Abuja, Nigeria – March 2024
The operational crisis at Nigeria LNG Limited (NLNG) has escalated, with natural gas supplies plummeting by a staggering 80% due to prolonged outages at its Bonny Island facility, according to a recent report by Bloomberg. The report reveals that only 20% of the company’s required gas supply is currently being met, posing a significant threat to Nigeria’s revenue streams and its projected 2025 dividends of N727 billion, a 113% increase from N346 billion in 2023.
The crisis, which has worsened in recent weeks, stems from persistent vandalism and sabotage of critical gas pipelines, severely curtailing operations at the plant and slashing exports of liquefied natural gas (LNG). Philip Mshelbila, CEO of NLNG, disclosed last week at the Nigeria International Energy Summit in Abuja that only two of the facility’s six processing units are operational, with three gas pipelines currently out of service. He attributed the challenges to repeated attacks on the company’s infrastructure by vandals.
The declining output from Nigeria’s sole LNG facility is expected to have global repercussions, potentially driving up spot prices as supplies to Asia and Europe tighten.
In 2024, nearly half of Nigeria’s LNG exports were destined for Asia, with a third going to Europe and the remainder to the Americas and Middle East, according to Bloomberg data. However, Nigeria’s LNG exports fell by 40% in February compared to the previous month, following the destruction of vital pipelines by suspected vandals. This disruption has delayed planned shipments for March by at least 10 days.
NLNG, a joint venture involving Shell Plc, Nigerian National Petroleum Corporation (NNPC), TotalEnergies, and Eni, plays a critical role in harnessing Nigeria’s vast natural gas resources for both domestic use and export. The company has disbursed 21.56 billion. The current reduction in production capacity threatens to undermine these financial contributions, potentially leading to a decline in export earnings and job losses in the sector.
The Niger Delta region, where much of Nigeria’s oil and gas infrastructure is located, has long been plagued by security challenges, including pipeline vandalism and sabotage. These issues have persisted despite efforts to address them, further complicating the operational environment for companies like NLNG.
In a related development, a London court last week ordered NLNG to pay $380 million in compensation to commodity traders Vitol and Glencore for failing to deliver contracted LNG cargoes. This ruling underscores the broader financial and reputational risks associated with the ongoing crisis.
As the situation at Bonny Island remains unresolved, stakeholders are calling for urgent measures to address the security challenges and restore full operations at the facility.
The federal government, alongside NLNG’s international partners, faces mounting pressure to safeguard Nigeria’s critical energy infrastructure and mitigate the economic fallout from the crisis.
For now, the outlook remains uncertain, with the potential for further disruptions to global LNG supplies and Nigeria’s revenue streams hanging in the balance.