Here are three key implications of cancelled Nigeria LNG shipments

Nigeria Liquefied Natural Gas (NLNG) Limited is said to have cancelled several liquefied natural gas shipments after production was disrupted due to vandalism of pipelines by oil thieves.

There could have been as many as 10 cargoes canceled, one of Bloomberg’s sources said. Nigeria LNG has also declared a force majeure on export cargoes and scrapped at least 2 loadings scheduled for January. More LNG cargoes planned to load in February could also be canceled, according to Bloomberg’s sources.

This is coming barely three months after NLNG declared force majeure on its 22.2 million ton per year Bonny LNG export facility due to widespread flooding that disrupted supply.

Bloomberg reported that two people with direct knowledge of the matter anonymously confirmed that the multinational gas company declared additional force majeure on LNG cargoes for export and canceled the loading of at least two cargoes scheduled for January delivery from the Bonny Island facility.

Here are three major implications of this development for Nigeria’s economy:

Quest to meet Europe’s LNG demand suffer

The development could further negatively affect Nigeria’s ability to close the gas supply gap in Europe and others, which has been affected by the Russia-Ukraine war.

Europe was the largest customer in the global liquefied natural gas market in 2022, with the region importing substantially higher volumes than rival buyers as it seeks to replace dwindling Russian pipeline gas supplies.

In previous years, the EU lagged behind Japan and China on LNG imports, but Russia’s weaponisation of energy since its invasion of Ukraine has forced the bloc to seek alternative fuel supplies.

“When the price rises in Europe, Asia then has to [increase the amount it pays] accordingly, to be able to compete to attract LNG cargoes,” said Olumide Ajayi, senior LNG analyst at Refinitiv. “Europe has become the premium market.”

According to data compiled by BloombergNEF, gas imports from Nigeria constitutes about 7 percent of Europe’s LNG supply in 2022.

Read also: In sign of competition ahead, Mozambique sends first LNG cargo to Europe

Blow to government’s dividend earnings

The NLNG, which is jointly owned by the Federal Government and three international oil companies, was established in 1989 to harness Nigeria’s vast natural gas resources and produce LNG and natural gas liquids for export but it started operations in 1999.

As of November 2022, Nigeria’s dividends from the Nigeria LNG were down by 30.7 percent to N101.7 billion, compared to a target of N146.79 billion.

Bede Emuka, regional director at Guyana-based Atlantic Oilfield Supplies, believes the situation is really bleak, considering that crude oil and gas are the twin pillars of Nigeria’s foreign exchange revenue.

BusinessDay learnt the federal government is expecting N187 billion dividends in 2022 from its 49 percent share in NLNG.

“It used to be that the NLNG was a quiet foreign exchange performer. Not anymore,” Emuka said.

Losing market share

Apart from losing FX, findings showed Nigeria may also be losing a decisive battle for market share to other smaller oil-producing countries, which are springing up different projects and attracting the right kind of investments.

Last year, Egypt announced it was earning about $500 million monthly from natural gas exports and aimed to raise the figure to $1 billion “in the coming period”.

Egypt exported 8.9 billion cubic metres (bcm) of LNG last year and 4.7bcm in the first five months of 2022, according to Refinitiv Eikon data.

“Unlike Egypt, Nigeria is at a crossroads in terms of the state of Nigeria’s oil and gas industry. Revenue from oil and gas exports has fallen significantly over the year. A huge loss to Nigeria with the high profits declared by other producing nations,” Etulan Adu, a production engineer familiar with Nigeria’s oil and gas industry, said.