Nigeria's gas export dropped to one million tonnes in January, representing 35 per cent decline year on year, and lower than export volumes by Algeria.
This is as the federal government identified new oil fields capable of delivering about 681,000 barrels of crude oil per day and 1.52 billion standard cubic feet of gas daily.
An analysis of flows data from Refinitiv Eikon, one of the world's largest providers of real-time data, showed Nigeria's LNG exports decline last month as Algeria surpassed Nigeria to be Africa's LNG largest producer for the first time ever on a monthly basis despite record spot prices for the commodity.
"In January, Nigeria's LNG exports slumped to about 1 million tonnes, representing a 35 per cent year-on-year drop vs Algeria, which exported around 1.1 million tonnes," Refinitiv Eikon said.
"Much of the feed gas supplied to Nigeria's NLNG project at Bonny Island is derived from associated gas, hence the drop in the country's oil production on the back of upstream issues and pipeline vandalisation has led to a sizeable decline in feed gas supply to the facility," Olumide Ajayi, a senior LNG Analyst at London Stock Exchange Group, told BusinessDay.
At name-plate capacity, findings showed Nigeria LNG's (NLNG) project can export up to roughly 1.8 million tonnes per month.
"Worth noting that two years ago, LNG spot prices fell to less than $2/mmBtu; so this opportunity to take advantage of high spot LNG prices won't always be there," Ajayi added.
Beyond Nigeria's local challenges, analysts say high prices are spurring the hunt for long-term deals as the global LNG market is expected to take several years to adjust to last year's shake-up.
After Russia slashed piped supply to Europe following its invasion of Ukraine, gas prices hit new highs and Europe bought record volumes of LNG.
While Asian spot LNG prices have eased by more than 70 per cent from their record levels to $18.50 per million British thermal units (mmBtu), they remain high compared to their previous single-digit prices, leading buyers to seek long-term contracts to avoid spot market volatility.
"What the industry has realised now is that they can't have a long-term business on spot purchases. So, the need is to have long-term contracts, a good mix of long-term, short-term and medium-term contracts," Akshay Kumar Singh, CEO of India's Petronet LNG, told CNBC.
The spot market for gas refers to the trade of large physical cargoes or parcels in one-off transactions for near-term delivery, while the long-term contract typically obligates the transaction to occur at an agreed price with further financing agreements for projects with high capital costs and long payback periods.
Approximately 70 per cent of the global LNG market, including that of Nigeria, are sold based on long-term deals, but in Europe spot and short-term contracts represent around 45 percent-50 per cent, with flexible prices.
Meanwhile, a new document put together by the Nigerian Upstream Petroleum Regulatory Commission titled "Nigerian Upstream Petroleum Sector: Value Optimisation, Energy Transition and Regulatory Perspectives showed the commission is facilitating timely approvals for expedited re-entry and early production.
"The chief executive of NUPRC, Mr. Gbenga Komolafe, in the document, explained that incremental volumes of crude were expected from new wells and well re-entry.
He said: "We have also completed the 2020 Marginal Field Bid Round and issued 50 Petroleum Prospecting Licenses to deserving awardees. It is expected that with the existing discoveries in the awarded fields, an early Field Development Plan would be pursued by the awardees leading to incremental oil and gas production
"The commission is facilitating timely approvals for expedited re-entry and early production. The estimated incremental production from the awarded fields is approximately 58,000bpd and 87mmscf/d."In the short/medium term, we expect an estimated incremental volume of 461,000bpd and 565mmscf/d from new wells and well re-entry. In the long term, we expect an estimated incremental volume of 162,000bpd and 868mmscf/d from FDPs, which have been approved and are at various stages of execution."
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Komolafe further noted that the implementation of Host Community Provisions under Section 235 of the Petroleum Industry Act 2021 saddled the commission with the responsibility of ensuring conducive and peaceful relationships among stakeholders within the host communities.
According to him, this would be done through the implementation of the Host Communities Development Trust."The commission, in collaboration with the relevant stakeholders, has developed templates and gazetted regulations, which include that of the Host Community Development Trust" he said.
