Nigeria earns twice more from gas than oil in Q1

Nigeria’s gas revenue outpaced its earnings from crude oil, the lifeblood of Africa’s biggest economy, in the first quarter of 2022, in keeping up with a trend that first emerged in December 2020.

Data obtained from the Nigerian National Petroleum Company Limited (NNPC) showed that while crude oil exports fetched the nation $177.86 million over the three-month period, revenue from gas feedstock to Nigeria LNG Limited (NLNG) amounted to $387.72 million.

“These are very unusual times in Nigeria’s oil and gas sector,” Joe Nwakwue, a former chair of the Society of Petroleum Engineers, said.

“The widening gap between Nigeria’s gas revenue and Nigeria’s crude oil export can be attributed to oil theft challenging the country which has gone beyond a crisis point.”

Oyinkepreye Orodu, head of Department of Petroleum Engineering at Covenant University, said crude theft is killing Nigeria’s oil business at historic levels, unlike Nigeria’s gas, which is in high demand because buyers are switching more to long-term Liquefied Natural Gas (LNG) contracts.

“Thefts combined with export terminal and pipeline shut-downs are limiting Nigeria’s ability to earn petrol dollars,” he said.

A further breakdown of NNPC’s data showed that in January 2022, Nigeria earned $75.88 million from crude oil, compared with the $84.45 million earned from gas feedstock to NLNG; in February, the country earned $13.05 million from crude oil, compared with $159.58 from gas feedstock to NLNG.

In March, Nigeria earned $88.93 million from crude oil while gas feedstock to NLNG fetched the country $143.69 million.

“Feedstock gas receipt was $143.69m. This includes receipts of $54.72m and $21.29m, which were expected in the previous month but slipped into the current month. Other related NLNG receipt was $7.67m,” NNPC said in its latest presentation at the Federation Account Allocation Committee.

The NNPC data also showed that the trend of Nigeria’s revenue from feedstock gas to NLNG surpassing crude oil earnings has been consistent in the last 16 months.

Between December 2021 and December 2020, Nigeria raked in a total of $644.28 million from gas feedstock to NLNG while income from crude oil exports was $368.34 million.

“Unlike the crude oil business with lots of inconsistency, most especially recent crude theft issues, supplies of gas feedstock under are a long-term contract, which typically obligates the transaction to occur at agreed terms,” said Kelvin Atafiri, who runs Cavazanni

Human Capital Limited, an investment firm exposed to the oil and gas sector.

Findings by BusinessDay showed feedgas is produced by the Joint Ventures (JVs) with NNPC from various concession areas in the Niger Delta —from onshore and offshore fields — and supplied to NLNG under a long-term Gas Supply Agreement with each JV.

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For instance, Shell Petroleum Development Company of Nigeria JV (SPDC JV) currently supplies feedgas to NLNG from a number of fields including Gbaran Ubie, Soku, Bonny (onshore), Bonga, and EA (offshore) supply facilities, each receiving gas from a wide range of oil and gas fields.

“Additionally, under a special supply arrangement with the SPDC JV, an indigenous marginal field concessionaire/operator — Niger Delta Petroleum Resources (NDPR) — supplies natural gas to NLNG from its Ogbelle-Obumeze oil and gas process facilities,” NLNG said in a note.

The Nigerian Agip Oil Company JV supplies gas to NLNG from its Obiafu-Obrikom Integrated Gas Supply centre, which receives gas from a wide range of fields including Idu, Akri, Kwale, Irri, Oshie, Tebidaba and Ebocha oil and gas fields.

On April 6, Nigeria’s government accused Shell Plc, Eni SpA and other shareholders of NLNG of hamstringing efforts to boost LNG exports to European countries looking to replace imports from Russia by refusing to allow additional feedstock from other companies.

According to a report by Bloomberg, if NLNG’s owners allow third parties to supply feedstock, the company will be able “to help ease the European Union’s gas crisis,” according to a statement by a spokesman to Timipre Sylva, minister of state for petroleum resources.

But the mainly western oil firms have refused unless it is provided at subsidised rates, the statement said.

The menace of pipeline vandalism is also hampering gas supply as BusinessDay learnt that NLNG’s gas supply has hit a record low on the back of rising pipeline vandalism and theft.

“Losses from pipeline vandalism, which used to be written off as tolerable ‘leakage’ for decades, has now become a troubling huge drain for everyone in Nigeria’s energy sector, most especially gas producers,” said Niyi Awodeyi, CEO of Subterra Energy Resources Limited, a firm exposed to Nigeria’s gas market.

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 Liquefied Natural Gas and natural gas liquids for export but it started operations in 1999. It also supplies Liquefied Petroleum Gas, also known as cooking gas, to the domestic market.

The Nigerian government received a dividend of N208.5 billion from the NLNG in 2021, according to data from the budget office. The country has received over $18.3 billion in dividends in the last two decades.