NLNG Revenue Dives Amid Persistent Gas Supply Challenges

Nigeria’s revenue from Nigeria Liquefied Natural Gas (NLNG) Limited has plummeted by 43 percent, largely due to ongoing gas supply challenges.

According to the latest data from Nigeria’s budget performance report, the federal government’s actual revenue from its NLNG share stood at N46.2 billion in 2023, a significant decline from the proposed target of N81.79 billion.

The decline in NLNG’s output is attributed to persistent gas supply constraints, which also pose a threat to its expansion plans.

Kelvin Emmanuel, CEO of Dairy Hills, highlighted the lack of a fiscal framework for associated and non-associated gas, particularly under production sharing contracts in Nigeria’s deep-water sector.

“International oil companies like Exxon and Chevron, which are not part of the NLNG Joint Venture, lack incentives to invest in gas development due to uncertainties around the sharing formula, carried costs, and pricing models,” Emmanuel explained.

NLNG has acknowledged the challenges, confirming that its $4.3 billion Train-7 project, which aims to boost capacity by 7.6 million tonnes per annum (mtpa), has reached 67 percent completion.

Despite employing over 9,000 Nigerians, concerns remain over securing future feedstock for the expanded capacity.

Emmanuel emphasized the urgent need for the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Federal Inland Revenue Service (FIRS) to develop a fiscal framework to attract investments in non-associated gas wells.

He warned that without such measures, Nigeria’s electricity supply would also suffer, as 19 out of 24 power plants connected to the national grid are thermal plants relying on gas.

Ayodele Oni, energy partner at Bloomfield Law Practice, pointed to poor infrastructure as a significant factor affecting gas production and revenue.

He urged the government to enhance security mechanisms using innovative technology to protect gas infrastructure and to implement policies that encourage gas utilization and commercialization.

Oni also called for the elimination of corruption within the sector and the promotion of gas-based industries to boost utilization.

“The government should implement measures to increase investments and enforce deterrence of gas flaring,” he added.

Jide Pratt, country manager of TradeGrid, noted that reduced drilling activity leads to lower gas output, impacting Nigeria’s export capacity.

He stressed the need for commercial pricing reforms to stimulate production and exportation, thereby increasing national revenue.

NLNG’s managing director, Philip Mshelbila, has previously expressed concerns over delays in deep-water gas projects intended to supply feed gas for Train-7 and future expansions.

“This delay means the facility could be completed without a gas source for liquefaction,” Mshelbila warned during an engagement session with the Nigerian Content Development and Monitoring Board.

Mshelbila revealed that NLNG is exploring several options to mitigate these challenges, including partnering with security agencies to curb pipeline vandalism and working with joint venture partners to boost gas production.

To enhance the performance of its existing Trains 1 to 6, NLNG’s board has approved the procurement of gas from other international and indigenous producers.