Extended NLNG shutdown jeopardizes gas production.

Date:

The ongoing suspension of operations by Nigerian Liquefied Natural Gas Ltd poses a looming threat to the country’s annual gas production of 22 million tonnes.

NLNG spokesperson Andy Odeh recently reiterated the persistence of the force majeure, which was invoked in October 2022 due to extensive flooding that disrupted supply chains.

This legal concept, force majeure, represents unforeseen external circumstances that hinder a contract party from fulfilling its obligations.

Odeh explained that the upstream gas suppliers’ critical pipelines for liquid evacuation remained unavailable due to acts of sabotage and vandalism, thereby affecting feed gas supplies.

Force majeure is a contractual clause that releases both parties from responsibilities when extraordinary events beyond their control occur, such as wars, strikes, riots, epidemics, or sudden legal changes, that impede the contract’s execution.

Odeh also highlighted NLNG’s ongoing collaboration with customers to mitigate the impact of the resulting gas supply shortage.

The company is an Incorporated Joint Venture, jointly owned by Nigerian National Petroleum Company Limited (49%), Shell Gas B.V. (25.6%), TotalEnergies Gaz & Electricité Holdings (15%), and Eni International N.A. N.V. S.àr.l (10.4%).

Operating with a production capacity of 22 million tonnes per year, NLNG primarily delivers to European clients like Galp and Endesa through long-term contracts.

The company additionally engages in over 70 spot agreements across major LNG markets and is a significant gas supplier within Nigeria.

In October of the previous year, NLNG declared force majeure due to similar circumstances faced by all its upstream gas suppliers.

This declaration, prompted by their suppliers, led to NLNG exporting approximately 18 cargoes in September, according to Refinitiv data.

It’s worth noting that Nigeria relies heavily on fossil fuel exports, contributing to 90% of foreign exchange and nearly half of its budget.

In a notable event, former President Muhammadu Buhari, during the Nigeria International Petroleum Pre-Summit Conference, announced NLNG’s remarkable revenue generation, with $114 billion over the years, accompanied by significant tax payments and dividends to the Nigerian government.

NLNG’s Managing Director, Tony Attah, also highlighted the company’s sales and purchase agreements and its revenue generation exceeding $110 billion since 1999.

However, Adeleye Falade, the General Manager of Production, revealed a substantial loss of nearly $7 billion in revenue in 2022 due to gas supply shortages.

As NLNG’s gas production challenges persist, power generation companies are grappling with gas shortages, leading to a decline in national power output.

The Nigerian Electricity Regulatory Commission emphasized the need for investments in infrastructure and operational procedures to enhance grid visibility and discipline among market participants.

Over the years, power generation has fluctuated between 5,000MW and 4,000MW, recently dropping below 3,000MW per day.

Experts argue that achieving a minimum of 30,000MW is crucial for the country to achieve energy sufficiency and meet its growing needs.

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