Market News

Nigeria LNG (NLNG), Africa’s leading liquefied natural gas producer, is poised to experience a significant 12 percent increase in its gas supply, marking a crucial step in overcoming operational challenges posed by rampant fuel theft.

This boost comes as a result of a newly forged preliminary agreement with indigenous energy giant, Seplat Energy, a top executive at Seplat Energy told Bloomberg.

Effiong Okon, who leads a Seplat subsidiary overseeing a vital gas project situated north of the NLNG plant in Bonny Island, Rivers State, revealed that the deal will see Seplat channeling over 150,000 tons of gas per month to the facility.

This volume surpasses NLNG’s average monthly gas intake in the preceding year by more than 12percent, signaling a substantial upswing in feedstock for the crucial energy plant.

The anticipated surge in gas supply offers a much-needed reprieve for NLNG, a joint venture involving the Nigerian government, Shell Plc, TotalEnergies SE, and Eni SpA.

The plant has been grappling with severely curtailed gas supplies due to the escalating menace of pipeline vandalism and fuel theft, which has significantly hampered its production capacity in recent times.

This agreement with Seplat marks only the second instance in NLNG’s history that it will be sourcing gas from a third-party supplier, underscoring the significance of this collaboration in the current operational climate.

Okon stated that both parties are currently engaged in finalizing the intricate technical and commercial aspects of the deal.

He expressed optimism that gas flow to the NLNG plant is expected to commence in the third quarter of the current year, potentially bringing much-needed stability to the plant’s operations.

Seplat Energy has witnessed a 50 percent surge in its gas production following its acquisition of assets from the Nigerian arm of Exxon Mobil Corp.

The landmark agreement with NLNG is also poised to inject vital revenue into Seplat’s $700 million ANOH gas plant. Despite its completion, the ANOH plant has remained idle due to delays in the completion of a critical east-west pipeline intended to transport its output.

Katlong Alex, an analyst at the African Energy Council, hailed the deal as a “strategic convergence of need and opportunity.”

He emphasised that the agreement “enables Seplat to overcome infrastructure limitations, while helping NLNG tackle its persistent gas supply issues.”

This symbiotic relationship stands to benefit both entities significantly, ensuring a more reliable gas supply for NLNG and providing a crucial outlet for Seplat’s increased production.

Okon clarified that the agreement is intended to be a “short term” solution, pending the eventual completion of the delayed east-west pipeline.

This suggests that while the Seplat deal offers an immediate and significant boost to NLNG’s gas supply, it is viewed as a temporary measure to mitigate the current challenges.

As of the time of reporting, NLNG had not issued any official statement or response regarding the agreement with Seplat Energy.

Implication

The implications of this deal extend beyond the immediate operational benefits for NLNG. A more consistent gas supply will be crucial for Nigeria to meet its domestic gas obligations and fulfill its commitments to international LNG markets.

This development could also have a positive ripple effect on Nigeria’s energy sector, potentially leading to increased power generation and industrial activity that rely on a stable gas supply.

Furthermore, the collaboration between a major international player like NLNG and an indigenous company like Seplat Energy underscores the growing capacity and importance of Nigerian energy firms in the nation’s oil and gas landscape.

It highlights the potential for strategic partnerships to unlock value and address critical challenges within the sector.

While the “short term” nature of the agreement suggests that long-term solutions to the gas supply challenges are still being sought, the immediate impact of the 12 percent increase in gas feedstock promises to be significant for NLNG.