Nigeria's oil and gas industry faces a significant challenge in securing financing for major projects, not due to a lack of resources, but because of the need for investors to have confidence in the durability of the investment framework and the predictability of earnings. According to Adeleye Falade, Managing Director and Chief Executive Officer of Nigeria Liquefied Natural Gas (NLNG), investors require substantial upfront capital and recovery periods of 20 to 30 years depend on confidence that the terms underpinning them will hold throughout their life.
Falade made these remarks at the 32nd Nigerian Economic Summit in Abuja during an interactive panel discussion on "Unlocking Nigeria's Oil Potential: The Push for More Oil." He emphasized that lenders assess not only the quality of the resource but also the durability of the investment framework, the predictability of earnings, and the ability of parties involved to honor their commitments. Consistent implementation is essential to sustaining investor confidence.
NLNG's Train 7 expansion serves as evidence of how these conditions can unlock capital for major energy projects. The project was financed in 2020 amid the COVID-19 pandemic through a combination of internally generated cash flows and $3 billion in external financing from 31 institutions, both local and international. This financing was secured due to NLNG's track record of developing six operating trains and repaying loans used to finance those developments.
Falade noted that each successful development strengthened NLNG's credibility and helped secure subsequent financing on more competitive terms. By the time NLNG sought funding for Train 7, lenders could assess a long history of performance rather than a promise of future potential. The financing of capital-intensive projects ultimately rests on three questions: "Who buys the product? Who carries the risk? Who stands behind the project?"
Operational reliability is another critical factor in securing financing. Falade reported that NLNG's plant utilization had reached 81 percent year to date, after approximately two years at around 60 percent due to feedgas constraints. The improvement demonstrates the plant's ability to deliver when sufficient gas is available, reinforcing the connection between reliable operations, predictable production, and lender confidence.
Beyond attracting capital, large-scale projects must leave behind businesses and skills capable of supporting the next generation of investments. Falade emphasized that local participation should be deliberately developed, not left to chance or measured solely by money spent. This approach ensures that projects contribute to the growth and development of the local economy.
The NLNG boss highlighted the importance of a credible investment proposition in securing financing for major projects. With a strong track record and a stable investment framework, companies can attract the necessary capital to develop Nigeria's oil and gas resources. This, in turn, can drive economic growth and development in the country.
Key points
- Investors need confidence in agreed terms and project delivery to secure financing for Nigeria's oil and gas projects.
- NLNG's Train 7 financing demonstrates how a credible investment proposition can unlock capital for major energy projects.
- Operational reliability and local participation are crucial for securing financing and driving economic growth.
