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of growth. As I earlier mentioned, this company is dedicated to Nigerianisation in the interest of the business. Until now, we have been using foreign companies to manage our ships which carry our gas across the globe. We reached an agreement to begin to learn how to manage the ships ourselves; so Nigeria LNG will, starting from this year, begin to manage some of its ships. The best thing that any natural resource can do for you is to give you competence, and competence learned in one area can be applied in another. I think it is a natural progression that will follow through. You get other people to do the work, you learn from them and you take over doing the work. Regarding the ship manning company, it’s a business requirement for us. We employ quite a significant number of seafaring officers and people who actually belong to a different industry than the oil and gas industry. We discovered that the best way to manage the seafaring officers is to have an independent manning company that employs seafaring officers, supply them to us to work on our ships. That makes those people acquire the culture that is necessary for seafaring rather than acquire the culture that is necessary for office work. It allows them to be managed under the rules that govern that trade and we believe that it will be good for our operations, our ships and also the seafarers because it gives them the total flexibility to be seen as professionals in that field. In that sense, it may be a small contribution to the Nigerian shipping industry but primarily it is a business requirement that will improve our operations. Let us take a look at the economy. A lot of people believe that the global recession is likely over. Do you agree with this and how is NLNG performing now? The economy of the world is beginning to show signs of recovery but there are still problems out there. Over Christmas, people were debating the employment numbers in the US. You see signals all over but I think the strongest indication so far is that the oil price is lurking around $90 per barrel, something that is now a new high. Whether it will disappear when the winter disappears, we have to watch and see. What we know is the fact that India will continue to grow; China will continue to grow, albeit at a slightly slower pace. Brazil is ambitious to grow. If they grow, and Europe and the US are not in decline, then you would see the world economy growing and with it the demand for our gas. Some of these growths will have a pull on the Nigerian economy. But as you know, our market has been challenged by something different. The discovery of non-traditional gas in shale formations in the US and in tight sands means that you may not expect a direct correlation between the oil price increase and the price of gas. If the fortune of the US is repeated in other places, that
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NLNG - The Magazine
may put a ceiling on the gas price. I think the economic price for developing shale gas would have to determine what sort of price we can charge, especially in a place like the US. The Far East will have a different price pattern because of the rapid growth in China but the US which used to be a market of last resort has had a ceiling on pricing. That is some challenge for us. There has been a lot of talk about IOCs divesting from major oil and LNG projects. Also Nigeria LNG recently went to the market to source for credit. Do any of these affect the way the market is assessed? Shell is not divesting from Nigeria, Shell is just doing what is called portfolio optimization and in my view, it is long overdue. Shell started out in Nigeria, owning hundred percent of all Nigeria’s exploration and production acreage in the country, before they became about fifty percent if the industry and then went off shore. At some stage, you need to take stock and ask yourself where would it make sense to invest or where would it make sense to extract value by transferring assets to other people. I think Shell has come to that and identified pockets of assets which can be better operated by other operators allowing them to take value now rather than waiting another 30 years. I think when Shell said they are not divesting from Nigeria, they meant it. Companies just have to decide, considering their global asset portfolio and on their capital investment ranking criteria. companies have to allocate their resources where they get the maximum benefit within the time window. With the delays in investments in Nigerian projects, it is possible for companies to re-assign capital expenditures to other regions. Overall, people haven’t indicated that they have lost interest or hope in this economy. But there is definitely an uncertainty and you don’t make investment decisions effectively in an uncertain situation. You’ve made an assessment of what is on ground and the direction. What would you like to see in the next 55 years in the industry? For me, the primary desire would be the oil and gas industry becoming a footnote for the Nigerian economy. It is too dominant today and everyone is talking about the industry, but really if this economy is properly balanced, it should be a footnote; it should be in the background powering the rest of the economy. The industry should be stable, doing what it is doing, but the activities in the economy should go into other areas of production and technologies. Agriculture should take its place. It is a bit frustrating that everything in Nigeria seems to be oil and gas after 55 years. It should have become background noise. That is really the kind of change I would like to see.
I think it is good that the shape has changed because ultimately it did not make sense to vilify the industry that was doing what it needed to do. The failure of Nigeria to utilise the resources created by the oil and gas industry to develop the economy cannot be pinned down on the operators alone. As CEO of Nigeria LNG, what will you say has been your biggest challenge? It is difficult to pick one thing as my biggest challenge. There have been several challenges but things have gone rather well for me in my time here. We have been profitable throughout the period. We had a big scare when Soku got shut-in and it coincided with the global financial meltdown. So our revenue in 2009 was very low in comparison with 2008 and we were just climbing out of that in 2010. That was a big shock for us but we understood what was happening. It can be anticipated within the environment in which we work. For me, one disappointment is that we haven’t been able to progress the Final Investment Decision for Train 7 which would have helped us move our production capacity from 22 to 30 million tonnes per annum. We have tried very hard on that but one has to be realistic with the environment in which we work and accept that, perhaps, this is not the time for it. So in the interim, we have tried to build a company that is well controlled, focused on the bottom-line, realising that when we are not growing, we must protect our value, ensure our profitability is assured and the risks minimised. We’ve also tried to make sure we maintain good relationships with the society in which we work because if you don’t, profitability will be lost. We have tried to play our part as a responsible corporate citizen which is why we do things like The Nigeria Prize for Literature and The Nigeria Prize for Science. Basically, we’ve tried to keep this company in a good condition ready for growth by making sure we have competent people, and that our system management framework is world class. We have to retain the confidence of our shareholders and the market by making sure that our operations are safe and our plant integrity is world-class. That helps us to be ready when opportunities for growth come up.