NLNG struggles with output despite demands from Europe

By Favour Ajibade

The Nigerian Liquefied Natural Gas, NLNG is struggling to boost output, despite rising  demands  from its European buyers, a report by the Natural Gas Intelligence has said.

This follows heavy flooding, upstream gas issues, pipeline vandalism among other problems, which have left the six-train facility on Bonny Island producing far below capacity last year.

According to recent natural gas exports, exportation of the product has been witnessing a major decline since last October 2022 when NLNG  declared a force majeure due to flooding among other issues. 

A gas analyst, Ana Subasic noted that the 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 1 million tons (Mt) to the global market at a 53 per cent utilization 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 in March.

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 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, utilization 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 6 per cent.

A “general lack of investment, maintenance, prolonged flooding periods, and more recently pipeline vandalism in Nigeria, has been at the core of Nigeria’s decline in output seen since 2019,” Subasic told NGI. “Human-imposed sabotage and theft have been affecting the feed gas supply of Nigerian associated gas, directly linked with Nigerian oil production.”

Rebound Possible

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’s ruling party candidate, Bola Tinubu, was declared the winner of Nigeria’s presidential election last month. While on the campaign trail, Tinubu did not say how his government would resolve NLNG supply issues, but instead pledged to lead Nigeria to economic prosperity.

He also pledged to help meet the European Union’s gas shortfall through the construction of a $10 billion gas pipeline to export volumes from Nigeria via Algeria to Europe. 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 proved 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 Subasic said the new train is 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.