Could there have been a better time for NLNG Train 7?

Recently, the Nigeria LNG Limited (NLNG) awarded the contracts for Front End Engineering Design (FEED) for Train 7 to B7 JV Consortium and SCD JV Consortium, inching closer to realising its expansion goals of increasing liquefied natural gas production output from 22 Million Tonnes Per Annum (MTPA) to 30 MTPA. A completed FEED process will pave way for Engineering, Procurement and Construction (EPC) pricing and bidding processes which are preconditions for Final Investment Decision (FID).

But could there have been a better time for Train 7?

“If you think about 2016; the perception was that the whole world will be drowning in LNG and then 2017 will be the worst year for LNG market because there will be LNG all over the place. If you follow the trends and the reality that happened; the whole of last year, there was only one FID. Those predictions did not happen”, Tony Attah, chief executive, NLNG, told Businessday on the sidelines of 2018 World Gas Conference (WGC) in Washington D.C

“Ten years ago, Train 7 was a fantastic business so I can just imagine 10 years later it has to be even better business”, Attah added.

Investment in new LNG supply projects is set to fall to just $15 billion this year, the International Energy Agency (IEA) said and is likely to dip further in the coming years in the absence of new final investment decisions.

In its latest annual World Energy Investment report, the IEA said spending on new LNG liquefaction plants had remained “subdued” over the past two years.

“On the basis of projects sanctioned, investment is projected to fall to around $15 billion in 2018 and, in the absence of new projects, to continue to fall thereafter,” it said.

This, it said, was a result of a decreased level of FIDs after the large wave of projects mainly from Australia and the US were sanctioned in the first half of the current decade.

The agency said that the current overcapacity in the market has meant a reluctance to spend on new projects.

“Many companies have been adopting a wait-and-see approach to new LNG investments,” it said. “This is consistent with the reduced incentive to embark on large and multi-billion dollar projects due to financial constraints affecting the upstream oil and gas sector.”

A reluctance to invest is also related to buyers not being willing to commit to new long-term contracts despite expectation of higher gas demand.

“In the absence of the sanctioning of new LNG liquefaction projects over the next 12-18 months, the LNG market could significantly tighten by 2023,” the agency said.

FRANK UZUEGBUNAM