The Nigeria Liquefied Natural Gas (NLNG) used to control ten per cent of the global market share. It has dipped to between seven and eight per cent. There are fears it may dip to five per cent, if its growth plans are not accelerated, writes Assistant Editor (News) OLUKOREDE YISHAU
Former Head of Interim National Government (ING), Chief Ernest Shonekan, was in a mixed mood on Tuesday. Shonekan was happy; he was also sad. Happy that the Nigeria Liquefied Natural Gas (NLNG) project, which he helped midwife, last year alone, among others, generated not less than $10 billion; sad that the growth of the company, of recent, is being stalled for unclear reasons.
Shonekan, who expressed his mixed feelings during a visit to the company’s Finima, Bonny Island, Rivers State facility, said: “With the success of Nigeria LNG Limited on Bonny Island, doubts about Nigeria’s capability to successfully see a project from construction to operation have now paled into insignificance. Also, doubts about Nigeria LNG Limited’s ability to grow and expand have been similarly wiped out by its glowing records of achievements of prompt delivery and of meeting its contractual obligations to its numerous customers around the world. The question now is: will it be able to reach its full potentials and also remain a beacon to the rest of Africa?”
Shonekan is not alone. Stakeholders in the gas sector and analysts are also worried. They feel the company, and by extension the country, should have developed its potentials more than what it is now.
Their worry makes sense when juxtaposed with facts. When the NLNG started, it was with only two trains, which had a capacity to produce about six metric tonnes of LNG per annum. In less than a decade, the Nigeria LNG project grew to a six-train operating plant producing 22 million tonnes of Liquefied Natural Gas per annum.
Five years ago, it signed sales and purchase agreement for its seventh train intended to raise production to about 30 million tonnes of LNG. But up till now, the seventh train is still a dream.
Left behind by other countries
The inability of the country to improve on its LNG production capacity has seen some countries overtaking it as the leader in the market. More have also put in place plans that may further see the country’s slot slip further.
This development has ensured that the Nigeria LNG Limited, once the fastest growing facility in the world, has slipped from controlling 10 per cent of the market share to about 7 per cent. Qatar and Australia are now the leaders. Qatar has moved its output from 20 million metric tonnes to 80 million metric tonnes. Australia, from its previous 20 metric tonnes, now churns out 81 metric tonnes annually. NLNG is stuck at 22 million metric tonnes. Australia has 10 LNG projects, with 20 trains and $215 billion worth of final investment decision. Yet, Australia has only 60 percent of Nigeria’s gas reserves. Nigeria has gas reserves estimated at over 160 trillion cubic feet.
The United States (U.S.), formerly a major LNG export destination, plans to become a net LNG exporter by 2016, with 1.1 billion cubic feet per day, projected to rise to 2.2 billion cubic feet per day in 2019.
China, with an estimated gas reserve of 1,275 trillion cubic metres, is also planning big for the LNG market. Mozambique too is warming up for a fair share of the market, with plans to build a two-train facility at advanced stage.
To Shonekan, the starting point to regaining its market share is for its seventh train to be approved by the Federal Government and shareholders. Nothing much can be done without the consent of the government, which has 49 per cent of its $13 billion assets through the NNPC. The remaining 51 per cent is owned by Shell Gas BV, Total LNG Limited and Eni International.
The seventh train has the potential of increasing the plant’s capacity to 30 million metric tonnes.
The former head of ING said: “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. Other nations are not staying idle…
“That Nigeria is still flaring gas is an unacceptable fact in today’s world, not only from a health and environmental perspective, but also for the basic fact that the perpetrators are burning cash. Again, as a former captain of industry and a statesman, I find it detestable that our country not only still leaves value on the table and walks away, year after year, but also continues to literally pour money into flames by flaring gas!
“These are some reasons that you must get on with Train Seven immediately... The NLNG has a very strong balance sheet and therefore does not need money from the federal purse to expand. It only needs government approval and support of its shareholders to build train seven.
“I am not entirely sure about what is delaying train seven. I gather that sales and purchase agreements for it were signed five years ago with buyers. Whatever might be delaying train seven, I call on the government to step in and ensure that the construction of that train takes off immediately. The time for it is now!
“This is why I call on the President of the Federal Republic of Nigeria to immediately order the acceleration of these gas projects in the interest of this country. Train Seven is a low hanging fruit. I urge the government to immediately pursue that.
“From the stand point of investment: it will cost Nigeria nothing; it will be built with third party loans. Nigeria LNG Limited has solid credit ratings and can raise funds with relative ease.”
NLNG Managing Director, Babs Omotowa, also believes the seventh-train will help shore up the country and the company’s fortune. He said delay in the progress of LNG projects may dip Nigeria’s market share in the global liquefied natural gas supply by a marginal 5 percent in 2017.
Omotowa, while speaking at the 2012 edition of the Nigeria Oil and Gas (NOG-12) conference in Abuja, said output has stagnated at 22 million metric tonnes per annum.
He said: “Looking at the market share dip to 10 percent in 2008; which is now 8 percent and will be 5 percent by 2017. Accelerated progress on Train 7 and other LNG projects will help build a better Nigeria.”
But going by a statement recently credited to the NNPC Group Managing Director, Austen Oniwon, the Final Investment Decision (FID) for the Train 7 may wait till next year. He was quoted to have given hint of this at the NOG-12 conference.
At a meeting with the NLNG management in his office in February, Oniwon said: “We believe that like the Brass LNG, the NLNG’s Train 7 is also viable. And we will continue to support its success. I want to encourage you to continue to do all pre-FID activities at minimum cost so that as soon as we are through with Brass, we can quickly move to Train 7.”
Benefits of Train Seven, other LNG projects
Industry watchers are of the opinion that building the seventh train of the NLNG plant will bring in Foreign Direct Investment (FDI) estimated at over $8 billion and help reduce flared gas, and improve the country’s revenue profile. The country will also reap an additional $2.2 billion annually in dividend.
With Train 7, the NLNG, said industry watchers, will provide about 10,000 jobs. Since it opened shop in Bonny, NLNG Limited has provided over 2,000 jobs each construction year and 18,000 jobs at the peak of construction.
The country, which invested in the company through the Nigeria National Petroleum Corporation (NNPC), they said, also stands to get more dividends. It has so far received $9 billion as dividends from the company.
The Brass LNG, The Nation learnt, is about to take Final Investment Decision for 20 million metric tonnes. In the case of the OK LNG, located between Ondo and Ogun states, Nigerians may have to wait till 2014 to know what direction it is moving.
Like Shonekan noted, these efforts at developing the country’s gas reserves are grossly inadequate, given the fact that a country like Australia with less gas reserves now have an LNG output of 81 metric tonnes. He also believes the country has a capacity to undertake more than one LNG projects at once, which suggests he sees no sense in NNPC’s position that the seventh NLNG train has to wait for the Brass LNG.
Omotowa believes the delay in progressing the NLNG Train 7 project, the Brass LNG and OK LNG projects, has deprived Nigeria of raising its LNG production to 52 million metric tonnes per annum.
But if the words of Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, are anything to go by, things may change soon. The minister, at an award ceremony in Howard University, United States recently, said the nation’s capacity in LNG production would increase to 46 metric tonnes annually.