Gas Scarcity Inevitable as NLNG Shut Operations Due to High Floodwater

Nigeria Liquefied and Natural Gas (NLNG) declared a force majeure to its partners due to widespread flooding that has disrupted supply.

This declaration could worsen Nigeria’s revenue and foreign exchange scarcity which is already at an abysmal situation.

Force majeure is a clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties happens. 

Such events or circumstances could be war, strike, riot, crime, epidemic or sudden legal changes which could prevent one or both parties from fulfilling their obligations under the contract.

Investors King had earlier reported that the production capacity of the Nigerian Liquified Natural Gas Limited (NLNG) has dropped by 40 percent. The drop was a result of overwhelming theft and the vandalism of oil and gas pipelines. 

No doubt, the subsequent cease of operation will further worsen the gas situation in Europe. Nigeria is a major supplier to some European countries, particularly Portugal. 

It will be recalled that Portugal Energy Minister, Duarte Cordeiro stated that his country could face supply problems this winter if Nigeria did not deliver all its supplies.

Europe has been in the middle of gas shortage since the European Union put an embargo on the importation of Russian gas due to its invasion of Ukraine. 

Several countries in Europe including the UK are already at serious risk of gas shortage. 

According to the chief executive of Shell, Ben van Beurden, he noted that the shortage of gas in Europe could last for several winters. 

“It may well be that we will have a number of winters where we have to somehow find solutions,” he said.

According to the spokesperson of NLNG, Andy Odeh, “The notice by the gas suppliers was a result of high floodwater levels in the operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG,”

Odeh however stated that NLNG is in process of examining the extent of the disruption and would try to mitigate the impact of the force majeure. 

Meanwhile, before the force majeure, Investors King understands that production from NLNG’s six-train Bonny plant had dropped to 16.8 million tonnes in 2021, from 20.7 million tonnes capacity in 2020. This has caused the company to lose more than $7 billion in revenue.