As Nigeria dithers with the much anticipated final investment decision (FID) on the Nigeria Liquefied Natural Gas (NLNG) Train 7, which ought to have taken place before the end of 2018, the country might miss out of the anticipated strong global demand for liquefied natural gas (LNG) which is projected to commence this year.
Other countries are moving ahead and this might lead to a record amount of LNG production getting the green light in 2019 in the bid the meet up with the projected strong global demand, especially from China. The potential new projects are expected to come from Russia, Australia, East Africa, US in addition to expansion projects from top 2018-LNG exporter, Qatar.
According to Giles Farrer, Wood Mackenzie’s research director for global gas and LNG, FID could be taken on more than 60 million tonnes per annum of LNG capacity this year, well above the previous record of about 45 million tonnes in 2005 and triple last year’s 21 million tonnes.
“If you have seen the potential demand for LNG, you have seen costs where they are now… that is motivating companies to push projects forward and motivating buyers to come forward to support some of these projects,” Farrer said.
The LNG projects that could get FID this year include the $27 billion Arctic LNG 2 project by Russia’s Novatek, at least one project in Mozambique and three in the United States, Woodmac said in a report. The three potential US projects are Qatar Petroleum’s Golden Pass joint-venture with Exxon Mobil Corp and ConocoPhillips, Venture Global LNG’s Calcasieu Pass project, and Cheniere Energy’s Sabine Pass train 6, the consultancy said. A three-train expansion in Papua New Guinea are among the projects awaiting FID this 2019.
“Now is a good time to invest. If you look at industry costs, they have really come off a cliff from 2 to 3 years ago. So if you’re investing now, you’re investing in the bottom of the cost cycle,” said Farrer.
Sources of the anticipated huge increase in LNG demand are being expected from China’s demand growth as part of a programme to shift households and factories from coal to gas, increased LNG import dependency in Europe, and a backlash against dirtier coal is driving optimism in the industry.
It is understood that the NLNG Train 7 FID will not take place until after the completion of the Front End Engineering Design (FEED )which is expected to give investors a fair idea of what would be needed financially to complete the project. However, non-signing of the FID does not mean that other commitments or activities that would facilitate the construction of the plant are not going on behind the scene, a source close to the company told BusinessDay.
Tony Attah, managing director, Nigeria LNG Limited was quoted to have said that the company would take FID on Train-7 by December 2018, having signed its FEED. A financial adviser had equally been appointed by the company ahead of the expected FID.
Train 7 is expected to produce eight million tonnes per annum (MTPA) LNG. The sale and purchase agreements (SPAs) for the new volumes had been locked down with off-takers since 2007, but its terms would need to be concretised before the FID is achieved.
FRANK UZUEGBUNAM
