Nigeria, Africa’s largest economy, faces a looming four-year decline in Liquefied Natural Gas (LNG) exports, a new report seen by BusinessDay has shown.
According to the Fragile Equilibrium: LNG Trade Dynamics and Market Risks Report by the International Energy Forum and SynMax, Nigeria’s LNG exports are expected to fall on the back of declining domestic production and increased domestic demand.
The report revealed that Nigeria, which sits sixth in the world’s largest exporter of LNG from January to October 2023, has been recording a steady decline in its trade in the past months.
Data sourced from Statista revealed that the volume of LNG exported from the country has been declining since 2022 after reaching a record high a year before.
LNG exportation in the country fell from 1.36 trillion cubic feet (tcf) in 2021 to 1.14 tcf in 2022, indicating a 16 percent decline due to a decrease in domestic production alongside an upswing in domestic demand.
Data gleaned from the National Bureau of Statistics (NBS) showed that Nigeria earned N2.85 trillion from the exportation of LNG in 2022 and has earned N2.28 trillion in the first nine months of 2023.
BusinessDay’s analysis revealed that this development hinged on the back of the Russia-Ukraine tussle which started in February 2022, thereby taking the market price of natural gas to an all-time high of $6.29 per Metric Million British Thermal Unit (mmBtu) or 1000 cubic feet. However, Natural Gas prices stood at $2.54 per mmBtu late Saturday, December 30, 2023, according to Oilprice.
Olufola Wusu, Partner and Head of Oil and Gas at Megathos Law Practice said continuous attacks on oil and gas facilities, escalating production costs, the demand for advanced drilling technology, and community issues have diminished associated gas supply for LNG companies.
“Other factors include the shift to deep offshore fields by International Oil Companies (IOCs), field maturity causing output decline, reluctance to drill new wells, and initial delays in establishing a bid process for new oil and gas blocks.”
Wusu also highlighted the impact of delayed drilling for non-associated gas in the prolific deep offshore fields on the decline in natural gas sales.
In March 2021, former President Muhammadu Buhari proclaimed the 2020s as Nigeria’s ‘decade of gas,’ signalling a deliberate shift in the government’s focus towards utilising gas as the primary fuel to propel the nation’s industrial ambitions.
Despite boasting the world’s tenth-largest gas reserves, totalling approximately 208 tcf, as reported by the Nigerian National Petroleum Company (NNPC) limited, the country’s actual gas production in 2021 amounted to 1.62 tcf—falling behind both Algeria (3.56 tcf) and Egypt (2.4 tcf), despite Nigeria possessing larger reserves.
The prevailing scenario highlights a disparity between Nigeria’s considerable gas potential and its current production output. The majority of the gas is derived as a byproduct of oil exploration, classified as associated gas, and a substantial portion of this produced gas is directed towards exports.