The rising pipeline vandalism and oil theft in Nigeria are limiting the volume of gas the Nigeria LNG Limited (NLNG) can supply to the domestic and international markets, threatening the N187 billion dividend expected by the Federal Government from the company this year, BusinessDay has learnt.
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.
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 escalating pipeline vandalism is affecting every pipeline including the ones transporting associated gas, which is bad business for NLNG and other companies in the gas business,” he added.
Last week, Italian oil major, Eni, announced an attack on its 24-inch gas line at Okaka in Yenagoa, which forced the company to declare a force majeure at NLNG in Bonny.
According to a statement by Eni, the incident on the gas pipeline operated by its Nigerian unit, Nigerian Agip Oil Company cut gas export feed to NLNG by 5 million standard cubic metres per day.
“Production ramp-up will take some days. Force majeure has been declared at Bonny NLNG. This is the second hacksaw cut in the area within a few days, following a previous event that occurred on the same pipeline on 28th March,” Eni said.
Another oil major, TotalEnergies EP Nigeria Limited is yet to lift the force majeure it declared after its Northern Option Pipe Line was vandalised in January 2022.
TotalEnergies EP Nigeria Limited said then that “gas supply to Alaoji Power Plant was suspended due to pipeline vandalism.”
Joe Nwakwue, former chairman of the Society of Petroleum Engineers, said, “The escalating pipeline vandalism is not only affecting oil majors’ earnings but it is also affecting the business of NLNG in a way never seen before since 1999.
“Everyone is bleeding,” Nwakwue added.
All efforts to reach NLNG for comment were unsuccessful.
The Centre for Petroleum Information, a think-tank, told BusinessDay, “That Nigeria’s most important industry is seemingly unable to protect itself against saboteurs and increasingly sophisticated crude thieves is unthinkable.
“The authorities really have no choice but must, as a matter of urgency, find an effective way to tackle the root cause of this painful adverse development, against the backdrop of apparently unsustainable borrowing.”
Last month, Timipre Sylva, minister of state for petroleum resources, said the NLNG was currently only able to produce at about 70 percent of installed capacity.
“The issue we have with the existing NLNG Trains is that of insufficient gas supply. The partners are running out of gas, and they are refusing the third party to supply gas to the trains,” Sylva said, adding that he hosted Stefano De Leo, the new Italian Ambassador to Nigeria, on April 5 in Abuja.
Experts say Nigeria appears ill-prepared to take advantage of increasing gas demands from the European Union, which is significantly reducing its dependence on Russian gas following President Vladimir Putin’s invasion of Ukraine.
“Nigeria is rich in LNG but still does not have adequate infrastructure to gain more market share,” Hendrick Malan, CEO of Frost & Sullivan, said in an interview with the African Energy Chamber.
NLNG, whose export plant is located on Bonny Island, an industrial hub in the restive Niger Delta, is owned by the Federal Government of Nigeria (49 percent) and Shell Gas B.V. (25.6 percent), Total Enegies Gaz & Electricité Holdings (15 percent) and Eni International N.A. N.V. S.àr.l (10.4 percent).
With 209.5 trillion cubic feet (tcf) of the natural gas reserve, Nigeria is the largest gas-producing nation in Africa and 10th globally, and produces 8 billion cubic feet of gas daily, according to the Nigerian Upstream Petroleum Regulatory Commission.
The NLNG monetises well over 4 billion cubic feet of gas daily, hence the company’s significant contribution to the nation’s economy through dividend payments from foreign exchange earnings, foreign direct investments (FDIs), and immense local content and community impacts.
Since it began operation in 1999, the company has generated over $114 billion in revenues, paid to the Federal Government $9 billion in taxes, $18.3 billion in dividends, and $15 billion in feed gas purchase.
The NLNG Train 7 is currently under construction and is targeted at increasing the company’s gas supply capacity from the current 22 million tonnes per annum (mtpa) to 30mtpa.
Apart from Nigeria, many major gas-producing countries are also embarking on new LNG projects to boost their capacity and compete in the market.
For instance, Qatar’s ongoing LNG expansion project is 32mtpa and valued at $32 billion. The project aims to increase the LNG production capacity of the North gas field from 77mtpa to 100mtpa. The facility is billed to be operational by 2023.