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Before his retirement, Commonwealth LNG founder and chairman Paul Varello shared his vision for the $9 billion LNG company he founded in 2014 with THE WHISTLER’s Ukpe Philip and Nneoma Benson. Commonwealth LNG is a gas liquefaction and export project in Louisiana with a capacity of 9.5 million tons per year.
excerpt…
Let’s start by calling for net zero by 2050. African leaders are calling for a just energy transition. Do you think we will just ask African countries, including Nigeria, to stop producing by 2050?
No, I’m very passionate and I feel for Africa. I believe that Africa has vast resources to improve its country and economy and should be allowed to do so as a top priority. There are three elements to the success of any economy. One is clean fresh water, another is enough food, and the third is energy. Affordable, cheap and good quality.
If a country has all three of these things, it has a much better chance of building a great economy and succeeding. Africa must continue to do everything it can to ensure these three conditions are in place. Good and clean water, good and abundant food and energy. We hope that Africa has sufficient financial resources for energy development.
Nigeria has been in the energy, crude oil and refining business for many years. There is also a lot of investment from foreign companies, and some international banks remain interested in improving Africa’s economy. I suspect that funding will come from international banks, oil companies such as France’s Total, and other companies that are investing in LNG, similar to Mozambique.
Also, Mozambique has huge oil reserves and faces turmoil from gorillas and violence, but Nigeria is much more advanced than Mozambique, but Nigeria resists it (Nigeria’s NLNG) and completely is not finished. But Nigeria is more settled.
We should be proud of what Nigeria has done so far. Because Nigeria has leaders with better education and international understanding who represent Nigeria well. Mozambique doesn’t have that, and neither do other parts of Africa. I think that makes a big difference.
I went to Ivory Coast and other parts of Africa, West Africa two years ago, and I found that there is still a lot of poverty and a lot of hardship in them. Problems eventually arose when he went to a refinery built by Italians and poorly run by an African country and realized that they were importing crude oil from Nigeria for refining.
After closing the refinery, they began importing diesel and gasoline from Nigeria again. They were very grateful that Nigeria at least had an economy that could provide fuel. This is important because being a leader allows you to advance the common good.
Are you optimistic that Nigeria will be able to resolve its LNG currency exchange issues and what alternative approaches do you think Nigeria’s LNG could take to achieve full capacity?
Nigeria supplies crude oil, diesel, and gasoline to various countries in Africa. So it’s already part of the improvement of Africa’s economy. I remember when we went to different parts of Africa, they said they were importing crude oil and fuel from Nigeria and the same was true for LNG. I am optimistic that Nigeria can solve its exchange rate problems with petrol, diesel and LNG.
I think Nigeria’s LNG production capacity needs two things. One is investment from international players seeking a position there, and the other is further investment in technology. There is also a need to develop further upstream gas sources to supply plants that require investment in upstream drilling and well development. It is carried out by major oil companies such as Shell, Chevron, and Total, both in the United States and abroad. I think those investors are likely to develop these gas assets. Nigeria has huge gas potential and it could be on the ground.
What are American companies doing to supply gas to the United States, Europe, and Asia?
We released even more gas through hydraulic fracturing. Hydraulic fracturing layers therefore allowed more gas to be released, increasing the amount needed in the United States. So we decided to export it. Nigeria has a lot of gas. Nigeria can earn more foreign exchange by selling gas internationally and bringing in money for other things.
Things are different in Nigeria, so many products are sold here that you don’t have to worry about foreign exchange except for the Chinese. The Chinese are powerful in bringing in products and sell many products in America. Therefore, foreign exchange with China is negative. We hope that they can use LNG to balance foreign exchange with China. Nigeria could do the same. The Chinese are willing to sign long-term contracts and will buy at a good price.
Are you planning to invest in Nigeria?
That is not the case now. The investment here, Commonwealth LNG, is going to be close to $9 billion, which to me is a large investment to be concerned about. The project will take gas from various geological formations in Louisiana, liquefy it with LNG and load it onto ships, with some ships going primarily to Europe, but also to Asia, particularly China. Nigeria should become an LNG exporter. Nigeria will become an important source of energy for Europe and other parts of Africa.
What led you to found Commonwealth LNG and what is your vision for corporate social responsibility?
We hope to start construction this year. The project will take three years to build and operate for 20 years. I believe in the importance of education. So we’re in a very remote area of Louisiana, where a significant portion of all funding goes to K-12 schools and local colleges to support the children being educated there. Don’t find a job there. The only jobs available are farmers, ranchers, and shrimpers. That’s loving, but if you’re college educated and you’re in engineering or finance or something, you definitely don’t want to be a fisherman.
Therefore, we need to create jobs for these children, and we need to do it when they are young enough to understand which professions to pursue. Do you like finance? yes i will. Then I’ll ask you to go into the financial industry. Are you an engineer? Do you like making things? And once they graduate from that school, we employ them. they will work. And we do it for them. Not only for them, but also for us who live in this area. They understand the field, which makes it easier to keep them.
My factory is going to make about $1 billion a year from selling LNG, primarily in the US and Asia, but we’re not going to sell it to Africa just because Africa gets its own LNG. Mozambique has Mozambican LNG, and Nigeria has an excellent source of LNG on the continent. Egypt has factories serving North Africa.
How do you hope to raise $9 billion for this project?
Our factory is a private company whose sole purpose is to generate profits. I own it, but I’m not going to be there all the time. But I’m lucky to have what I have now. I collect some of the funds through banks. Show them your project and say write them a check for $6 billion. Then I go to private equity and receive $3 billion. Because private equity has money. They are accused of investing money and we showed them a very nice return of 15 percent. So they like it and they get it for 20 years.
