• Thursday, May 30, 2024
businessday logo

BusinessDay

50 years of LNG

businessday-icon

In September 1964 the world’s first commercial LNG facility, the CAMEL liquefaction plant at Arzew in Algeria, was completed.

On October 12, 1964, Methane Princess, the world’s first ship specifically designed for LNG trade, delivered the world’s first commercial LNG cargo to the UK’s Canvey Island regasification terminal from Algeria. Fifty years on, the sector has grown from this single trade between Algeria and the UK to over 400 trade routes.

Over the 50 years since the start of the LNG, the trade has grown exponentially and now it makes up close to 30 percent of the international gas trade. LNG cargoes are now exported from 19 countries worldwide, 105 LNG receiving terminals and imported by 27 countries.

Until October 12, 1964 natural gas was a fuel that was bought and sold exclusively via pipelines. This meant the gas industry was confined to the size of its pipeline network. The industry could only trade within a defined region, as very long pipelines, particularly those offshore, were costly. In addition pipelines constrained the industry to rigid trade patterns. Once built their destination was obviously fixed. The delivery of the first commercial cargo, carried on the Methane Princess, changed all that.

Japan stimulated LNG market

Japanese companies have been central to establishing the LNG industry as a major source of global energy supply. They gave both investors and banks the requisite comfort to invest in high-risk, capital-intensive LNG export projects by moving in to sign sales purchase agreements (SPA).

In 1970, Tokyo Electric, Tokyo Gas and Osaka Gas signed LNG SPAs with Shell, Mitsubishi and the Brunei government to underpin the development of the Brunei LNG project, the first LNG project in which Japanese companies participated in both export (Mitsubishi has a 45 percent interest) and import.

Demand for LNG in Japan grew from around 17 MTPA in 1980 to more than 45 MTPA in 1990, largely due to a sharp increase in gas-powered electric generation. This demand was instrumental in facilitating the development of export projects in Malaysia and Australia.

In the 1990s, a number of Japanese companies were instrumental in bringing Qatar’s Ras Laffan LNG project to life.

During the 1980s and early 1990s, Japan also dominated the LNG vessel building business. Between 1993 and 1994 Japanese companies constructed 10 of the 13 LNG vessels built during this period. Japan has since been overtaken by both Korean and Chinese ship yards.

The appetite of Japanese companies for investment in LNG projects does not appear to be waning. Mitsui, for instance, has an interest in the proposed Mozambique project and JAPEX has a stake in Canada’s proposed Pacific North West project.

Whither Africa potential?

It is instructive that the world’s first commercial LNG facility in 1964, the CAMEL liquefaction plant was at Arzew in Algeria but Africa has paled behind. With 525 million tonnes LNG export to date, Algeria comes behind Indonesia and Qatar who have exported 721 million tonnes and 566 million tonnes respectively while Nigeria occupies the 7th position with an export 189 million tonnes.

Recent large discoveries of gas in Mozambique and Tanzania have seen the two East African countries alter the LNG equation in Africa. Tanzania is said to be sitting on natural gas reserves estimated at 40 trillion cubic feet while in Mozambique, operators Anadarko and Eni have found a 100 trillion cubic feet of gas in the Rovuma basin since February 2010.  The International Energy Agency (IEA) estimates that Africa holds nearly 74 trillion m3 of technically recoverable natural gas reserves, about 10 percent of the world’s total, and it is believed that the majority of African natural resources are still undiscovered.

Nigeria should act fast

The Nigeria Liquefied Natural Gas (NLNG) Limited has generated over $50billion for the Nigerian economy since October 1999 when it exported its first LNG cargo. Nigeria, through the NLNG exported its 1 000th cargo in December 2006, 2 000th cargo in October 2010 and 3 000th in January 2014.

However, the Brass, Olokola LNG (OKLNG) and Train 7 projects have over the past few years continued to await FID by the stakeholders on the projects, even as some have pulled out of the projects.

As the world look forward to the next 50 years of LNG, Nigeria should act fast as time is running out.

FRANK UZUEGBUNAM