Nigeria has lost its status as Africa’s biggest exporter of Liquefied Natural Gas (LNG) to Algeria as the continent’s biggest economy saw its export decline the most in January, BusinessDay’s findings show.
An analysis of flows data from Refinitiv Eikon, one of the world’s largest providers of real-time data, showed Nigeria’s LNG exports decline last month as Algeria surpassed Nigeria to be Africa’s LNG largest producer for the first time ever on a monthly basis despite record spot prices for the commodity.
“In January, Nigeria’s LNG exports slumped to about 1 million tonnes, representing a 35 percent year-on-year drop vs Algeria, which exported around 1.1 million tonnes,” Refinitiv Eikon said.
“Much of the feed gas supplied to Nigeria’s NLNG project at Bonny Island is derived from associated gas, hence the drop in the country’s oil production on the back of upstream issues and pipeline vandalisation has led to a sizeable decline in feed gas supply to the facility,” Olumide Ajayi, a senior LNG Analyst at London Stock Exchange Group, said.
At name-plate capacity, findings by BusinessDay showed Nigeria LNG’s (NLNG) project can export up to roughly 1.8 million tonnes per month.
“Worth noting that two years ago, LNG spot prices fell to less than $2/mmBtu; so this opportunity to take advantage of high spot LNG prices won’t always be there,” Ajayi added.
Beyond Nigeria’s local challenges, analysts say high prices are spurring the hunt for long-term deals as the global LNG market is expected to take several years to adjust to last year’s shake-up.
After Russia slashed piped supply to Europe following its invasion of Ukraine, gas prices hit new highs and Europe bought record volumes of LNG.
While Asian spot LNG prices have eased by more than 70 percent from their record levels to $18.50 per million British thermal units (mmBtu), they remain high compared to their previous single-digit prices, leading buyers to seek long-term contracts to avoid spot market volatility.
“What the industry has realised now is that they can’t have a long-term business on spot purchases. So, the need is to have long-term contracts, a good mix of long-term, short-term and medium-term contracts,” Akshay Kumar Singh, CEO of India’s Petronet LNG, told CNBC.
The spot market for gas refers to the trade of large physical cargoes or parcels in one-off transactions for near-term delivery, while the long-term contract typically obligates the transaction to occur at an agreed price with further financing agreements for projects with high capital costs and long payback periods.
Approximately 70 percent of the global LNG market, including that of Nigeria, are sold based on long-term deals, but in Europe spot and short-term contracts represent around 45 percent-50 percent, with flexible prices.
“Long-term contracts and the increase in domestic (gas) production during this crisis have definitely helped our country,” Kumar said. “Going forward, we think we should move more contracts on (to a) long-term basis.”
According to a report by the Independent Commodity Intelligence Services (ICIS), Nigeria, Africa’s biggest exporter of LNG, is expected to export 16.2 million tonnes of LNG this year.
According to ICIS, Nigeria’s LNG exports dropped significantly in 2022, falling 15 percent compared with 2021, following periods of maintenance, weather-related outages and sabotage to pipes supplying Bonny.
“We forecast Nigerian exports will rise slightly to 16.2 million tonnes, but still below the 17.1 million tonnes exported in 2021,” the report said.
Last August, the NLNG said construction of Train 7, which would increase the plant’s capacity by 35 percent from 22 million tonnes per year to 30 million tonnes per year, was at 26 percent completion.
The Nigerian government has approved a memorandum of understanding between the Nigerian National Petroleum Compnay Limited and the Economic Community of West African States for the construction of a 5,660 km (3,517 miles) long Nigeria-Morocco Gas Pipeline.
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