ECONOMIC DIVERSIFICATION: DTSG AND UTM FLNG STRATEGIC PARTNERSHIP DEAL

BYMONDAY UWAGWU

Long ago, African sages held that no wise man puts all of his eggs in one basket.

This proverb, which, in contemporary times, in its vital essences equates the necessity for diversification, is as true and relevant today as when it was first made, perhaps aeons of years ago.
In fact, today, at the individual and corporate levels, the critical import of the African proverb above is finding more thematic and practical relevance in daily activities.

Not losing sight of the import of the proverb, the administration of Rt. Hon. Sheriff Oborevwori, has acted in toe to diversify the economy of the state, which, for today, is mainly fed on the proceeds of the crude oil sector.
Of course, as is self-evident in the case of Delta, just as its Nigeria’s other oil-dependent states, the virtual total dependence on the crude oil for financial receipts to provide service to the citizens, is fraught with multiple dangers: first, crude oil, by its nature, is an exhausting asset, which can run dry over time, with continuous exploitation; secondly, it is a primary material-a raw product- which attracts far less value than the finished or processed product, and thirdly, and perhaps, most importantly, the crude oil market is strictly subject to international oil market forces over which the state, as indeed , Nigeria, has no control.

All of these factors and the need to begin the effective reversal of the prevailing situation, made the Oborevwori administration to begin, from the onset, to seek ways of earning non-oil financial receipts for the smooth running of the state, even it be in the medium or long terms.

And this is where the partnership between the Delta State Government, under the watch of Governor Oborevwori, and both the UTM Offshore Limited and the Nigerian National Petroleum Development Company Limited (NNPCL), comes into focus.

At a recent highbrow event at the NNPCL Towers, Abuja, the Delta State Government, under the watch of Governor Oborevwori, UTM Offshore Limited and the NNPCL, signed a Memorandum of Understanding (MoU) for the construction and operationalization of a multi-billion naira Floating Liquefied Natural Gas (FLNG) project.

At the event, the Secretary to State Government (SSG), Dr. Kingsley Emu, and the Permanent Secretary, Delta State Ministry of Justice, Mr.Omamuzo Erebe, initialled on behalf of the state government, while the NNPCL Group Chief Executive Officer, Mr. Mele Kyari, and the Group Managing Director of UTM Offshore Limited, Mr. Julius Rone, endorsed on behalf of their establishments. Of course, like the worthy captain of the ship of state, Rt. Hon. Sheriff Oborevwori was physically present at the historic event, some of which elements of importance are simply historic.

By the terms of the shareholders’ agreement, the NNPCL will have a 20 per cent equity holding in the company, while the UTM Offshore Limited, which is the majority shareholder, will have 72 per cent, thus, leaving 8 per cent stake for the Delta State Government. The final agreement on the investment will be decided soon, according to stakeholders.

The shareholders’ agreement regarding the FLNG project involving the state government, NNPCL and UTM Offshore is significant in many respects, all of which depict the Rt Hon Sheriff Oborevwori’s administration as exceptionally visionary and forward-looking.

In the first instance, the project symbolizes the overall top quality attention that the state administration, under the watch of Governor Oborevwori, accords viable economic diversification. By seeking to diverse in the increasingly vital gas segment of the hydrocarbon sector, the Rt Hon Sheriff Oborevwori’s administration has shown uncommon foresight, given that aside of being a steady income source, gas is now regarded as the oil of the future global economy, at least, in the medium term.

Once operationalised, the income from this investment will provide a viable alternative source of income receipts for the government that is now virtually tied to the apron strings of the global oil market, the fluctuations of which are not only not always predictable, but can be quite devastating for economies wholly or largely dependent on that source of income.

Closely allied to the above is the fact of the correlation between the investment action of the state government and the main policy thrust of the Federal Government regarding the gas segment of the larger crude petroleum sector.

By investing in the harnessing of the critical gas sector of the national economy, the Delta State Government has perfectly keyed into the Federal Government’s Gas Sector Initiative Policy, which places great premium on the development of the gas sector and is actively encouraging local and foreign investments in it. In one simple sentence, the state government and the Federal Government are perfectly aligned regarding this innovative gas sector development initiative. That is not all.

The stakeholders’ agreement for the construction of the FLNG is equally of historic significance in that it is the first such initiative by indigenous Nigerian investors. This attests to the fact of the growing local interest in the money-spinning gas sector as well as the evident existence of locally available technology to drive the big dream inherent in the project. That Delta is leading in this direction can only attest to the visionary leadership of the state government, and the versatility of Deltans as truly talented global-scale competitors.

Of course, the investment, on fruition, has the great prospect of harnessing the abundant natural gas in the state (Delta has an estimated 40 per cent of all of Nigeria’s gas reserves put at more than 200 trillion cubic feet), and, by so doing, help reduce the scale of flaring of gas by existing local and international oil firms.

The reduction in the tempo of gas flaring will help reduce the level of emission of harmful particles into the atmosphere of gas-bearing communities, with their dire effects on the health of the people.

Besides helping to reduce flaring and the multiple environmental and health challenges it poses, the FLNG, on full operationalization, is expected to provide Deltans an opportunity to switch from harmful energy variants for domestic application to clean energy sources. In fact, Governor Oborevwori captured this at the shareholders’ agreement signing ceremony, when, inter alia, he said; “Of particular interest to Delta State Government is the dividend that this UTM FLNG will generate, thus advancing the socio-economic development of our great state. It is expected that over 300,000 metric tonnes of LPG (cooking gas, technically liquefied petroleum gas) will be produced and dedicated to the domestic market.’’

The direct and other effects of a potential significant embrace of cooking gas ( in relation to the conventional stove and firewood) by many more Deltans will not only help reduce deforestation and its multiple negative effects on the environment, including the now evident Climate Change, but also help households save cost, especially those dependent on stoves powered by the relatively more expensive Dual Purpose Kerosene (DPK), locally called kerosene.

The UTM FLNG project is equally expected to provide economic and technical expertise opportunities for Deltans, especially youths, who would not only be engaged as employees, but would acquire the high value expertise related to the LNG technology. In sum, over the medium and long hauls, the project will not only create direct and indirect job opportunities, but will equally transfer technology in such a strategic field to engaged Deltans, in fulfillment of the third element of the MORE agenda of the state government, which is to provide viable development opportunities for Deltans. Like all such projects, the UTM FLNG has come as an idea that had been fallow for far too long.

But as it is said in ancient Africa, it is the single day deluge that eventually ends the spell of the dry season. For Deltans, while that rain is yet to fall, they can be rest assured that fertile rain-bearing Columbus clouds have taken over the skyline, and it is just a matter of time, before the heavens will give the precipitation for the crops (ideas) to flourish to fruition.

For the FLNG, a core element of the imaginary rain will fall when, early this year, all shareholders will assemble to put pen to paper at the Final Investment Decision (FID) session to signal the beginning of the hopeful planting season, that is expected to ultimately cap in a bountiful harvest for the sowers.

This rich harvest was the object of the potent allusion by both the Chief Executive Officer of NNPCL, Mele Kyari, and the Group Managing Director of UTM Offshore Limited, Mr Julius Rone, when in their separate remarks at the shareholders agreement signing ceremony, they publicly applauded the Delta State Government, under the watch of Governor Oborevwori, for being not only a promoter of the potentially rewarding gas policy initiative, but also an active significant investor in the sector.