Can Nigeria take advantage as LNG shortage looms?

A master thread weaving through liquefied natural gas (LNG) markets is that of an emerging LNG supply shortfall in Asia and higher prices by early 2020s and Nigeria can benefit if it improves regulatory framework and ease of doing business.

These LNG markets concerns are based on a recent report by New York based investment bank and financial services company, J. P. Morgan, informed by its annual Asia LNG tour to Beijing, Tokyo and Sydney and over 20 meetings held.

However, with several LNG projects in Nigeria stalled over the past years amid untapped gas reserves, opaque regulatory framework, and delays in taking some final investment decisions, Nigeria is losing its competitive advantage in the global LNG market and may not be in a position to take advantage of this emerging market dynamics.

“Nigeria started 24 months after Qatar. Qatar now produces 77 million tonnes per annum and is the number one LNG supplier in the world, while Nigeria is still on 22 MTPA. Australia is already flooding the market and will know down Qatar to the third or fourth place” Tony Attah, managing director and chief executive officer of Nigeria LNG was quoted to have said at Nigeria International Petroleum Summit in Abuja early this year.

Data obtained from the Nigerian National Petroleum Corporation showed that export gas to the Nigeria LNG Limited was 1.12 trillion cubic feet (Tcf) last year, translating to 3.06 billion cubic feet per day (Bcfpd).

In addition, NLNG’s latest Facts and Figures report, show it currently manages 16 long-term LNG Sale and Purchase Agreements executed with 10 buyers on a Delivered Ex-Ship (DES) basis.

It said, “The long-term LNG buyers take delivery of their volumes at receiving facilities spread across the Atlantic Basin in countries such as Spain, France, Portugal and Italy in Europe, Turkey, Mexico and the United States of America.

“In recent times, the NLNG cargoes have been delivered to the Far East, Middle East, South America and the United Kingdom through existing customers and via Spot Free on Board Master Sales Agreements with several companies.”

The NLNG said volumes had been delivered to receiving facilities in Japan, South Korea, Taiwan, China, India, Kuwait, Brazil and Argentina, adding that this had positioned the company as a major player in the global gas/LNG industry.

These traditional NLNG markets are gradually falling under the United States of America because as it progressively makes inroads into export markets that Nigeria sends its Liquefied Natural Gas cargoes to as the North American country’s LNG exports quadrupled in 2017.

With two projects scheduled to come online this year and another two in 2019, the USA is set to surpass Nigeria in terms of the LNG export.

Nigeria, according to the 2017 World LNG Report, retained its position as the fourth-largest exporter of the LNG in 2016, while the US occupied the 16th position. But this situation is changing rapidly, as the US gains market share.

The Energy Information Administration (EIA), the statistical arm of the US Energy Department, said more than half (53 per cent) of the US LNG exports in 2017 were shipped to three countries: Mexico, South Korea, and China, all of which had received the LNG volumes from Nigeria.

This situation is compounded by the fact that in Africa, significant gas finds in excess of 127 million cubic feet in Mozambique have created the potential for another African super player.