By Daniel Edu
The ongoing operational halt enforced by the Nigerian Liquefied Natural Gas Ltd (NLNG) poses a significant threat to the country’s annual gas production of 22 million tonnes.
The spokesperson for NLNG, Andy Odeh, recently confirmed that the force majeure, initially declared in October 2022 due to widespread flooding disrupting supplies, remains in effect. The term “force majeure” refers to unforeseen external circumstances that prevent contractual parties from fulfilling their obligations.
Odeh stated, “The force majeure remains in place due to the unavailability of primary upstream gas suppliers’ major liquid evacuation pipelines. These pipelines have been impacted by acts of sabotage and vandalism, which continue to affect feed gas supplies.” He emphasized that NLNG has been working with its customers to mitigate the impact of the resultant gas supply shortage.
The concept of force majeure is a standard provision in contracts that relieves both parties from liability or responsibility when extraordinary events beyond their control, such as war, strikes, natural disasters, or sudden legal changes, hinder the fulfillment of their contractual commitments.
NLNG operates as an Incorporated Joint Venture, with ownership distributed as follows: Nigerian National Petroleum Company Limited (49%), Shell Gas B.V. (25.6%), TotalEnegies Gaz & Electricité Holdings (15%), and Eni International N.A. N.V. S.àr.l (10.4%). The company has an annual production capacity of 22 million tonnes, primarily supplied to European clients through long-term contracts with companies like Galp and Endesa. NLNG also engages in over 70 spot agreements across major global LNG markets. Additionally, NLNG holds the position of the largest gas supplier in the Nigerian market.
Last year, NLNG’s upstream gas suppliers invoked force majeure, compelling NLNG to follow suit. The company exported approximately 18 cargoes in September of that year, as per Refinitiv data.
Notably, Nigeria heavily relies on fossil fuel exports, accounting for 90% of foreign exchange earnings and roughly half of the national budget.
In 2022, during the Nigeria International Petroleum Pre-Summit Conference and the launch of the Decade of Gas in Abuja, former President Muhammadu Buhari highlighted NLNG’s significant contribution, including generating $114 billion in revenue over the years and paying taxes amounting to $9 billion. He also mentioned dividends of about $18 billion to the federal government and $15 billion in feed gas purchases.
Furthermore, NLNG’s Managing Director, Tony Attah, announced sales and purchase agreements for domestic LNG supply during a press conference in Abuja last year. He indicated that the company’s revenue generation since 1999 had exceeded $110 billion. Adeleye Falade, the General Manager of Production at NLNG, revealed that the company suffered nearly $7 billion in lost revenue in 2022 due to gas supply shortages.
While NLNG grapples with its gas production challenges, power generation companies are also voicing concerns about gas shortages impacting plants connected to the national grid.
Recent reports from The PUNCH suggest that daily power generation has fallen below 4,000 megawatts, prompting calls for infrastructure investment and improved operational procedures by the System Operator (SO) to enhance real-time grid visibility and enforce discipline among market participants, according to the Nigerian Electricity Regulatory Commission.
Over the years, power generation has fluctuated between 5,000MW and 4,000MW, with recent drops below 3,000MW per day. Experts assert that reaching sufficiency requires at least 30,000MW of power generation capacity for the country.
