Unstable Oil Price: NLNG Revenue Drops By 30% | Independent Newspapers Limited
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Unstable Oil Price: NLNG Revenue Drops By 30%

Posted: May 15, 2015 at 1:43 am   /   by   /   comments (0)

By Obas Esiedesa,  Abuja   Nigeria Liquified Natural Gas Limited, on Thursday reported  a 30 per cent drop in revenue at the end of last month, to $7 billion about (N1.365 trillion), due to the fluctuations in global oil prices. The company said although not tied to daily price of Brent in the international market, the average price of Brent in the last six months has led to reduction in its revenue to $10 billion. The company’s General Manager, Commercial, Patrick Olinma, who disclosed this during a presentation on ‘the current dip in energy prices-outlook for Nigerian economy,’ at NLNG external Stakeholders Forum in Abuja, said despite the drop, NLNG still enjoyed the high prices witnessed last year. The compay is owned by the Federal Government, which holds a 49 per cent stake through the Nigerian National Petroleum Corporation (NNPC); Shell Petroleum Development Company, 25.6 per cent; Total LNG Nigeria Limited, 15 per cent, and Italian oil giant- Eni, 10.4 per cent; contributes about one per cent of Nigeria’s rebased Gross Domestic Product (GDP). Olinma noted that the NLNG is fighting to retain its current global market share which has dropped to five per cent from eight per cent in the past. According to him, “in terms of revenues, we said there would be reduction in foreign revenues for the country and it would affect projects. In Nigeria I have not heard about big announcements, but clearly it will affect ability to reach investment decisions for those projects that have not had investment decisions taken. “And for the Nigerian LNG, as at April we have seen 30 per cent reduction in our revenue and the reason we are still where we are is, we do have a what we call a lag effect on our prices. “Normally, our prices are not Brent of the day but an average of six months Brent. So we are still carrying over some of the high Brent prices but even with that we have lost 30 per cent of our revenue as at the end of April compared to 2014. “So when a lot of people look at the Nigerian economy and they only talk about oil… in terms of revenue we generate a revenue of over $10 billion on the average. So when you look at the fact that we are losing about 30 percent that is a lot of reduction in revenue for the country,” he added. Continuing, Olinma explained that “in terms of borrowing, when you have $7 billion in the balance sheet, it is still a strong balance sheet  for a Nigerian company. The appetite to lend money to NLNG will still be there.” Olinma stressed that with contracts for NLG trains 1,2,3 and 4, coming to an end by 2021, the company needs to work hard to ensure that they are renewed and global market share retained. “In terms of future expansion, if you have a crisis where there are a lot of supplies in the market and you have price concerns, and the EPC contracting rates are not going down and you may have to struggle in terms of reaching FID, because we are not a charity, we can only do projects that are profitable. “If you are not profitable, and you won’t make money and there is no market for the expansion we will not do the projects. This is the situation the current market also throws up in terms of how we go forward with expansion. “What will also be key is that our current market share is imperative and I don’t think that is negotiable, we will fight to retain that and that is a question the Deputy Managing Director was touching on, when he talked about the fact that our trans 1,2,4 contracts which is roughly 10mtons of LNG will be expiring beginning 2021 and with all  these projects all over the world and declining prices we have to fight to be able to renew those agreements. “If you look at some of the countries in the Middle East like Brunei that tried to renew theirs it is not given, especially today when a lot of buying counterparts are not keen on long contracts anymore. Most of them are going for shorter and medium term contracts. So there could be challenges in terms of retaining the kind of values we have in those contracts. “More important, is that we have to retain the market share”, Olinma added.