lot of growth upside in terms of Train Seven and the capacity in the shipping side that we are continuing to build. I think the fundamentals are very strong and I would encourage investors to keep investing in LNG, it is the future.