Oil & Gas Development To Thrive With Stable Contractual Policy —Falade

Nigeria’s oil and gas industry will witness accelerated growth when its policy direction sustains stability to offer investors more assurances.

The managing director and chief executive officer (MD/CEO) of the Nigeria LNG Limited (NLNG), Adeleye Falade, taking up issues on unstable policy dimensions listed key factors that Nigerian authorities should address to position its energy sector to attract investors attention.

He raised concerns that the country’s vast natural resources alone cannot attract the capital required to develop them as he called for greater certainty in Nigeria’s oil and gas industry.

In the first place, he said investors needed confidence that contractual terms would remain stable, buyers would take delivery of production and operators would meet their obligations, citing the $3 billion in external financing secured for NLNG’s Train 7 project as evidence of the importance of these conditions.

Falade, made the remarks at the 32nd Nigerian Economic Summit in Abuja during a panel session titled, “Unlocking Nigeria’s Oil Potential: The Push for More Oil,” .

According to him, Nigeria’s challenge was not a shortage of resources but the ability to translate them into commercially viable projects that lenders could confidently finance.

Falade, explained that investments in the oil and gas industry required substantial upfront capital, with recovery periods of 20 to 30 years depending on confidence that the terms underpinning projects would endure throughout their lifespan.

For lenders, he said, the quality of the resource was only one consideration, alongside the durability of the investment framework, predictable earnings and the capacity of project owners and other participants to honour their commitments.

Falade pointed to the financing of Train 7, secured in 2020 amid the COVID-19 pandemic, as an example of how a credible investment proposition could attract capital even during a period of global uncertainty.

The project is being financed through a combination of NLNG’s internally generated cash flows and $3 billion in external funding from 31 local and international financial institutions.

According to him, the financing was underpinned by NLNG’s track record of developing six operating liquefaction trains and repaying the loans used to finance those earlier expansions, giving lenders evidence of its ability to execute projects and meet its financial obligations.

“Track record compounds,” he said, explaining that each successful project strengthened the company’s credibility and improved its ability to secure financing on competitive terms.

By the time NLNG sought funding for Train 7, he said that lenders could evaluate an established history of project delivery rather than rely solely on projections of future performance.

Falade identified three fundamental questions that lenders and investors must be able to answer before committing capital to major energy projects: “Who buys the product? Who carries the risk? Who stands behind the project?”

He explained that long-term sales and purchase agreements, including contracts extending to 20 years, provided the commercial foundation for NLNG’s investments by establishing a market for future production before a final investment decision.

Such agreements, he said, enabled projected output to be translated into anticipated cash flows that lenders could assess when determining whether to provide financing.

He added that bankable projects also required clear allocation of risks to parties best equipped to manage them, with buyers better positioned to handle market risks while the company and its contractors managed technical risks.

The NLNG chief executive also highlighted the importance of operational performance in sustaining investor confidence, disclosing that plant utilisation had risen to 81 per cent year to date after remaining at about 60 per cent for approximately two years because of feedgas constraints.

The improvement, he said, demonstrated the plant’s capacity to deliver stronger output when sufficient gas was available, reinforcing the link between reliable operations, predictable production and lenders’ willingness to provide capital.

Beyond financing, Falade said major energy projects should deliberately develop Nigerian businesses and technical capabilities that could support subsequent investments and compete in international markets.

“Capability has to be deliberately built into what you do,” he said, arguing that local participation should not be measured solely by the amount of money spent within Nigeria but by the lasting capacity created among domestic suppliers.

He cited the construction of NLNG’s six vessels, during which Nigerian manufacturers supplied products including furniture and cables, as an example of how local businesses could gain access to opportunities beyond the immediate project.

Some of the Nigerian suppliers, he said, continued to do business with the overseas companies involved after completing their original orders for NLNG, demonstrating how participation in major projects could open doors to international markets.

Falade said the next priority was to deploy these capabilities in subsequent projects, allowing Nigerian suppliers to deepen their experience, remain engaged in the industry and undertake increasingly complex assignments.

He called on policymakers to support the development of local capacity by providing an enabling business environment that would allow Nigerian companies to grow alongside major investments in the oil and gas industry