NLNG Suffers $7bn Year-to-Date Revenue Loss Due to Gas Supply Shortages

•Heirs Oil & Gas’ crude production fell to 3% in Dec. 2021 

•Seplat backs FG on call for just energy transition for Africa

Peter Uzoho

The security challenge facing oil and gas companies in the country is having a heavy toll on the production and revenues of the Nigeria Liquefied Natural Gas (NLNG) Limited as it has resulted to the company losing almost $7 billion revenue so far in 2022 due to gas supply constraints.

The company’s General Manager, Production, Mr. Adeleye Falade disclosed this yesterday in Lagos, during a panel session at the 45th Nigeria International Conference and Exhibition (NAICE) 2022, with the theme: “Global Transition to Renewable and Sustainable Energy and the Future of Oil and Gas in Africa.”

Also at the session, Tony Elumelu’s Heirs Oil & Gas revealed that oil production at its Oil Mining Leases (OML) 17 dropped to three per cent in December 2021, just as Seplat Energy Plc has joined the federal government in advocating for a balanced and just energy transition for Nigeria and other developing Africa nations.

Speaking on the panel, which centred on the topic: “Operationalising a Clean-Energy Transition for Sustainable Development in Africa, Falade, who represented NLNG’s Managing Director, Dr. Philip Mshelbila, said the company’s 22 million tons per day plant’s production currently trends at 99.4 per cent year-to-date availability while utilisation hovers around 68 per cent.

He said the data between the 99.4 per cent availability and the 68 per cent utilisation at the moment, which was equivalent to $7 billion revenue, was part of the effect of the critical oil and gas pipelines that were shut down due to insecurity at the facilities.

He stated that the unavailability of important gas pipelines like the Abuja-Kaduna-Kano (AKK) Pipeline and the lack of gas pipelines in the eastern corridor for distribution were impacting negatively on their production.

He lamented that even the Trans-Niger Pipeline (TNP) which is the main artery in the eastern region, had been shut down since March with no clue as to when be back on stream.

Falade said, “I’ve spoken eloquently about the AKK Pipeline. In the eastern corridor, we also don’t have enough pipeline distribution pipeline. But the ones that we have, what has happened to them? Today, Trans-Niger Pipeline, which is the main artery in the eastern region, had been down since March. We don’t know when it’s going to come back.

“As a result of that, I don’t have gas in the LNG to run my plants. Currently trending 99.4 per cent year-to-date availability, my utilisation is moving around 68 per cent.

“The data between that 68 per cent and the 99.4 per cent is equivalent of almost $7 billion revenue today, which would have found its way into our economy, which would have helped our government in a cash constrained world.  And I’m not talking about the impact of upstream.

“So what is the guarantee around the security of even the pipeline that we have? And everybody has a role to play in that: government, security agencies, have a role to play.”

He added that based on the work done by the Decade of Gas policy, there was a clear three billion cubic feet (3BCF) gap between gas demand and supply, raising doubts about to bridge that gap considering the lack of infrastructure and investment.

Falade pointed out that the challenge around lack of gas transportation infrastructure to guarantee sufficient supply of gas which had been designated as Nigeria’s transition fuel was a major challenge in achieving energy transition.

In his contribution the moderator of the panel and Managing Director of Heirs Oil & Gas Limited, the upstream arm of Tony Elumelu’s TNOG Oil & Gas, Mr. Osayande Igiehon, said insecurity at the company’s operational base led to the company’s crude production falling to three per cent in December 2021.

 In a deal worth $1.1 billion, TNOG Oil & Gas Limited had in January 2021, bought the 45 per cent stake in OML 17 and associated infrastructure, from three oil majors -Shell Petroleum Development Company (SPDC), TotalEnergies and Eni, who held 30 per cent, 10 per cent and five per cent interests respectively.

Announcing the completion of the deal at the time, SPDC had stated that OML 17 had a current production capacity of 27,000 barrels of oil equivalent per day and, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional one billion barrels of oil equivalent resources of further exploration potential.

Businessman and Chairman Heirs Holdings, Mr. Tony Elumelu, had bemoaned the fact that Nigeria was losing over 95 per cent of its oil production to thieves.

Also lamenting the challenge his company and many others were facing in dealing with security of production facilities and losses in the Niger Delta, Igiehon said the problem has reached an existential level.

He added, “We acquired the asset, OML 17, in middle of January 2021. We took operational control by first of July. In that month of July when we took over, from what we acquired, the reconciliation of what we get at the terminal was 65 per cent.

“In December of 2020, it was about 85 per cent. In January, it was 65 per cent; by December (2021), we got three per cent. So, that caused us and many other companies to shut down.”

Igiehon said a lot of work was being done on different levels by all stakeholders including the government and oil companies to address the challenge, noting that the impact of the insecurity has gone beyond oil.

According to him, “Because you cannot evacuate the liquids that come from oil: condensates and any water, we are having to shut down our gas plants. And because you cannot produce gas, no electricity. And because you cannot produce electricity, you go back to diesel and firewood. So, we are a kind of just stepping back.

“So, it’s an existential problem for all of us, and it’s not a question of pointing fingers. It’s a question that we all need to stand up as leaders and players and do whatever it is in our box to ensure that this is addressed.”

On his part, the Director, New Energies, Seplat Energy Plc, Mr. Effiong Okon, representing the company’s Managing Director, Mr. Roger Brown, joined the federal government and other industry stakeholders in the call for the rest of the world to grant Africa a balanced and just energy transition.

Okon noted that there was the need to balance de-carbonisation with development, adding that: “Global warming and climate volatility are existential threats to humanity and nature. The world needs to accelerate efforts to achieve net-zero and mitigate warming effects.”

He said, “Africa’s climate, agriculture and people will suffer most in the coming decades. The problem has been caused by emissions from developed-world countries that have enjoyed their ‘carbon privilege’ and built strong economies on fossil fuels.

“However, we need to consider the reality in the continent. Poverty, hunger, unemployment, population growth abound here. Africa contributes just 3.3 per cent of global emissions. Most Africans (600 million) lack access to reliable energy, which hampers development. Use of inefficient and costly diesel, petrol generators saps financial resources, drains foreign exchange and creates pollution.”