Why Nigeria must not miss out in multi billion dollars global LNG market

The global demand for LNG is expected to hit 500 million tonnes per annum (MTPA) by the year 2040, from the current 360 MTPA, according to stakeholders and participants at the recently concluded CWC World LNG Summit and Awards Evening in Rome, Italy. They posited that the increase in demand for LNG will be driven by population growth and quest for a sustainable, reliable, cleaner and safe energy.

The LNG industry is recognised for its excellent safety record and is continuously working to further improve energy safety and security.

Rapid LNG development has seen countries like Qatar, Australia and United States reaping trillions of dollars in revenue. The Nigeria LNG Limited makes Nigeria the 5th largest LNG producer in the world with 22 MTPA capacity, but Nigeria can attract more investments if the federal government formulates deliberate policy to develop gas and LNG.

Addressing participants on the economic importance of LNG development, the Firmwide Chair of Global Projects Department, Baker Botts L. L. P., Jason Bennett, said “The future demand of LNG is China and everything else. Presently, China can consume all the world LNG including new projects in the world. So, what China does is very impressive. India also has huge consumption but has less gas distribution system as much as pricing system than China. They can import tons of LNG if the price is right. So, everyone here should be looking at future LNG projects that will meet growing European and Asian demand each one of which won’t change the outcome of global demand. This will continue in the next five years.”

By implication, it means there is need for more projects across the globe to bridge the demand gap that already exists in the LNG markets. This is where it becomes imperative for Nigerian government to formulate policy that will encourage more investments in LNG projects.

NLNG’s Train 7 to the rescue?

The Nigeria LNG Limited is the pioneer LNG company in Nigeria and it currently operates six trains (plants) with combined output of 22 million tonnes per annum (MTPA) capacity.

The Final Investment Decision (FID) for Train 7 is expected to be signed in December 2019 following the signing of Gas Supply Agreements (GSAs) for Trains 1, 2, 3 and 7 recently in Abuja.

Signing of FID is the most critical aspect of capital project decision where the shareholders will outline the funding model for the projects and it represents approval for the projects to commence.

The Train 7 project is expected to boost NLNG’s capacity by additional six million tonnes to 30 MTPA. It would also boost Nigeria’s Liquefied Petroleum Gas production to reduce LPG importation. The FID for Train 7 would be over $7 billion worth of investment, which would create over 10,000 jobs with attendant multiplier effects on the economy in terms of wealth creation.

The Managing Director/Chief Executive Officer, Nigeria LNG Limited, Tony Attah, stated that at peak construction, the Train 7 project is targeted to provide direct, indirect and induced employment of about 40,000 jobs from the Nigerian Content Development and Monitoring Board (NCDMB) perspective, if looked holistically over the next six-year window.

He warned that Nigeria risked losing its market share in the international gas market as well as dwindling gas export, if it failed to make new investments in gas development.

“If we do not take new FID investments in Trains, Nigeria may continue to drop from 5th to 10th position by 2025. We are here to enable gas. Nigeria has ridden on the back of oil for more than 50 years. It is now time to fly on the wings of gas.

“In LNG exports and market share by market, Qatar leads the chart with 78.7 MTPA, 24.9 per cent, followed by Australia with 68.6 MTPA, 21.7 per cent, while, Nigeria sits at 5th, with 20.5 MTPA and 6.5 per cent market share.

“Our vision is to be a global LNG company helping to build a better Nigeria. We have four shareholders, government with 49 per cent of the company with NNPC as its representative, Shell 25.6 per cent, Total 15 per cent and Eni 10.4 per cent.

“This year we celebrate our 30th anniversary, and 20 years of safe and reliable operation in the Niger Delta. We believe that gas will continue to be a strong part of the energy mix in Nigeria. Today we have $11 billion asset base. We have six LNG trains with 22 MTPA capacity. We have 23 ships going round the world. The best time to develop our gas resources in Nigeria is yesterday, the next best time is now,” he added.

On the May 17, 1989, NLNG Limited was incorporated and six years after, the shareholders signed FID for Trains 1 and 2 in November, 1995. In February 1999, FID for Train 3 was signed followed by the signing of FID for Trains 4 and 5 in March 2002. In July 2004, FID for Train 6 was signed.

15 years after the signing of the FID for Train 6, NLNG shareholders are set to sign the FID for Train 7 and it would be in the interest of Nigeria and the NLNG shareholders to ensure more FIDs for Trains 8, 9 and 10 are signed in earnest without delay if the nation would really benefit maximally in the growing demand for LNG across the globe.

Currently, the NLNG Limited produces over 20.5 MTPA of LNG and the company is creating jobs, improving the environment, supporting lives and it is the company with highest tax payments in Nigeria with about $7 billion paid since 2009.

Why LNG projects are capital intensive

The LNG value chain is a series of separate but interdependent activities. Each activity has its own commercial arrangements connecting the participants but problems in one part of the chain will affect others. Each link in the chain must be economically, technically and commercially viable.

The value chain requires alignment of start-up dates, operational activities and financial incentives. Participants in the LNG value chain include upstream producers, gas sellers/suppliers, upstream pipeline owners, liquefaction project companies and operators, LNG buyers and aggregators, LNG transportation/shipping providers (vessel owners and operators), LNG interim storage facility owners, regasification terminal owners, downstream pipeline owners and operators, LNG and gas marketing companies, gas storage facility owners and operators and gas buyers, utilities, power projects and industrials.

Mozambique and Angola are among the few African countries competing with Nigeria regarding the much needed capital expenditure or investment needed to develop LNG projects. Nigeria cannot afford to continue lagging behind but to attract more investment to the LNG industry for maximum benefits to the economy.

Train 7 is a ‘game changer’ – Senator James Manager

Speaking to the Nigerian Tribune on the sideline of CWC World LNG Summit in Rome, Italy, the Chairman of Senate Committee on Gas, Senator James Manager, stated that Train 7 will be a game changer after the signing of the $7 billion FID.

According to him, “As you are aware that in Nigeria, we never made deliberate gas discovery but associated gas from crude oil exploration. There is this assumption that gas is the future for Nigeria, but from what I have heard from the participants, now I know that gas is not the future of Nigeria but now (the present). We need to tap into the full potential of gas industry for us to maximise the benefits.

“You can see that Nigeria is being mentioned at every session, it means we are a major stakeholder in the LNG industry and thanks to the Nigeria LNG Limited for being good ambassadors.  FID on Train 7 ought to have taken place in October but it didn’t happen for certain reasons. I’m sure it will take place before the year ends and I’m sure stakeholders will take advantage of this because it is a game changer.”

Nigeria is considered a gas country than crude oil country, yet, Nigeria relies more on crude oil exploration and exports for its foreign exchange earnings. This is the time for Nigeria to harness its full gas potential and maximise its benefits which include, foreign exchange earnings, job creation and provision of energy security.

Conclusion

Nigeria has the largest gas reserves in Africa and it is considered to be one of the highest countries in the world with huge gas reserves. Infact, it is considered to be more of a gas country than crude oil country because it has proven gas reserve of 202 trillion cubic feet. With such huge gas reserves, it is expected that every policy needed to attract the much needed investment in the gas sector must be formulated.

This is because there are other countries with gas reserves competing with Nigeria for the same scarce financial resources. It would be in the interest of Nigeria, the shareholders and Nigerians that the FID on Train 7 is taken, fund is raised or secured and construction commences. Nigeria has waited for so long for another Train to be constructed.