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Nigeria LNG rejects probe findings

6 Nov 2012, 3.25 pm GMT

Nigeria LNG rejects probe findings

Johannesburg, 6 November (Argus) — Nigeria LNG (NLNG) has denied key findings in a government-commissioned probe into the country's oil and gas sector, which said the firm had paid below market prices for gas supplied to its 22mn t/yr plant and that it owed $29bn to the government for this gas.

The report by the special task force on petroleum revenue was received by Nigerian president Goodluck Jonathan on 2 November.

But NLNG, whose shareholders are state-owned NNPC, Shell, Total and Italy's Eni, rejected the report's findings on its operations.

“This report is inaccurate and the allegation grossly erroneous,” NLNG said. “It is an error to compare the price of raw material (natural gas feedstock) to that of finished product (regasified LNG). It is even worse to declare the difference as losses or cut down rates. This sort of comparative economic analysis is simply bizarre. It fails to recognise the intensive production-liquefaction costs, the shipping costs, the regasification costs, taxes and levies and other ancillary charges.”

NLNG said it had paid over 300pc of the going rate of gas in Nigeria during the period under review.

The price that NLNG bought gas from producers is a "netback price", which since 2008 has been between 26pc and 36pc of the weighted prices it obtains from the sales of its products in various regions in the world. This price level compares well across LNG plants globally and reflects the capital-intensive nature of the liquefaction process and shipping costs, NLNG said.

NLNG currently pays over $2bn/yr to the Nigerian government in various taxes.

The firm did back the report's recommendations that more LNG trains should be built in the country, including the seventh train at the current plant on Bonny island. No final investment decisions have been taken on a seventh train on Bonny island or on the proposed Brass LNG and OKLNG projects.

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