By 2030, the world’s demand for liquefied natural gas (LNG) could hit 500 million tonnes per year (mpta) from current demand of around 300 mtpa but Nigeria, who holds the 9th largest amount of natural gas in the world could see its market share dwindle.
Three years to the end of many Nigerian LNG long-term contracts, the company is yet to sign on new buyers of its cargoes even as development of new LNG trains remains uncertain. The units that freeze natural gas into liquid form for export on ships are known as trains in the natural gas industry.
Meanwhile, other countries are not slowing down. The International Energy Association sees Australia, Qatar and the United States supplying 60 per cent of the world’s LNG by 2023 and increasingly doing battle for a bigger share of the key market of Asia.
Nigeria started its LNG operations 24 months after Qatar but Qatar now produces 77 million tonnes per annum, while Nigeria has not moved the needle on 22 MTPA.
The International Energy Association (IEA) says that the United States, already the world’s top producer, accounts for almost 45% of the growth in global production and nearly three-quarters of LNG export growth.
In Africa, significant gas finds in excess of 127 trillion cubic feet in Mozambique have created the potential for another African super player. Mozambique is expected to become the second-largest exporter of liquefied natural gas by 2025, as the country steps up production from 10 million tonnes per annum in 2017 to an envisaged 50 Mtpa.
Egypt which could become self-sufficient in natural gas by the end of this year with the start of Eni SpA’s giant Zohr field has vast facilities to turn gas into LNG, which can be exported by ship.
“It is possible that gas imported under this agreement will be directed towards domestic consumption or to the LNG plants to be liquefied and re-exported,” El-Molla said on Egyptian CBC television. “We have LNG plants, we have capacity that is not being exploited, so why not have a third party bring good?”
Since the development of the NLNG, new projects have been too few and far between. Three LNG projects in Nigeria: Olokola LNG, Brass LNG and the NLNG’s Train 7 have been unable to reach final decision by the stakeholders.
The OK LNG project was stalled because all the international oil companies (BG, Shell and Chevron) withdrew from the project, with only the Nigerian National Petroleum Corporation left.
The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Total, ConocoPhillips and Eni Group. But ConocoPhillips withdrew from the project in 2013.
NLNG Train is expected to reach final investment decision in the fourth quarter of this year. BusinessDay gathered that an announcement is expected within two weeks. The component of an FID incudes gas supply certainty, secured funding and execution of a sales agreement. None has yet to be established.
“It’s time to prepare for the likely demand outlook that’s positive, and has out-performed projections in the last three years. Let’s get back to exploration and production activities,” Tony Attah, managing director and CEO NLNG Limited said at Nigeria International Petroleum Summit in Abuja in February.
The IEA projection supports the notion of demand growth. “Driven by continuous economic growth and strong policy support to curb air pollution, China accounts for 37% of the global increase in natural gas consumption between 2017 and 2023, more than any other country.
“As domestic production cannot keep pace, China becomes the world’s largest natural gas importer by 2019 and with 171 billion cubic metres (bcm) of imports by 2023, is mostly supplied by liquefied natural gas (LNG),” says the report.
Nigeria could struggle to regain prized markets for its long-term contracts due to its unstable regulatory environment even as competitors look to offer more flexible terms.
LNG buyers receive fixed monthly volumes. Even if a buyer cancels a cargo due to a period of unusually low demand, payment is still due under “take-or-pay” obligations. Most Asian long-term supply contracts contain “destination clauses” which prevent buyers from on-selling LNG to third parties. To protect buyers and sellers from sharp price swings, the LNG under most long-term contracts is indexed to oil which is prone to volatility.
However the United States has developed destination-free and gas-indexed US LNG exports and this provides additional flexibility to the expanding global LNG market and makes its cargoes more attractive to Asian markets where Nigeria is targeting.
