A Review of the Nigerian Energy Industry

Nigeria’s share of China’s LNG imports under pressure

25 September 2014, Lagos – Nigeria’s share of Chinese Liquefied Natural Gas market is being threatened by new supplies from Australia, potential imports from the United States and the recent gas deal between China and Russia.

China, the world’s biggest energy consumer, traditionally imports its LNG cargoes from Qatar, Australia, Malaysia and Indonesia.

LNGImports from Nigeria constituted 26 per cent of cargoes from non-traditional originations in 2013, according to data from China Customs. Other non-traditional exporters to the Chinese market in 2013 included Republic of Yemen (47 per cent), Egypt (17 per cent) and Equatorial Guinea (10 per cent).

The data shows Nigeria and Equatorial Guinea as maintaining their shares in 2014, with the entry of Angola (10 per cent), Russia (five per cent), Oman (five per cent) and Norway (4 percent) and Trinidad and Tobago (4 per cent). Share of Republic of Yemen dropped to 27 per cent and Egypt nine per cent.

Angola’s $10bn LNG plant, which came on line with the first cargo shipped in June 2013, was halted in April this year due to a leak. The plant is expected to restart in the middle of next year.

From Australia, where major gas suppliers have made huge investment in LNG in order to make it the LNG exporter of choice for the Asia-Pacific region, new Chinese supplies are being expected from projects including Chevron’s Gorgon, Wheatstone, Queensland Curtis and Gladstone LNG.

On September 1, Russian president Vladimir Putin launched the construction of what will be one of the largest gas pipelines in the world, stretching from China to the Russian Far East.

China National Petroleum Corporation had in May agreed to a $400bn contract with Russia’s Gazprom. Russia will deliver 38bn cubic metres of natural gas to China for a period of 30 years, through the pipeline. First gas is expected to be pumped from Siberia to China in early 2019.

“Going forward, gas trade flows will become more Asia-focused. Between now and 2030, more than half of additional demand coming from Asia and Middle East,” said Elizabeth Proust, managing director and chief executive officer, Total E&P Nigeria.

She further said that one-third of new supply would come from North America. “The increasing new supply of LNG, shale oil and gas, is intensifying global competition for access to demand markets for oil & gas.”

Asia’s fast growing economies will be the main drivers of growth in global gas demand in the next decade, said global management firm McKinsey. China, India, Indonesia, and other Asian countries would see demand rise from 350bn cubic metres per year in 2012 to 870bn cubic metres per year in 2030, accounting for more than a third of gas demand in that period, according to US Energy Information Administration forecasts.

With the entry of the US into the LNG market, buyers now have more choice. Already, major Asian energy consumers have signed deals with yet-to-be-built export terminals in the US. The US Department of Energy has received 43 applications for 38.97 billion cubic feet per day of capacity and 87.54 million tonnes per annum (11.6 Bcfd) of MOUs have been signed, according to energy market analytics company Bentek Energy.

“North American LNG exports will average 10.31 Bcf (77.33 mtpa) in 2024,” said Senior Energy Analyst, Bentek Energy, Javier Díaz.

The strategic policy of the Nigerian government to keep the country’s share of the global LNG market at 10 percent recently went awry as its share slipped by 2.5 per cent amid delay in the start-up of key projects.

“Nigeria will have to tighten up a lot of loose ends – delayed projects, etc. The Nigeria Liquefied Natural Gas (NLNG) used to control ten per cent of the global market share. It has dipped to between five and seven per cent, and the fears that this trend might continue is cause for concern,” said Claire Lawrie, head of oil and gas for Africa, Ernst & Young.

“Growth plans need to be accelerated. Nigeria no longer has the luxury of deferring major decisions or of picking and choosing developmental projects to do and in what order. The LNG market is tightening. Quite simply, other nations are not staying idle.”

Olokola LNG, Brass LNG and Train 7 projects have over the past few years continued to await Final Investment Decision by the stakeholders on the projects, even as some have pulled out of the projects.

Nigeria, world’s fifth biggest LNG exporter, currently has LNG production capacity of 22 mtpa, which is expected to increase when the seventh train comes on stream.

According to NLNG, sale and purchase agreements had already been executed with five buyers for the 8.4 mtpa Train 7 project, which will raise the liquefaction capacity of NLNG to 30mtpa.



– The Punch

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