The Nigerian Liquefied Natural Gas (LNG) export sector is experiencing substantial challenges due to feedstock shortages, resulting in a concerning 13 percent reduction in export volumes.
The international Gas Union (IGU) published its 2024 World
LNG Report, revealing a 13% decline in Nigeria’s LNG sales, from 15.1 million
tonnes in 2022 to 13 million tonnes in 2023.
This recent development has resulted in the West African
nation dropping from sixth to eighth place in the global gas export rankings.
Indonesia and Algeria surpassed the nation’s export volume, with Indonesia
exporting 15.6 million tonnes and Algeria exporting 13 million tonnes of gas in
the previous year.
“Nigeria’s exports have declined by 1.55 metric tonnes due
to ongoing force majeure, primarily caused by insufficient feedstock gas supply
resulting from upstream disruptions,” IGU stated.
The underlying cause of the issue can be attributed to the
diminishing availability of natural gas reserves suitable for liquefaction.
These feedstock shortages stem from multiple factors, such as the declining
production of aging oil fields and disruptions in gas transportation due to
pipeline vandalism.
As per the International Gas Union (IGU), Nigerian LNG
declared force majeure on certain cargo loadings in October 2022. This was
primarily due to substantial flooding across its upstream gas supply production
regions, necessitating the closure of several gas production wells.
“While flooding conditions have been resolved, feedstock
deliveries have still not recovered for pipeline vandalism.”
The current situation poses significant challenges for
Nigeria. The LNG industry has been a substantial source of revenue for the
nation, and the diminishing market share results in a considerable loss of
income. Furthermore, this decline may potentially lead to job displacement and
impede economic growth.
In the year 2023, the Nigeria LNG Limited (NLNG) disbursed a
substantial dividend exceeding $40 billion. Of this amount, approximately 49%
was allocated to the Federal Government of Nigeria, reflecting its shareholding
interest in the company through the Nigerian National Petroleum Company (NNPC)
Limited.
Furthermore, the NLNG has disbursed approximately $32
billion to joint venture feedgas suppliers since its inception.
“Fifty-five percent-60 percent of such payment goes to the
Federal Government of Nigeria via its shareholding in NNPC Limited,” the
company said.
The recent suicide bombing incident in Borno highlights the
urgent need for enhanced intelligence gathering and unwavering commitment from
the military to effectively address security challenges in the region.
“Some critical reasons associated with the decline in gas
exports and production are insecurity and vandalism of gas infrastructure which
often results in significant losses and disruption of production,” said Ayodele
Oni, partner at Bloomfield LP.
He added: “Also, due to the exit of some major International
Oil Companies (IOCs), there has been a significant reduction in the level of
investment in the gas sector.
“Poor gas infrastructure is also a factor that has also
contributed to the decline in gas production capacity. The emigration of some
IOCs from onshore and shallow waters to deep offshore fields, leaving
indigenous companies to take on significantly larger responsibility, has also
been attributed as a factor for the decline in gas exports and production.”
Nigeria’s ability to regain its footing in the LNG export
market hinges on its success in tackling the challenges of vandalism, force
majeure, and infrastructural deficit.
The Nigerian government Is facing significant pressure to
promptly address the critical issue of feedstock shortages. Potential solutions
include augmenting investments in gas exploration and prioritizing
infrastructure development to guarantee a consistent supply for LNG production.
In March, Ekperipe Ekpo, Minister of State for Petroleum
Resources (Gas), announced that significant efforts were being made to address
the ongoing crisis affecting the supply of gas feedstock to liquefied natural
gas (LNG) production and distribution companies.
While reiterating our unwavering commitment to fortifying
the nation’s gas supply, Ekpo provided assurances of a sustained augmentation
in gas production and distribution.
He emphasized the government’s proactive initiatives to
tackle energy-related challenges and cater to the increasing demand..
Amidst growing apprehensions regarding energy security, his
affirmation underscores the government’s unwavering commitment to augmenting
the accessibility and dependability of gas resources, catering to both domestic
and industrial consumption.
“I am impressed with what I have seen here today. We are
moving towards zero emission and we need to do everything to supply gas to
Nigerians,” Ekpo said.