Whither Nigeria’s global LNG market share?

Driven by a growing demand for natural gas and impacted by macroeconomic fundamentals, technology evolution and shale revolution, the global liquefied natural gas (LNG) industry is rapidly evolving, with strong recovery now underway.

Instructively, Nigeria, Africa’s top oil producer and world’s fifth biggest LNG exporter, has been negatively impacted by the shale gas boom in the United States as LNG exports to the US has seen significant decline.

The Nigeria Liquefied Natural Gas (NLNG) Limited, which used to control ten per cent of the global market share, has seen its share drop to between five and seven percent.

Nigeria is home to the world’s ninth biggest gas reserves and one of the world’s largest LNG export terminals. In 1989 the NLNG Limited was established to harness the nation’s vast natural gas resources and produce LNG and natural gas liquids for export.

Although the country’s presence in energy-hungry Asia has been growing in recent times, it is now being threatened by the increasing LNG export potential of the US and East Africa, as well as Singapore’s aspiration to become the region’s LNG trading hub.

As a result of rising shale gas production, it is projected that the US would become a net exporter of natural gas in the year 2020. This would lead to LNG supply abundance in the market and a likely decline in LNG delivery price to Asia and Europe, main destinations of Nigeria’s LNG.

Analysts have said that Nigeria’s share of the LNG market could significantly fall as the increasing availability of LNG from US and East Africa finds their way into the Asian region, the top destination for the fuel.

Already, Asian buyers have expressed concern over the high price they are forced to pay and are increasingly considering the US as a cheaper alternative. Surging shale gas production has pushed down prices in the US, which has started relaxing restrictions on gas exports. Four LNG projects have so far been approved in the country, with over 20 proposals still awaiting approval.

Japan and South Korea have reportedly cut deals in recent months to buy gas from US terminals.

Enter Singapore. The country is apparently taking no prisoners in its drive towards realising its ambition to become Asia’s LNG trading hub by the end of this year, as it is investing heavily in new facilities.

With the city-state now on the verge of becoming Asia’s new trading hub for LNG, we hope that the federal government and other stakeholders would see this as a wake-up call to tighten up the many loose ends such as the long delays of LNG projects limiting the growth of the nation’s oil and gas industry.

Aside from the threat from the US and Singapore, analysts believe that East Africa’s proximity to Asia is likely to stand it in good stead for LNG exports. The prospect of Mozambique and Tanzania becoming LNG exporting nations is expected to present a veritable alternative for Asian buyers. East Africa, in particular Mozambique, could be a new hotspot in LNG exports due to its recent large offshore discoveries, according to British maritime classification society, Lloyd’s Register, in its ‘Global Marine Trends 2030’ report.

While we agree that there is need for the NLNG Limited to intensify efforts in finding new markets and attracting long-term buyers, we believe that it is high time the National Assembly took seriously the Petroleum Industry Bill (PIB). Dithering over the PIB is undoubtedly hampering investment in gas exploration and development in the country.