Nigeria’s LNG Exports Decline by 13% Due to Feedstock Shortages

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Nigeria’s Liquefied Natural Gas (LNG) export industry is facing a significant setback as feedstock shortages have caused a 13 percent decline in exports.

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LNG sales from Nigeria dropped from 15.1 million tonnes in 2022 to 13 million tonnes in 2023, the International Gas Union (IGU) revealed in its latest 2024 World LNG Report. This development saw Nigeria fall from sixth place to eighth, losing its position to Indonesia and Algeria, which exported 15.6 million tonnes and 13 million tonnes of gas, respectively, last year.

According to the IGU, “Nigeria, whose export declined by 1.55 metric tonnes, continued its force majeure, plagued by low volumes of feedstock gas due to upstream disruptions.”

The root cause of the problem lies in dwindling natural gas supplies available for liquefaction. These feedstock shortages are attributed to various factors, including declining output from aging oil fields and pipeline vandalism disrupting gas transportation.

Nigerian LNG declared force majeure on some cargo loadings in October 2022 due to significant flooding across its upstream gas supply production regions, which required several gas production wells to be shut. While flooding conditions have been resolved, feedstock deliveries have not recovered due to pipeline vandalism.

This situation has severe consequences for Nigeria. The LNG industry has been a significant revenue generator for the country, and the declining market share translates to a substantial loss of income. Additionally, the decline could potentially lead to job losses and hinder economic growth.

In 2023, the NLNG paid a dividend of over $40 billion, with 49 percent going to the Federal Government of Nigeria through its shareholding in the company via the Nigerian National Petroleum Company (NNPC) Limited. Additionally, the NLNG payment to joint venture feedgas suppliers from inception till date is about $32 billion, with 55-60 percent of such payments going to the Federal Government of Nigeria via its shareholding in NNPC Limited.

“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, a partner at Bloomfield LP.

He added, “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 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 responsibilities, has also been attributed to 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 deficits. The Nigerian government is under pressure to address the feedstock shortages urgently. Solutions might involve increased investment in gas exploration and infrastructure development to ensure a steady supply for LNG production.

In March, Ekperipe Ekpo, Minister of State for Petroleum Resources (Gas), said serious work was ongoing to resolve the crisis in gas feedstock supplies to LNG production and distribution companies. While reaffirming the commitment to bolster the nation’s gas supply, Ekpo reassured a sustained increase in gas production and distribution.

He highlighted the government’s proactive measures to address energy challenges and meet growing demand. “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.

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