Nigeria, Africa’s biggest economy, lost its title as the continent’s leading exporter of Liquefied Natural Gas (LNG) to Algeria in January as the country’s export declined. A data flow study from Refinitiv Eikon, one of the world’s major sources of real-time data, indicated that Nigeria’s LNG exports decreased over the past month as Algeria overtook Nigeria to become Africa’s top LNG producer for the very first time on a monthly basis. This occurred despite high spot markets for the product.
Refinitiv Eikon said that Algeria exported about 1.1 million tonnes of LNG in January, whereas Nigeria only exported about 1 million tonnes, a reduction of 35 percent year over year. Olumide Ajayi, a senior LNG Analyst at the London Stock Exchange Group, explained that the significant drop in feed gas supply to Nigeria’s NLNG project at Bonny Island is due to the fact that a large portion of the gas used in the facility is associated gas, as a result of the nation’s oil production falls due to upstream problems and pipeline vandalism.
Russian invasion and other factors also contributed to the gas surge.
The Nigeria LNG (NLNG) project has the potential to export up to 1.8 million tonnes per month. In the past two years, LNG spot prices dropped to less than $2/MMBtu; thus, Ajayi cautions that the current opening of opportunity to benefit from high spot LNG prices may not last forever. Outside Nigeria’s domestic difficulties, analysts say that high prices are driving the search for long-term partnerships because the global LNG market is not likely to recover from last year’s disruption for several more years.
As a result of Russia’s attack on Ukraine, the price of gas surged, and Europe purchased unprecedented quantities of liquefied natural gas (LNG). The price of Asian spot LNG has dropped by over 70% from its record of $18.50 per million British thermal units (MMBtu), which is still quite high compared to its prior single-digit pricing, prompting buyers to prefer long-term deals to escape the spot market’s instability. This sector has just realized that spot purchases cannot sustain a business over the long run. According to CNBC, CEO of India’s Petronet LNG, Akshay Kumar Singh said that the buyer needed long-term contracts, as well as a balance of shorter and longer-term deals.
Long-term contracts account for over 70% of the world LNG market.
On the gas spot market, large physical shipments or parcels are traded in one-time trades, with delivery occurring within a short period of time. In contrast, long-term contracts often bind the purchase to occur at an agreed price, with additional financing arrangements for projects with significant capital expenditures and extended payback periods. Even though long-term contracts account for over 70% of the world LNG market, which includes Nigeria’s, spot and short-term contracts makeup about 45%-50% of the market in Europe, and prices are more negotiable in these cases. Kumar affirmed that the country has benefited from both long-term contracts and the rise in domestic (gas) production throughout this crisis.
Also, a study by the Independent Commodity Intelligence Services (ICIS) states that Nigeria, Africa’s largest LNG exporter, anticipates shipping 16.2 million tonnes of the commodity this year. ICIS reports that after periods of servicing, weather-related interruptions, and vandalism to pipelines feeding Bonny, Nigeria’s LNG shipments drastically decreased in 2022, decreasing 15% compared to 2021. According to the analysis, Nigerian exports are projected to increase marginally but lower than the 7.1 million tonnes shipped in 2021.
35% boost in the facility output expected from the Train 7 project.
Moreover, the NLNG reported in August that work on Train 7, which was about 26% completed, would boost the facility’s output by 35% from 22 million to 30 million tonnes per year. The Nigerian government has also given its approval to a memorandum of understanding for the building of the 5,660 km (3,517 miles) long Nigeria-Morocco Pipeline Project between the Nigerian National Petroleum Company Limited and the Economic Community of West African States.