Before his retirement, the Founder and Chairman of Commonwealth LNG, Paul Varello, shared his vision for the $9bn LNG firm he founded in 2014 with Ukpe Philip and Nneoma Benson of THE WHISTLER. Commonwealth LNG is a Louisiana gas liquefaction and export project with a capacity of 9.5 million tons per annum.....KINDLY READ THE FULL STORY HERE▶
Excerpt…
Let’s begin with the call for net zero by 2050. African leaders are seeking a just energy transition. Do you think it is just to ask African countries including Nigeria to stop producing by 2050?
No. I am very passionate and I sympathise with Africa. I believe that Africa has huge resources to improve its own countries and economy and they should be allowed to do that foremost. There are three things for every economy to be successful. One of them is clean fresh water, the other is adequate food and the third one is energy. Affordable, cheap and good quality.
If a country has all three of these, it stands a very good chance of building a great economy and being successful. Africa must continue to do whatever it can to have those three things in place. Good clean water, good and abundant food and energy. We hope that Africa has enough financial resources to develop its energy.
Nigeria has been in the business of energy- crude oil and refining for a long time. It has a lot of investments from foreign firms and some international banks are still interested in improving Africa’s economy. I think the money can come from international banks, from oil companies like French company Total and others who have invested in LNG just like they have in Mozambique.
Also, Nigeria is far more advanced than Mozambique although Mozambique has huge oil reserves, it is faced with turmoil with gorillas and violence but Nigeria put up that (Nigerian NLNG) and is not quite done with it. But Nigeria is more settled.
We have to be proud of what Nigeria has done because it has leaders that are better educated and who have a global understanding and they represent Nigeria well. Mozambique doesn’t have that and other parts of Africa don’t have and I think that makes a lot of difference.
I was in Ivory Coast two years ago and other parts of Africa and West Africa and I could see they still have a lot of poverty and a lot of difficulties. I noticed when I went to a refinery that was built by Italians and was not well run by the African country, it ended up having issues and they were bringing in crude oil from Nigeria to refine.
When they shut down the refinery, they started bringing in diesel and gasoline again from Nigeria. They were very thankful that Nigeria had at least an economy that should help them with fuel. That is important because when you become a leader, you advance common good.
Are you optimistic that Nigeria can solve FX issues with LNG and what different approach do you think Nigerian LNG can adopt to reach full capacity?
Nigeria furnishes different African countries with crude oil, diesel and gasoline. So, it is already a part of improving the African economy. I remember various places we went to in Africa that said they were importing crude oil and fuel from Nigeria and same would be for LNG. I am optimistic that Nigeria can solve its FX problems with gasoline, diesel and LNG.
I think Nigeria’s LNG capacity will take two things. One, investments from international players who want a position there and two, more of technology. They also have to go upstream and develop more upstream gas sources to feed the plant that will take investments in upstream drilling and development of these wells. The people that will do that are big oil companies like Shell, and Chevron in the US and internationally, Total and others. I think those will be the investors who are likely to develop those gas assets. Nigeria has a huge potential for gas which is maybe on the ground.
What are companies in the US doing differently to deliver gas to US, Europe and Asia?
We freed up more gas by fracking. So, fracking formations allowed us to free up more gas and that gave us more volume that we needed in the US. So, we decided to export. Nigeria has a lot of gas. Nigeria can make more foreign exchange by selling the gas internationally and bringing in money for other things.
In Nigeria, you have a different thing and here we have so many products that we are selling that we don’t have to worry about foreign exchange except for the Chinese. Chinese are powerful in terms of bringing in products and they sell a lot of products in America. So, our foreign exchange with the Chinese is negative. We hope that they can balance our foreign exchange with China using LNG. Nigeria can do the same thing. The Chinese are willing to enter into long term contract and they will buy at a good price.
Do you have any plans to invest in Nigeria?
I currently don’t. This investment here- Commonwealth LNG, will be in the neighbourhood of $9bn which is a lot of investment for me to worry about. The project will take in gas from the different formations in Louisiana, I will liquefy it in the LNG, load it in a ship, and some of the ships will go primarily to Europe and also to Asia, particularly China. Nigeria should be an exporter of LNG. Nigeria will be an important source of energy for Europe and for other parts of Africa.
What inspired you to set up Commonwealth LNG and the vision you have for corporate social responsibility?
We want to start construction this year. This project will take three years to build and it will operate for 20 years. I am a good believer in education, so, a good bit of all the money will go into supporting schools from kindergarten through high school and in colleges in the area because we are in a very remote part of Louisiana and the children who are educated there don’t find jobs there. The only jobs are farmer, ranchers and shrimping. It is loving but if you have a college education, you are an engineer or in finance or something, you definitely will not want to be a fisherman.
So, we need to create jobs for those kids and we need to do it when they are young enough so that they know what profession to go into. Do you like finance? Yes, I do. Then we ask them to go into finance. Are you an engineer? Do you like building things? And when they come out of that school, we will hire them. They will work. And we do it for them. It is not just for them but also us, because they live in the area. They understand the area and it is easier to keep maintaining them.
My plant will be making about a $1bn a year in sales of LNG primarily in the US and also Asia but we will not sell it to Africa only because Africa has got its own. Mozambique has its and Nigeria’s LNG also has good sources for the continent. Egypt has a plant that will service North Africa.
How do you hope to raise the $9bn for the project?
Our plant is strictly to bring in revenue and we are a private company. I own it and I am not going to always be there. But I am lucky to have what I have now. I am raising some of the money through the bank — I will show them the project and say, write me a check for $6bn. Then, I will go to the private equity and get $3bn because private equities have money. They have been charged with investing money and we show them a very handsome return of 15 per cent, so, they like it and they will get it for 20 years.