Nigeria’s ambitious liquefied national gas project, the NLNG Train 7 has run into a new obstacle namely falling global demand.
The $12 billion project, which has faced several years of delay is expected to complement the existing six-trains and raise Nigeria’s total production capacity from the current 22 million tonnes per annum (MTPA) of LNG to 30 million tonnes per annum, which is an increase of 35 per cent.
According to Tony Attah, the managing director of NLNG Limited, “train 7 is the next big deal for Nigeria. Train 7 is real; Train 7 is here.”
However, the global liquefied natural gas (LNG) sector has been hit by supply overhang followed by COVID-19-induced economic slowdown and lower demand worldwide.
Several operators are delaying their upcoming LNG projects. Operators are reducing their expenditures for 2020 as a measure to counter the impacts of COVID-19. Woodside Energy and Exxon Mobil have resorted to downsizing their capital expenditure (capex) by 60 percent and 30 percent, respectively, for 2020.
British Petroleum has pushed the timeline for its Tortue floating liquefied natural gas (FLNG) project from 2020 to 2023 in response to the COVID-19 impact. Similarly, Qatar Petroleum has also postponed the project timelines of its Ras Laffan North Field LNG terminal development by a year to 2025.
“Due to the sharp fall in oil prices, spread between oil-indexed long-term LNG contracts and spot contracts have considerably reduced. This can make it challenging for LNG producers to meet their revenue targets,” Haseeb Ahmed, Oil and Gas analyst at GlobalData.
Additionally, a rapid decline in gas demand is affecting financing of capital-intensive new liquefaction projects, leading to inordinate delays and capex reductions.
Although Ahmed also believes that one silver lining amid all the chaos induced by the pandemic outbreak is the increased opportunity for new entrants to the LNG sector. Global LNG oversupply, as well as low LNG prices, might encourage new countries and companies to start importing LNG, contributing to LNG industry growth. “Sustained low LNG prices will encourage several gas-importing countries to switch from coal and oil to cleaner natural gas,” he said.
A timely line Nigeria’s Train-7 LNG project as follows. On December 27, 2019, NLNG took the Final Investment Decision (FID) for its Train 7 Project, which will increase production by 35 percent and its competitiveness in the global LNG market.
On December 13, 2019, NLNG signed the first Basic 20-year term of Gas Supply Agreements (GSAs) for NLNG Train 7 with Joint Ventures (JVs) for the supply of feed gas to Train 7, closing out a condition necessary for taking of the Final Investment Decision (FID).
On September 11, 2019, the Company issued a Letter of Intent for the Engineering, Procurement and Construction (EPC) Contract of the Project to SCD JV Consortium. SCD JV Consortium is made up of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea.
On March 22, 2019, NLNG and Nigerian Content Development Monitoring Board (NCDMB) signed off the approved plan for Nigeria Content (NC) for NLNG’s Train 7 project which will ensure the delivery of value and benefits to the Nigerian economy.
