The Nation Newspaper

Tag: LNG

  • BOGAS disrupts LNG retailing

    BOGAS, a division of Dangote Group, has started retailing Liquefied Natural Gas (LNG) across Lagos. With hundreds of franchisees across the city, the objective is to take over the gas retail market by providing free home delivery of branded cylinders, with a seal of confidence and safety.

    BOGAS, registered as Borkir International Company Limited, was incorporated in 1999 as a gas trading, distribution and cylinder bottling company. The company has been distributing the filled branded cylinders across communities in Lagos. The cylinders are branded with “Dansa” and “BOGAS”.

    Findings revealed that 12kg gas will go for N3,600 from BOGAS franchise-partners, while same volume of gas is being sold for N4,000 to N5, 000 by road-side retailers. Also, BOGAS delivers in their branded cylinders in exchange with the cylinders of buyers.

    Dangote Group’s entry into the oil and gas industry will change the landscape and refocus the sector for consumer marketing. Dangote Refinery, a $12 billion investment, is expected to be completed in 2019. The launch of BOGAS is thus a reflection of the group’s strategy direction. With a lot of value proposition and benefits to households, BOGAS is set to disrupt the market and reshape it into a value-driven one.

  • Nigeria’s gas export to China, Turkey, others rises

    Nigeria’s gas export to China, Turkey, others rises

    The export of Liquefied Natural Gas (LNG) from Nigeria to China, Turkey, India and other countries has risen over the last six months.

    Also, the Nigeria Liquefied Natural Gas (NLNG) has replaced six of its 23 vessels to boost gas shipping across the globe.

    Other importers of gas from Nigeria are Egypt, Poland, Colombia, Jamaica, Jordan and Pakistan

    Sources at the Nigerian Ports Authority (NPA) saida total of 388,000 metric tons of gas was exported through Onne Port in June.

    “The liquefied gas was ferried out of the port by six vessels. LNG Adamawa carried 65,000 tons;  LNG Oyo-68,000 tons; LNG Niger-68,000 tons;  Finnima-II, 77,000 tons; Adam LNG-65,000 tons and  LPG Pampero – 45,000 tons.

    “In May, no fewer than six vessels exported 389,000 metric tons of gas to the international market,” the official said. Investigation revealed that exported with LNG Lagos II, 77,000 tons; LNG Kano, 68,000 tons; LNG British Sapphire 67,000 tons; LPG Regina, 30,000 tons; LNG Port Harcourt II , 77,000 tons and LNG Concovado, 70,000 tons.

    Also, 293,000 metric tons were exported through Onne Port while 274,000 tons were ferried from Warri Port in March and April.

    At Onne Port, LNG Adamawa  carried 65,000 tons; LNG Kano, 68,000 tons; LNG Cross Rivers; LNG Trinity Arrow carried   65,000 tons; and Silver Joan, 65,000 tons.

    Similarly, from Warri Port, LNG Ogun shipped 68,000 tons; LNG Kano  65,000 tons; LNG Enugu 68,000 tons;  and LNG Maran Gas Agamemnon, 70,000 tons.

    Sources also said about 35,000 tons of LNG gas were shipped to other countries from Onne Port in February.

    It was also revealed that the product was shipped by LNG Cross Rivers, 65,000 tons; LNG Goodside Goode, 70,000 tons; LNG Pskov, 70,000 tons; MT Aegean Wave, 25,000 tons; LNG Maran Gas Mystras,  65,000 tons and LNG Vuekiy Novgorod, 70,000 tons.

    Meanwhile, Nigerian Ports Authority(NPA) has started depending on natural gas and bulk liquid cargoes as means of revenue due to the challenges faced by the ports in the eastern ports, as container and bulk cargo ships abandoned the ports.

    Other challenges include: piracy, youth restiveness and terrorism, lack of effective monitoring of offshore operations and shallow depth of the long river channels.

    It was gathered that Delta Port revenue generation was coming through LNG shipment and service boat operations, while Onne Port leverages on proceeds from Nigeria Liquefied Natural Gas (NLNG) operations to emerge as the highest revenue earners.

  • Dickson to partner govt on Brass LNG

    Dickson to partner govt on Brass LNG

    Bayelsa State Governor of Bayelsa Seriake Dickson has promised to help actualise the $20 billion Brass LNG project.

    In an interaction with Dr. Jackson Gaius- Obaseki, the Chairman Board of Directors of the Brass LNG project, in Lagos on Tuesday, Dickson declared the total commitment of the government and good people of Bayelsa State to bring the project to fruition in the shortest possible time.

    The governor said the government would do everything possible to ensure that the project stays on course.  As part of his commitment to the project, the Governor said Bayelsa State Government has already allotted an office space to Brass LNG at the Investment Towers in Yenagoa to facilitate the sharing of investable information.

    He said: “I am passionate about the Brass LNG project because it will boost the Bayelsa economy and the Niger Delta in general by creating jobs for over 18 thousand people at the peak of construction alone, for the project also has licenses for Seaport, Airport and Free Trade Zone. The provision of job opportunities will engender development in the region, reduce youth restiveness, crime and above all, build peace amongst communities. The multiplier effect of all of these is that, the Brass LNG project will complement our vision of taking Bayelsa State to the world and bringing the world to Bayelsa State! ’’

    A statement by Commissioner for Trade, Industry and Investment Kemela Okara noted that the governor promised to collaborate with the Federal Government to create the enabling environment for the successful take-off of the project.

  • Nigeria’s LNG market shifts to Asia, Japan leads

    Nigeria’s LNG market shifts to Asia, Japan leads

    With the discovery of shale gas in the United States, the Nigeria Liquefied Natural Gas Limited (NLNG) has shifted focus to Asia. Japan as one of its global biggest markets, The Nation has learnt.

    The Managing Director/Chief Executive Officer of NLNG, Babs Omotowa, told The Nation how Japan became one of its biggest markets and how the company grew the Asian market.

    Omotowa said when the Nigeria LNG opened shop 15 years ago, US was one of its biggest markets, but with the discovery of shale gas, US didn’t need LNG and by 2008, the NLNG’s market share there dropped substantially, adding that at the moment, the US accounts for less than one percent of its market.

    He said: “When we started off in 1999 to 2008, 35 per cent of our sales were to United States, while 65 per cent was to Europe. But in the last 10 years, the US has discovered shale gas and no longer needs LNG.

    “From 2010 we were able to penetrate Japan. We were the first country to respond to Japan when it had a nuclear accident to provide them LNG. The trade has grown and Japan is one of our highest markets. Overall in Asia, we do about 48 per cent of our sales while 52 per cent to Europe.  United States gets less than one per cent. We only send cargoes there once or twice in a year just to fulfill some obligations.”

    He also said, NLNG is the fourth largest LNG plant in the world, and accounts for seven percent of the global LNG market and has the fourth largest. With the  realties in the industry, Omotowa said the firm would be looking globally to maximise revenue and value for the country.

    He said the NLNG is playing a significant part in achieving government’s aim to eliminate gas flaring, adding that between 1999 and 2015, it has converted 146 billion standard cubic meters (Bscm) or 5.16 trillion standard cubic feet (Tscf) of associated gas to export products, equivalent to more than 1864 LNG and NGL (natural gas liquids) cargoes, which otherwise would have been flared.

    The NLNG chief said Nigeria is trending toward zero gas flaring.

     

    adding that “when we are through with the final investment decision (FID) of Trains 7&8, we will be able to consume some more of the gas being flared now just as we have consumed quite a lot of what was flared much before now. There is no gas flaring in Saudi Arabia as at today or flared at the barest minimum, because the gas is harnessed for petrochemical and other uses, so in Nigeria we need commitment by the government and all the stakeholders in the oil and gas industry to stop gas flaring.”

     

     

     

  • Govt gets wake-up call on N11.6b LNG cash

    The Civil Society Legislative Advocacy Centre (CISLAC) has urged the Federal Government to recover all revenues due to  Nigeria and expedite action on the implementation of recommendations made by the independent Auditors in the Annual Reports of the Nigeria Extractive Industry Transparency Initiative (NEITI) in the past 10 years.

    In a letter signed by the non-governmental organisation’s (NGO’s) Executive Director,  Auwal Ibrahim Musa, the centre noted the reminder credited to the NEITI Secretariat which alleged that about $11.6 billion (N2.32 trillion), outstanding total dividends arising from loans and interest repayments from Federal Government’s investment in Liquefied Natural Gas (LNG), among others, is yet to be remitted into the nation’s coffers. It said the revenue is, therefore, unavailable to finance development.

    Musa said: “CISLAC observes that this figure, if verified, is more than 50 per cent of the total expenditure in the 2015 annual budget. It will also be about 10 per cent more than the allocation for recurrent expenditure, 75 per cent of the provision for capital allocation and about 65 per cent of the fiscal deficit in the annual national budget for the 2015 fiscal year.

    “We reiterate that this state of affairs has resulted because of lack of political will by previous administrations to implement remedial action emanating from recommendations from previous NEITI audit reports, which had been reinforced by the reports of several probe panels and committees.

    We recall that one of the President’s promises during the campaigns was to implement the recommendations from the NEITI reports and believe that the time to start is now. We are aware that lack of political will is what has long hindered the ability of the Inter-ministerial Task Team (IMTT) and the Board of the NEITI to implement these recommendations, block leakages and recover unremitted funds,” he said.

    Musa called on the Federal Government to empower and strengthen the IMTT to effectively carry out its mandate. He added that it might also be necessary to review the NETI Act 2007 to strengthen sanction mechanisms, which are presently weak and probably empower the NEITI Board or some other independent body to enforce more stringent sanctions on erring stakeholders outside of the usually politicized and sluggish Office of the Attorney-General of the Federation.

    “CISLAC is aware of the ability and willingness of the NEITI to provide necessary information to assist the Federal Government in recovering these funds and therefore, there will be no need to invest precious time and resources in setting up of any more superfluous Panels to conduct any fresh probes and investigations, he said.

    He urged the government to expedite action on the recovery of all the monies due to the coffers of the Nigerian people and channel them into people oriented development as a way of ushering in the change that citizens voted for and in fulfilment of campaign promises to the teeming population of highly expectant Nigerians.

    He also urged government to demonstrate the commitment to address the cancer of corruption that has undermined Nigerians’ collective desire for development and good life.

  • ‘Brass LNG has global market’

    ‘Brass LNG has global market’

    Once the Brass Liquefied Natural Gas (LNG) project takes off, it will enjoy an unlimited patronage of the global market, reports JOHN OFIKHENUA. 

    The Board Chairman, Brass Liquefied Natural Gas (LNG) project, Dr. Jackson Gauis-Obaseki, has assured shareholders that the advent of Shale oil in the United States (U.S.) will not affect the market of LNG.

    Upon the adoption of Shale oil, the U.S. which was a major importer of Nigeria’s oil withdrew from the market, causing apprehension and uncertainty in the nation’s oil and gas sector. But with this  insight, Obaseki raised the hope of the shareholders of the company during his courtesy call on the Nigerian National Petroleum Corporation (NNPC), Abuja recently.  The global appetite for gas, he said, is still intact and the products have long been diverted from the United States market. Besides, he explained that Shale oil is different from Shale gas, noting that he predicated his confidence on data fundamentals. Therefore, Brass LNG will remain impervious to the ravages of the Shale oil. Obaseki insisted that the project has not in anyway outlived its usefulness despite the prevailing teething challenges.

    He said: “The reasons for conceiving that project are still very relevant today; the market is still there, that is one of the things, Shale gas or no Shale gas, the market is still there with a large appetite.”

    Gas has become grossly insufficient in Nigeria consequent upon the demand for gas to power for new plants.  To meet the demand, the Federal Government has sought to allocate more gas from the export corridor to fuel the power plants. The Minitser of Petroleum Resources, Mrs. Diezani Madueke therefore, in the bid to incentivize gas to power in the country announced the approval of a new price of $2.50 per Standard Cubic Feet (SCUF) and $.80 for gas transportation per SCUF.

    On a global pedestal however, in a  recent report, for instance, a global management firm, McKinsey projected that four factors will be the major drivers of future market dynamics and prices in the global gas market. According to him, these include the pace and volume of North American LNG exports, demand growth for LNG in Asia, LNG supply from Australia, East Africa, Middle-East and Russia and the price of oil. The report also noted that  Asia’s fast-growing economies will be the main drivers of growth in global gas demand in the next decade, it forecasted that demand in Asian countries will grow by 4.5 per cent between 2010 and 2035. If the report is anything to go by,  countries such as China, India and Indonesia would see demand rise from 350 billion cubic metres per year in 2012 to 870 billion cubic metres per year in 2030, accounting for more than a third of gas demand in that period.

    In retrospect,  the chairman, who is also the former NNPC Group Managing Director, accepted that for the intervention of the Minister of Petroleum Resources Mrs. Diezani Alison-Madueke, Brass LNG would have now winded up. According to him, she literally saved the firm from death. His words:  “I want also congratulate you that you are still going to preside over Brass that is alive because Brass just escaped death and in this respect, I want to specially again thank the Honourable minister.”

    He explained to the stakeholders that the minister took the singular decision that has now guaranteed  the continue existence of the firm, considering her action as the major trigger that has revived  the gas project.

    Obaseki said : “We went through a very tough time with the exit of ConocoPhilips  because the provision of the shareholders agreement would have been that we would deadlock and have to wind up the company and I knew that it would have been a nightmare if we went that way.”

    He recalled  that the project was in a recession due to exit of one of the shareholders-ConocoPhilips which would have stalemated the shareholders’ agreement. The overall impact of its withdraw would have been better imagined  were the remaining shareholders NNPC, Total and ENI not tenacious .

    According to him, “We demonstrated the commitment otherwise when ConocoPhilips  left, you have had to shop for a replacement and NNPC, Total and ENI said they will take up the shares, although they were not ready because shares acquisition is a long process in any organisation and that also encouraged.”

    Obaseki said that as a result of their commitment to the project, the shareholders acquired the shares of  ConocoPhilips in the project. He happily congratulated the NNPC GMD, Dr. Joseph Dahwa for now presiding over the firm instead of being an undertaker.

    Having scaled the hurdles, Obaseki revealed that Brass LNG is now re-strategising to consolidate on its triumph over hard time. On this note, he said that the company is now shopping for a new technology especially in view of the fact that ConocoPhilips that came with its “cascade technology” has withdrawn as a shareholder.

    “We are now re-strategising; there might be some technology changes and therefore some quick movements that will be realised,” he said.

    Asked why the project needs a new technology, he added that “When ConocoPhilips  exited, the remaining shareholders then sat down and said well if you had problem where do you go to and the decision was then taken that we should change technology since ConocoPhilips  has left with their technology and that is the reason, nothing more than that.”

     

     

  • NAPE raises concern over falling oil price

    NAPE raises concern over falling oil price

    • Reiterates need to boost exploration  

    The Nigerian Association of Petroleum Explorationists (NAPE) has expressed worry over the continued drop in price of crude oil and the anticipated negative impact it will have on the economy.

    NAPE President, Mrs. Adedoja Ojelabi said the falling oil price shouldn’t have been a concern if the necessary precautions were put in place. She said that in any normal market, prices are expected to rise and fall but the fact is that as a country, we don’t anticipate issues that will drive up or down the price.

    She stated that although Nigeria doesn’t have control over oil price because it’s internationally determined through the forces of demand and supply but it can mitigate the effect locally. She said: “Nigeria cannot control the price of oil in the international market but can mitigate the effects locally by producing and refining sufficiently. If we have this self-sufficiency, the effect will trickle down to other sectors of the economy.”

    Ojelabi said imagine if Nigeria doesn’t import products but produces and refines more than it requires locally, in a period of continued drop in prices, it can export refined products and create jobs and value in-country. Also if proceeds from oil have been sufficiently invested in making power available to Nigerians, the benefits should be unquantifiable. Imagine if Nigeria will have two years of uninterrupted power supply what the effect will be on industrialisation, manufacturing and technology development, she added.

    She said the effect of the falling oil price is worsened by the fact that Nigeria has not been meeting its production target for a long time. Although she couldn’t say much on the effect of the falling price on the economy, it is noteworthy that production target and price benchmark have been two critical indices on which Nigeria’s budget is hinged, therefore, inability to meet production targets coupled with continued drop in price, should be a major cause for concern to Nigerians.

    However, Ojelabi noted that mitigating effects of falling oil price is by ensuring steady power supply in the country, which is the only way to industrialisation, reducing gas flaring and monetising it. “Although putting the mitigating facilities in place will take a long time, it will not only boost other sectors but also industrialisation through steady supply. Gas supply constraint has been a major challenge to generating enough power while huge quantity of gas is flared,” she added.

    Also speaking on the declining oil reserves and the need to check it, Ojelabi said: “The Nigerian oil and gas industry landscape has in the last five years or so witnessed some of the sweeping changes since the discovery of crude oil in the country more than five decades ago. On the international scene, the advent of shale gas has proved to be a game changer and a peculiar threat to the industry, especially in the LNG market where Nigeria is a major player within the Atlantic basin region. On the other hand, the spate of oil and gas discovery in other African countries is putting a lot of pressure on Nigeria as the ‘favourite’ destination for oil and gas investments.

    “On the local scene, the changes are even more profound. For the first time in several years, the nation’s reserve is showing a sign of decline as exploration,  drilling has hit the lowest level ever experienced in the nation’s history. Expectedly, reports of new discoveries are few and far between and where reported, the reserves are getting smaller.”

    Also NAPE President-elect, Chinwendu Edoziem, said that one of the causes of the drop in oil price is self-sufficiency of consumer countries such  as United States of America (USA). Let’s hope the price hold at current price, he added.

    He stated that it is important the price of crude doesn’t go down further because it is the price that determines whether an oil firm will go and drill or not. Search for oil is often driven by price of crude, he added.

    Oil price traded at $81.46 per barrel on Friday as against an average of  $100 per barrel some months ago.

  • BG’s ex-CEO to help InterOil build LNG plant

    InterOil Corp. (IOC), Total SA (FP)’s partner in Papua New Guinea, named former BG Group Plc Chief Executive Officer Chris Finlayson as chairman to help the company develop a natural gas export project in the Pacific nation.

    Finlayson has led exploration and production ventures in Russia, Nigeria, Europe and Asia with BG and Royal Dutch Shell Plc, Singapore-based InterOil said in a statement yesterday. He will replace Gaylen Byker, a director at the company since 1997, according to the statement.

    Finlayson joins InterOil as the energy company and Paris-based Total proceed with plans to use supplies from the Elk and Antelope fields to build Papua New Guinea’s second liquefied natural gas development. The proposed project will target customers in China and Japan as the U.S. adds to supply competition in the global LNG market, Finlayson said.

    He said: “Whilst I do see the U.S. as a major exporter, it’s not going to be the dominant exporter. Elk-Antelope sits in a very attractive position” from a cost perspective, and Asian buyers will want to diversify their sources of supply.”

    A Total and InterOil development in Papua New Guinea would follow Exxon Mobil Corp. (XOM)’s $19 billion LNG project, which started shipments to Asia earlier this year. Oil Search Ltd., Exxon’s partner, acquired part of Elk-Antelope this year.

    Finlayson said InterOil would be interested in working with competitors in Papua New Guinea to curb costs.

    “We’ll be open to cooperation,” he said.

     

     

  • NLNG… A growth stunted by indecision

    NLNG… A growth stunted by indecision

    The Nigerian Liquefied Natural Gas (NLNG) Limited used to be the third largest supplier of LNG. It has since dropped to fourth position and  the possibility of dropping further is imminent. No thanks to other LNG projects  and the  indecision  of the Federal Government on its expansion plans,  writes OLUKOREDE YISHAU

    It was incorporated 25 years ago. Its first cargo of liquefied natural gas (LNG) did not leave the Bonny Port until ten years later. And once it took off, it appeared there was no stopping it. It rose so fast that it became the fourth largest supplier of LNG. That is part of the story of the Nigerian Liquefied Natural Gas (NLNG) Limited, whose six-train plant produces about 22 Metric Tonnes Per Annum (mtpa) of liquefied natural gas (LNG) for export and 5 MTPA of natural gas liquids (NGLS).

    No thanks to indecision on expansion plans, it has been overtaken by other producers. It has lost its position as the third largest supplier of LNG. It now occupies the fourth position.  There are imminent fears it will still dip further if its expansion plans are not concretised soon.

    As at the time it celebrated the export of its 3000th cargo on January 6, a large expanse of land close to its Train Six in Finima, Bonny Island was waiting for further action to house the Seventh Train of the plant. But years after work began on sand-filling of the site, there is no definite decision on when real construction work will begin.

    The NLNG, once the fastest growing facility in the world, has lost grounds to Qatar and Australia. 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 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 set for a fair share of the market, with plans to build a two-train facility at advanced stage.

    NLNG Train Seven project will raise the liquefaction capacity of the Plant to 30mtpa, consolidating Nigeria’s position as one of the largest producers and exporters of LNG.

    What really is the problem? Some have wondered if the company, which contributes 4 per cent of the country’s Gross Domestic Product (GDP), does not have the financial wherewithal to see the project through. But checks have revealed that the company’s challenge with expansion has nothing to do with money.  Industry sources say for this Train Seven to become a reality a Final Investment Decision (FID) has to be taken. The only person who can take this decision is President Goodluck Jonathan, through the Minister of Petroleum, Mrs Diezani Alison-Madueke. The Federal Government, through the Nigerian Petroleum Corporation (NNPC) whose board is chaired by Mrs. Madueke, controls 49 per cent of the company. The remaining 51 per cent is owned by Shell (25.6 per cent), Total (15 per cent) and Eni (10.4 per cent).

    At its board meeting last month, it was agreed that pre-FID work should continue on the site, which has gulped about $300 million, with the hope that the final decision will come soon.  But if the words of Rivers State Governor Rotimi Amaechi are anything to go by, the FID may not be taken anytime soon. Amaechi once quoted Jonathan as telling him that NLNG’s expansion has to wait until the Brass LNG in Bayelsa State takes off. There are no clear signs that the Brass LNG is set to take off.

    The indecision on the FID is baffling given the fact that even top cabinet members have spoken about the need for the NLNG to surmount global challenges with countries, such as United States and others in East Africa, growing their LNG industry aggressively.

    Last November, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, visited the company’s Finima plant. She could not hide her excitement at these facts: it has made $25 billion from a $2.6 billion investment, has  six-train plant worth over $15 billion, owns 24 ships and six ships are underway from Samsung and Hyundai dockyards; and so on.

    Dr Okonjo-Iweala said: “I came after looking at your books and saw that you have been commercially viable and successful. The Nigeria LNG is an asset to the country.”

    The minister, however, said the company must rise above the looming global LNG industry storm, which may see NLNG lose its market share if it does not expand.  She said the company should consolidate its feed gas supply and ensure it secures long-term offshore contracts for its proposed Train Seven, adding that with the United States of America joining the league of oil and gas exporters, it was imperative for the NLNG to explore other major importers.

    Like Dr. Oknojo-Iweala, former Heads of State Gen. Yakubu Gowon and Chief Ernest Shonekan had earlier spoken about the need for the NLNG to expand. Both spoke during visits to its plant.

    Shonekan 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.”

    To Gen. Gowon, the NLNG growth should be more than what it is. He said: “I am still not completely fulfilled that we haven’t reached our destination in that journey we started so long ago. I am worried that history is about to repeat itself as other players (including the United States, a previous importer now a net exporter) will get to the global market ahead of us and it may be another 30-50 years lost. I will not like to see another great opportunity lost due to our lethargy. We can’t afford to sit on the fence any longer.”

    NLNG Managing Director Babs Omotowa believes expansion is the only answer to America’s shale gas development and other emerging natural gas producing countries, which are serious threats to NLNG’s current success status.

    Instructively, six years ago, the NLNG signed sales and purchase agreement for its seventh train. Observers are of the view 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. With Train 7, the NLNG, said industry watchers, would 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 government, they said, will also reap an additional $2.2 billion annually in dividend. It has so far received over $9 billion as dividends from the company.

     

    Other worries

     

    Speaking on the challenges facing the company at a retreat of the Corporate Planning Department,  NLNG’s Head of the Department, Charles Orji, said: “We have come to the end of our tax holiday, which means we will pay tax to the Federal Government and that definitely is going to affect the bottom line in terms of dividends paid to shareholders. There are challenges facing us as an organisation. Competition is building up. The dynamics in the market keeps changing. Some years back, we never knew there will be anything like shale gas. Shale gas is real now. America has given out four licences. And those licences are for production and export. There is competition expected from Australia. Down here in Africa, there is also competition from Angola. They have actually done their first shipment and Mozambique has also signed an agreement with the Japanese for an LNG Plant and a whole lot of the coast of East Africa is saturated with gas. So, we have to face these challenges as a company and we have to reposition.

    “If shale gas is a game changer, gas hydrates, God forbid, will be the end of the game because you have deposits all over the world, just as we have deposits of shale gas across the continental shelf. So, the threats against our business coming from these unconventionals are becoming real.

    “We also have issues to tackle internally within the company and some of these issues include those of aging plants. Our plants as you all know are aging and there is need to rejuvenation. We have no choice than to refurbish and revamp our plants. There is also the issue of gas supply. We are having challenges at the moment. The number of cargoes we projected for 2013 we had to revise our outlook going down from 325 cargoes projected for this year, first to 305 cargoes and now to 280 cargoes. So, gas supply continues to be a major issue for the company and part of the problem is that the country is not funding the Joint Venture Partners gas gathering projects. Added to the gas supply issue is the need for us to expand. We have proposed Train Seven, which would have increased our capacity from the 22, 000 metric tonnes we are currently producing. Trains Seven is also having issues and one of the major issues is gas supply.

    “In a few years time, we will need to renegotiate our SPAs and gas supply will also be an issue. Externally, there is the challenge we face from the regulatory authorities, the interpretation of the Nigeria LNG Act, which we will continue to depend on as a company.”

    The United States, followed by Canada, leads the world in producing natural gas from shale formations. Shale gas is said to account for 39 per cent of all natural gas produced last year in the United States, where four licences have been issued for large scale production. Data from the Energy Information Administration, the statistical arm of the Department of Energy, shows that shale gas production will continue to rise. Already, shale gas has cut into the share of U.S. electricity provided by coal-fired power plants. It has fallen from 53 per cent in 1993 to 42 per cent in 2011. EIA said U.S. shale gas production will increase 44 per cent between 2011 and 2040.

    Gas hydrates, according to the EIA, could be a potential source of natural gas. It said one cubic foot of gas hydrate releases 164 cubic feet of natural gas when brought back to the earth.

    EIA said: “According to the United States Geological Survey, the world’s gas hydrates may contain more organic carbon than the world’s coal, oil, and other forms of natural gas combined. Estimates of the naturally occurring gas hydrate resource vary from 10,000 trillion cubic feet to more than 100,000 trillion cubic feet of natural gas. Tapping such resources would require significant additional research and technological improvements. The U.S. Department of Energy recently selected 14 gas hydrate research projects to receive funding, building on a successful test in early 2012 in which a steady flow of natural gas was extracted from gas hydrates on Alaska’s North Slope. Japan is also conducting research on producing gas hydrates from deepwater basins near its shores.”

     

  • Why long-term contracts help liquefied natural gas carriers

    Why long-term contracts help liquefied natural gas carriers

    Given that LNG carriers require a few months to construct—about 28 to 34 months, according to Golar LNG Ltd. (GLNG), there could be short-term timing disconnects between the delivery of a new LNG vessel and the LNG cargoes they were ordered to transport. The timing of LNG project upstarts, newbuild delivery lead time, the economics of investing in newbuilds, economic cycles, and structural weaknesses or strengths in natural gas consumption are some factors that shape the industry’s cycles.

    As the chart above shows, spot rates for LNG carriers have fluctuated wildly in the past, ranging from as low as an average of ~$34,000 a day to recent highs of ~$128,000 a day, which we can attribute to the inelastic nature of the shipping industry’s supply.

    While companies that do operate in the spot market are subject to volatile earnings, keep in mind that most LNG carriers such as Golar LNG Partners LP (GMLP), Dynagas LNG Partners LP (DLNG), GasLog Ltd. (GLOG), and Teekay LNG Partners LP (TGP) are contracted out long-term (for five years or more) with inflation adjustment features, under which rates are much less volatile than the spot market. In some cases, these contracts are agreed upon for up to 25 years.

    As we noted earlier in this series, long-term contracts have been dominant because these vessels are costly to build, so LNG owners are more cautious about being able to generate adequate returns on investments. But their dominance is also because shipping costs can make up 15 per cent of landed LNG gas prices for importers such as utility operators. To hedge against the volatility of spot rates, most utilities are also interested in engaging in long-term contracts.

    Certainly, this could change in the future if newbuild prices came down, the LNG shipping industry’s rivalry intensified, and shipping rates came down to the extent that the cost of shipping makes up only a small percentage of total delivered price. This could make investing in LNG carriers more risky, although it’s probably going to take years before this happens.