LNG: Why Nigeria is headed in the right direction

By Adekunle Segun

Liquefied Natural Gas, popularly known as LNG, is a gaseous form of fuel used for various purposes, including but not limited to, propulsion and electricity generation. LNG is actually cooled down to sub-zero temperatures in order to maintain a liquid form majorly for safety reasons and to achieve an anticipated level of storage for the purpose of local consumption or for transport in dedicated trucks or vessels. After achieving its liquefied state, a typical LNG storage system maintains about 1/600 the actual quantity of natural gas in its non-liquid form.

Natural gas is composed majorly of methane. This is not to say that there are no other gases in natural gas; however, the major presence of methane helps an optimistic overview that a pure gas of pipeline quality can be achieved. The gas found at various well heads is defined as associated gas and as such weds to be properly refined, or separated, to become a market friendly commodity. After refining, the non-associated gas needs to be properly pressurised and stored in order to be attractive commercially. Raw natural gas can be found in various types of wells, and these include majorly condensate wells, gas wells, and crude oil wells. Upon drilling of a well for the purpose of exploration, various tests and production processes are carried out to determine the kind of well to be achieved ultimately. This is not to say that crude oil or other wells are not known ab initio. However, when a relatively new geographical location is to be explored, the outcome of the research well will determine the type of commodity to explore in this area.

Nigeria currently operates six trains of liquefaction, purification and LNG storage facilities. However, there are bigger plans to put in operation train seven and eight. Only recently the Nigerian LNG process for train seven crossed the FID (Final Investment Decision) stage to commence actual construction and ultimate operation. However, the setbacks and dangers posed by covid-19 amongst other factors have hampered the train seven process. This will very soon be a thing of the past as more vaccines are rolled out to the Nigerian public.

Nigeria stands at number nine when discussing LNG proven deposits capacity. Her proven gas reserves total about 187 trillion cubic feet (tcf) with the prospects of more deposits and expansion in the nearest future. It is proposed that NLNG (Nigerian Liquefied Natural Gas) will add another 600 tcf of natural gas if trains seven and eight were to come on stream. Associated advantages to this is the creation of over 750,000 jobs and an addition of more LNG and LPG vessels to the current 23 LNG carriers. There is also proven potentials to bring onboard more reserves and create additional employment in the LNG value chain process. It will be pertinent to note here that Nigeria’s gas production is a public-private partnership between some oil majors namely, Total Eni, Royal Dutch Shell and the Nigerian National Petroleum Corporation (NNPC).

Nigeria’s trade partners in LNG business include Portugal in Europe and certain major importers in Asia. However, just like a typical commodities market, the laws of demand and supply play a very important role in determining the prices of this all important commodity. Nonetheless, the good news is that Nigeria has one of the lowest costs of production in the league of LNG market producers. The cost of production is significantly minimal that they still churn out profits at various LNG prices. One other factor is that supply contracts are usually extended to more than six months and in some cases they run into years. The various buyers also exercise certain clauses in their contracts to vary their intake capacity or supply lines. The good news about this is that head or tail, if there is a glut of supplies in the LNG market, we can easily dispose our overage in the spot market where other buyers can take off the products on a one off transaction, though this is not as profitable as a regular contract. While this is done at a discount, it does not have any major adverse effect on the anticipated profitability.

Finally, it is projected that world’s LNG consumption will continue to increase in the future, with the coming on stream of various liquefaction plants in major LNG markets in Africa, Europe and Asia. Countries will continue to demand for more sub-zero energy. Countries will also continue to erect more regasification plants to accommodate products from the liquefaction plants. However, to fully utilize and be a force in this all important market, Nigeria needs to continue to improve her liquefaction capacity and target markets with huge regasification capacity. As countries’ ability to earn in this markets will be determined by their liquefaction and proven reserves capacity. I hope to make more lucid various significance of liquefaction and regasification, in subsequent articles.

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•  Adekunle Segun is a maritime professional…He writes from Lagos; Nigeria…