The Export market of Liquefied Natural Gas (LNG) from Nigeria is experiencing a major setback as exports have already declined by 13 percent due to shortages of feedstock. According to the 2024 World LNG Report by the International Gas Union (IGU), Nigerian LNG sales fell from 15.1 million tonnes in 2022 to 13 million tonnes in 2023. The nation dropped to eighth place from sixth in terms of rankings, falling behind Indonesia and Algeria, who exported 15.6 million tonnes and 13 million tonnes respectively in the year 2023.
IGU reported that Nigeria’s export decline of 1.55 metric tonnes persisted due to ongoing force majeure, which has been exacerbated by insufficient feedstock gas supplies resulting from upstream disruptions. The issue stems from a decrease in natural gas resources for liquefaction, as a result of aging oil fields and Pipeline vandalism interfering with gas transportation, leading to feedstock shortages. In October 2022, Nigerian LNG declared force majeure on certain cargo loadings due to widespread flooding in its supply production areas. As a result, several gas production wells had to be closed, as per the IGU report.
Exports and production decline due to vandalism.
Although the flooding issues have been addressed, Nigeria is still facing challenges with feedstock deliveries due to pipeline vandalism. This is having a detrimental impact on the country, as the LNG sector has been a major source of income. With a decrease in market share, Nigeria is experiencing significant financial losses. In addition to financial implications, the decline could also result in Unemployment and slow down economic progress. The federal government of Nigeria received 49 percent of the over $40 billion dividend paid by the Nigeria LNG (NLNG) Ltd in 2023, through its ownership stake in the company held by Nigerian National Petroleum Company (NNPC) Limited.
Since its establishment, NLNG has paid approximately $32 billion to its joint venture feed gas suppliers. Between 55% to 60% of this amount was received by the Federal Government of Nigeria through NNPC Limited, according to the company. Ayodele Oni, a partner at Bloomfield LP, pointed out that exports and production have been declining primarily due to Insecurity and vandalism of infrastructure. These issues lead to substantial losses and interruptions in production. Additionally, there has been a decrease in Investment in the sector following the departure of several major International Oil Companies (IOCs).
Lack of adequate infrastructure hinder production capacity.
Despite various efforts to promote gas projects, realizing the full potential of this valuable resource continues to be a struggle due to insufficient investment and Infrastructure improvements. Lack of adequate gas infrastructure has hindered the production capacity. The decrease in exports and production has been linked to the transfer of certain IOCs from land and shallow waters to deeper offshore sites. This shift has led to local companies shouldering more substantial roles in the industry.
For Nigeria to re-enter the LNG export market, it depends significantly on resolving key issues such as vandalism, force majeure, and a shortage of infrastructure. As such, the government is under pressure to promptly address the feedstock shortfall. Potential solutions could include increasing funding for exploration and enhancing infrastructure to ensure a consistent supply for LNG production. In March, Ekperikpe Ekpo, the Minister of State for Petroleum Resources (Gas), stated that actions are being taken to address the feedstock crisis affecting LNG production and distribution companies.
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Ekpo reaffirmed the government’s commitment to enhancing the country’s gas supply, assuring a continual increase in production and distribution. He highlighted the proactive measures the government is taking to tackle energy issues and meet the growing demand. As concerns about energy Security rise, Ekpo said the government is dedicated to improving the availability and reliability of resources for both domestic and industrial use. He stressed the need to utilize all possible methods to provide gas to Nigerians, as the nation aims for zero emissions.