The federal government has taken a significant step toward maximising its Natural Gas reserves with the approval of its first floating liquefied natural gas (FLNG) facility. The project, led by UTM Offshore Ltd., received its license-to-construct from the Nigerian Midstream and Downstream Petroleum Regulatory Authority. The FLNG plant is projected to produce about 2.8 million metric tons of LNG annually, positioning the country further to expand its presence in the global gas market. This initiative aligns with the country’s plan to utilise its extensive gas reserves, estimated at 206 trillion cubic feet.
Much of this gas has been flared off or re-introduced into oil wells, representing a potential Revenue loss. The nation aims to reduce this wastage by implementing the new floating project and effectively leveraging its natural resources to stimulate Economic Development while addressing the increasing global need for energy. Farouk Ahmed, who leads the Nigerian Petroleum Regulatory Authority, emphasised the project’s significant goals in gas development. He stated that this milestone represents a vital success in the area’s aim to establish itself as a significant force in the LNG industry.
Increased LNG market demand enhanced the natural gas project.
Moreover, UTM Offshore initially received permission in 2019 to build a smaller FLNG facility with a production capacity of 1.2 million tons annually. However, the increased LNG market demand enhanced the project, which now boasts a capacity of 2.8 million tons. This reflects the rising global interest in cleaner energy alternatives. The plant is set to be situated in Akwa Ibom state, positioned offshore within the Niger Delta area. Its inauguration is anticipated for 2028, with gas output commencing the following year.
In addition to LNG, the facility will generate liquefied petroleum gas and condensate, enhancing its role in the energy supply chain. The project is well-equipped to serve local and global markets by expanding its production capabilities, enhancing the region’s pivotal position in global energy exports. Julius Rone, the CEO of UTM Offshore, noted that the company has entered into a memorandum of understanding with the African Export-Import Bank (Afreximbank) for project financing. The bank has granted initial approval for an Investment of $350 million, part of a larger funding strategy totalling $2 billion. This financial support is vital for establishing the FLNG facility and reflects global entities’ trust in the project’s potential success.
UTM Offshore partnered with an international firm to execute the project.
Regarding engineering design and project execution, UTM Offshore has established partnerships with JGC Corporation from Japan and KBR Inc., based in Houston. These companies will create the floating facility and guarantee compliance with global standards and Sustainability benchmarks. Likewise, an agreement has been finalised with the Vitol Group, a leading independent energy trader globally, to acquire the gas generated at the facility. This contract ensures a reliable demand for the facility’s production and provides additional financial protection for the initiative.
Alongside its global collaborations, the Nigerian National Petroleum Company Limited (NNPC) has entered the investment venture. In 2022, NNPC secured a 20% stake in the initiative, demonstrating the state-owned entity’s commitment to promoting gas advancement. The collaboration between private enterprises and the government is vital for the success of the FLNG facility. A major limitation of the project is obtaining its raw materials. UTM Offshore intended initially to acquire gas from an offshore oil site managed by Exxon Mobil in collaboration with the NNPC. However, this asset is now being transferred to Seplat Energy, a Nigerian independent oil and gas firm with aspirations for gas expansion.
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Despite this change, Rone stays hopeful, emphasising that the gas is “stranded” and can be efficiently utilised only with floating technology. On the other hand, this initiative presents Seplat with an ideal option for gas advancement, which could improve its financial position. The inaugural floating project is crucial as the global energy market moves towards more environmentally friendly fuels. The nation can enhance its economic prospects by optimising its natural gas reserves, which will be significant in the global shift to reduced-carbon energy sources. The effective execution of this initiative will minimise Gas Flaring and position the country as a key player in the gas Export market, creating new pathways for advancement and progress in the future.