Nigeria’s LNG markets in Europe and Asia will face new competition by smaller producers with outsized ambitions, who are ramping investments into new projects that could task Nigeria’s ability to compete.
Nigeria accounts for about 50percent of the current LNG production capacity in Africa and is also expecting about N208 billion in dividends from NLNG in 2021, but newer LNG projects in Mozambique, Equatorial Guinea, Egypt, and Tanzania are looking to upstage Nigeria.
Africa’s biggest oil producer needs to pay attention because “For Nigeria, losing market share means losing more money and opportunities in the value chain,” Luqman Agboola, head of energy and Infrastructure at Sofidam Capital said, it could portend an existential threat.
In Mozambique, for example, the Government has recognized the opportunities regarding electrification, regional trade, economic growth, and industrialization that LNG presents.
Boasting Africa’s third-largest gas reserves, Mozambique has prioritized the development of three LNG plants that have the combined capacity to export an estimated 30 million tons per year of LNG.
The incentive for Mozambique to nurture political stability and lure more investors to Maputo is clear; the country could earn up to $5.2 billion a year by 2026 from LNG exports, creating more than 70,000 jobs in its gas sector.
Equatorial Guinea is focusing on the development of a Gas Mega Hub to spur regional LNG trade and expand the market. Accordingly, the Gas Mega Hub will monetize neighbouring gas reserves by establishing itself as a gas-processing centre for all stranded gas fields in the Gulf of Guinea.
Equatorial Guinea has also created the LNG2Africa initiative, which prioritizes intra-African trade through the provision of natural gas to the wider region.
State-run Tanzania Petroleum Development Corporation (TPDC) is working alongside Shell, Statoil, Exxon Mobil and Ophir Energy after securing a land deal for an LNG plant on Tanzania’s coastline in first quarter of 2021.
The national significance of Tanzania’s LNG export market is vast; the country’s central bank expects LNG to be the main driver of the country’s transformation into a middle-income nation by 2025.
Egypt is also targeting a long-awaited boost to its LNG sector after the shareholders in the 5 million mt/year Damietta LNG facility reached a new deal to allow for the plant to restart in Q1 2021.
The plant has been idled since 2012 and its restart would provide additional export optionality for Egypt, which has a surplus of gas mainly due to production from the Eni-operated supergiant Zohr field in the East Mediterranean and imports from Israel.
Victor Eromosele, a former group finance manager at Nigeria LNG said Africa’s LNG race is becoming more competitive with a huge opportunity for any country to overtake.
“Algeria was originally dominating the market share before Nigeria overtook them, so who says Equitorial Guinea or Mozambique cannot overtake Nigeria?” Eromosele asked.
He noted that the race is getting more competitive and further Nigeria could lose its market share if the country doesn’t develop more projects.
According to the latest estimates in BP’s 2019 Statistical Review of World Energy, Nigeria exported about 982 Bcf of LNG in 2018, ranking Nigeria as the world’s fifth-largest LNG exporter, behind Qatar, Australia, Malaysia, and the United States. Nigeria’s LNG exports accounted for about 6.5percent of LNG traded globally.
“If Nigeria had developed Olokola LNG and Brass LNG, we would be dominating more market share in the global market,” Eromosele said.
More than 18 years after they were inaugurated, Nigeria’s Brass LNG project, and the Olokola LNG project worth approximately $30 billion is yet to progress beyond the drawing board despite billion-dollar spending.
Most energy experts noted that delays caused by unnecessary bickering, lack of political will and above all uncertainties around the Petroleum Industry Bill (PIB) have remained a self-inflicted injury by the federal government.
Other gas value chain experts noted that if the Brass LNG and Olokola LNG project had been up and running, it would have equally enabled the country to produce an additional 10 million metric tonnes of gas yearly, and also secure a brighter future in the international market.
For Niyi Awodeyi, CEO at Subterra Energy Resources Limited, flexible regulatory structures in other African countries are making investors look more in their directions, unlike Nigeria.
“Although, the NLNG model points the way for how the government can attract investments, however, Nigeria’s regulatory uncertainties still remain a major challenge for any new investors,” Awodeyi said.
NLNG is run in a unique way that is different from other public assets, as it is owned partly by the government and the private sector. It is however run exclusively by the latter, earning it plaudits along the way for its operational success.
The Federal Government, represented by NNPC, owns 49 percent of NLNG while international oil companies such as Shell owns 25.6 percent. French oil company, Total Gaz Electricite Holdings owns 15 percent and Eni owns 10.4 percent.
The ownership structure makes it an independent incorporated joint venture, guaranteeing an independent board of directors, effective decision making as well as funding for its projects.
In December 2019, Nigeria LNG (NLNG) took the final investment decision, to add a seventh train to its existing facility, adding about 365 billion cubic feet, thus increasing the total capacity of the facility to 1.4 Trillion cubic feet. The expansion project was initially proposed in 2005 but encountered numerous delays.
