Africa’s largest economy earned N2.1 trillion from exporting natural gas from January to September 2022, the highest in five years, data from the National Bureau of Statistics (NBS) has shown.
Gas exported from Nigeria is sold as Liquefied Natural Gas through the Nigeria LNG long-term contracts with countries in Europe and Asia including Portugal.
According to NBS, Nigeria earned N655 billion in the first quarter, N735 billion in the second quarter and N757 billion in the third quarter of this year.
Data sourced from NBS shows that Nigeria’s earnings from natural gas rose by 15 percent from the first quarter to the third quarter.
Gas produced in Nigeria is either exported or used domestically for power generation as feedstock for gas-based industries such as petrochemicals and fertiliser production, industrial heating and as fuel for natural gas vehicles.
Experts that discussed with BusinessDay placed the increase in natural gas sales on the Russia/Ukraine war, which spike demand for Nigerian gas from Europe.
Chinedu Onyegbula, an energy sector expert and director at Bullox Resources Limited said that the increase in natural gas sales can be attributed to a greater demand for gas influenced by the Russia/Ukraine crisis.
Onyegbula also said that gas sales are dollar dominated and influenced by market conditions. “Any increase in gas prices as a result of global demand and realities or the exchange rate affects the revenue expectations.
“Another factor is the increased production from our gas facilities to meet that demand,” Onyegbula said.
According to him, Nigeria continues to see a high demand for its gas both domestically and internationally for export.
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He said, “Some captive gas power plants are coming on stream, as well as grid-connected power plants utilising more gas as their maintenance is being finalised and allowing for more gas to be supplied.
“So the biggest factor that could be influencing this increase would be greater demand domestically and internationally, dollar fluctuations, and increased supply being generated to the market.”
Natural gas is said to be Africa’s greatest opportunity as a long-term energy supply solution to help alleviate energy poverty and enhance the quality of life, specifically in sub-Saharan Africa. As a fuel for sustainable development, natural gas can provide accessibility, affordability, and reliability to African nations.
For Olufola Wusu, partner and head of oil and gas at Megathos Law Practice, the increase in natural gas sales is due to soaring demand for LNG, a cold winter, and increased economic activity in Asia.
He also said the struggle for spot LNG between Asia and Europe and the drive to fill Europe’s natural gas storage and global economic recovery influenced the increase in natural gas exports. LNG prices may continue to rise and Nigeria may earn even more from natural gas sales.
“It is hoped that this windfall will encourage decision-makers to revive moribund LNG and natural gas projects,” he said.
Wusu said Russia’s supply of about 40 percent of Europe’s natural gas needs changed the moment the war with Ukraine started.
“The scramble for new sources of natural gas by European and Asian countries has caused the LNG spot market to boom and LNG shipping rates to rise to as high as $500,000 per day,” he said.
“With LNG tankers lingering around LNG terminals, in some instances waiting for the highest price.”
According to the latest African Energy Chamber’s (AEC) Q2 2022 Outlook, Nigeria, Algeria, and Egypt are on the course to account for about 80 percent of Africa’s natural gas production from 2022 to 2025.
It said, “Nigeria and Algeria are expected to contribute to over 65 percent of the liquefied natural gas (LNG) exports from Africa to international markets.
“In addition, 50 percent of the 2022-2025 cumulative gas flows from the top 10 producers in Africa are expected to be exported as LNG to international exports.”
Oreoluwa Owolabi, corporate intelligence lead at GAS360 said the sharp increase in gas sales is due to the price of diesel that drove industries to replace gas with diesel.
He also said the Russian/Ukraine war increased the European demand for Nigerian gas. “Local and international demand for gas has increased this year,” he said.
From Q1 to Q3 of 2022, natural gas sales accounted for the second-highest share of all exported products. The product accounted for 9.24 percent, 9.93 percent and 12.76 percent in Q1, Q2 and Q3 respectively.
In June, Mele Kyari, group managing director of the Nigerian National Petroleum Company Ltd said that Nigeria earned over $1 billion from Portugal through the sale of natural gas in 2022 alone.
Kyari said that there are ample opportunities to grow the energy supply to Portugal, saying Nigeria has invested in critical infrastructure to ensure domestic gas availability and increase gas supply to the international market.
The Nigerian government has indicated that it is turning its focus on gas with the declaration of a ‘Decade of gas,’ backed by new policy actions including drafting a gas expansion plan to use more gas domestically, but its inability to liberalise pricing has stalled investors’ plan to build new projects.
The NLNG is expanding its supply with the planned construction of Train 7, which could create over 12,000 jobs and improve growth by 35 percent from 22 to 30 Metric Tonnes Per Annum (MTPA) of LNG.
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