• Friday, April 19, 2024
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Nigeria watches as Qatar reaps big on LNG expansion bet

FG to Securitise NLNG dividends for $7bn cash

Nigeria, once Africa’s top liquefied natural gas (LNG) exporter, is watching enviously as Qatar reaps the rewards of its long-held bet on expanding its LNG capacity.

President Bola Tinubu, who took the helm of Africa’s biggest economy just over 10 months ago, is on a state visit in Qatar, as part of efforts to drive up investments in the country.

Tinubu told investors at the Nigeria-Qatar business and investment forum in Doha, that Africa’s largest economy is ready for serious business, pledging to remove all bottlenecks hindering profitable and legitimate enterprise.

As President Tinubu tries to lure investors, fresh findings have revealed Qatar, a small peninsular nation neighbouring Saudi Arabia, has emerged as a dominant player in the global LNG market, thanks to its foresight in investing heavily in expanding its LNG production capacity over the past two decades.

Qatar’s planned expansion of liquefied natural gas (LNG) production could see it control nearly 25 per cent share of the global market by 2030 and squeeze out competitor projects including in Nigeria’s LNG, according to market experts.

Qatar, one of the world’s top LNG exporters, plans an 85 per cent expansion in LNG output from its North Field’s current 77 million metric tons per year (mtpa) to 142 mtpa by 2030, from previously expected 126 mtpa.

“Non-associated gas fields is one of Qatar’s strengths, Qatar has the largest non-associated gas fields in the World even ahead of Australia and the US, Most of Nigeria’s Natural Gas comes from Associated gas trapped from well-heads when drilling crude oil,” Kelvin Emmanuel, co-Founder, CEO at Dairy Hills said.

“Please what are the Ministers doing? Have you seen their plan?” he asked.

Some market experts said that the move by Qatar will have an impact on global projects in the US, East Africa, and elsewhere which require financing and long-term customer commitments to reach a final investment decision, given the Gulf state’s edge as the world’s lowest cost producer.

“The Qataris realised that they should be able to offer pretty much the most competitive prices. They have the reserves, lower costs for building incremental capacity, the relationship with engineering firms and existing clients, so why stop here?,” said Ira Joseph, senior research Associate at Columbia University’s Center on Global Energy Policy.

“This suggests that they are hurtling into use it or lose it mode. If you’re the world’s low-cost producer, why not throw down the hammer & scare away any competition that’s requiring long-term customers & financing,” he added.

The world’s top energy companies including Exxon Mobil, Shell, TotalEnergies and ConocoPhillips have played a central role in Qatar’s LNG industry for decades. They all hold stakes in existing production facilities and in recent years acquired stakes in the new expansion phases, offering cash in exchange for LNG volumes.

Contrast this with Nigeria where investors have largely been unimpressed with overtures to build new liquefaction plants.

The NLNG, owned by the federal government of Nigeria and three international oil companies, has seen its output decline owing to gas supply constraints, which also pose a threat to its expansion plan.

The NLNG had on October 17, 2022, declared a force majeure on product supplies from its production facilities on Bonny Island, following the declaration of force majeure by all its upstream gas suppliers.

Since the development of the NLNG, new projects have been too few and far between. The two LNG projects in Nigeria: Olokola LNG and Brass LNG have been unable to reach a final decision with the stakeholders as investors have pulled out.

The OK LNG project was stalled because all the international oil companies (BG, Shell and Chevron) withdrew from the project, with only the Nigerian National Petroleum Company left.

The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Total, ConocoPhillips and Eni Group. But ConocoPhillips withdrew from the project in 2013 and has stalled since then.

BusinessDay’s findings showed Nigeria lost its status as Africa’s biggest exporter of LNG to Algeria as the continent’s biggest economy saw its export decline in 2023.

Qatar’s LNG growth strategy

The new expansion is expected to lead to a period of more stable, lower prices across the rest of the decade and would encourage greater take-up of LNG from Asian buyers, said Alex Froley senior LNG analyst at data intelligence firm ICIS.

“Bringing online 16 mtpa of low-cost volumes is positive for Asia and is exactly what the LNG market needs to guarantee a long-term future in emerging Asia,” Rystad’s Ramesh said.

The global gas market will grow to 580-600 mtpa by 2030, from the current 400 mtpa, mainly driven by Asian demand. Qatar is expected to control 24-25 per cent of that market by then.

“Qatar is geographically well placed to meet the current high demand in Northeast Asia in China, Japan and Korea and future demand in the only real growth region of South Asia, especially in India,” said Henning Gloystein, practice head, at Energy and Resources at Eurasia Group.