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Friday, 17 March 2023

The Nigerian Liquefied Natural Gas (NLNG) is making desperate efforts to boost output after heavy flooding, upstream gas supply issues and pipeline vandalism left the six-train facility on Bonny Island producing far below capacity last year, and the trend has largely continued in 2023.

According to a report by Natural Gas Intelligence, liquefied natural gas exports have been “protractedly declining” since the 22 million metric tons/year NLNG declared a force majeure in October 2022 due to flooding, said Kpler analyst Ana Subasic. “Nigeria’s LNG exports have been lower, but steady since the beginning of this year.”

Subasic said NLNG, a major Atlantic Basin supplier since 1999 when the first train came online, delivered one million tons (Mt) to the global market at a 53 per cent utilisation rate in January. The situation seems to be improving, however, as exports bounced back to 1.07 Mt last month, or 63 per cent of its total monthly capacity, after four consecutive months of decline, according to Kpler. The commodity data firm also projects exports to reach 1.22 Mt recently.

Although Nigeria is Africa’s largest LNG exporter and as Europe looks to replace Russian natural gas with more of the super-chilled, Nigeria has been unable to increase capacity to meet the ramp in global demand. The country is missing out on opportunities in what the International Energy Agency (IEA) expects to be a tight market until 2026, when new projects come online and begin easing the supply crunch.

Nigeria is reportedly not alone as output has fallen across Africa. In Algeria, Angola, Cameroon, Egypt and Equatorial Guinea, utilisation rates have slipped to just 58 per cent of the 71 mmty of liquefaction capacity available, according to the Gas Exporting Countries Forum.

At the continent’s largest plant, NLNG exports have dropped from a high of 21.33 Mt in 2019 to just 14.61 Mt last year, according to Kpler. Nigeria once had a 10 per cent share of the global LNG export market, but by 2021, the country’s market share had fallen to just six per cent.

Stakeholders maintained that a general lack of investment, maintenance, prolonged flooding periods, and more recently pipeline vandalism in the country, has been at the core of the decline in output seen since 2019.

Kpler Insight expects to see some Nigerian natural gas production return this year with efforts on the part of exploration companies underway, but not at levels seen in 2021. “Overall production from NLNG will continue to underperform, and should issues persist in the future, we expect to see a tighter national balance.”

Nigeria was Europe’s fifth largest LNG supplier last year, when it exported 8.75 Mt to the continent, Kpler data shows. That was down from 9.29 Mt in 2021 before Russia invaded Ukraine and cut off supplies to the continent.

NLNG’s last train was commissioned in 2007, but the International Gas Union recently noted that the country’s resources could easily support up to 10 trains. Nigeria has proven gas reserves of 208 Tcf, according to the Nigerian Upstream Petroleum Regulatory Commission.

A seventh train was sanctioned in 2019 at NLNG and it is currently under construction. The expansion would boost the facility’s output to 30 mmty, but the new train is said to be less than 30 per cent complete.

Another two LNG projects, Olokola LNG and Brass LNG, could have added more than 22 mmty to Nigeria’s production capacity. The projects have been stalled for more than a decade and have yet to be sanctioned.

About IWIN

The Independent Energy Watch Initiative (I-WIN), an enterprise of Energy ConServ and the Roundtable for the Growth and Development of Power (RODEP), is an online/web based power sector portal that strives to engage stakeholders and the Nigerian public on topical issues in the power sector.

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