NLNG: Last Year’s Flood-induced Force Majeure Not Yet Called Off

•Oil price hits new highs, crosses $87

Emmanuel Addeh in Abuja

Nigeria LNG yesterday said the force majeure it declared in October 2022 due to widespread flooding that disrupted supply was continuing, according to a report by Reuters.

Force majeure refers to unexpected external circumstances that prevent a party to a contract from meeting obligations.

“The force majeure still subsists as the unavailability of upstream gas suppliers’ major liquids evacuation pipelines, occasioned by sabotage and vandalism, still impacts feed gas supplies,” NLNG spokesman Andy Odeh said in an emailed response to a Reuters enquiry.

The company, jointly owned by the federal government and some International Oil Companies (IOCs) had said the notice by the gas suppliers was a result of high flood water levels in their operational areas, leading to a shut-in of gas production, causing significant disruption of gas supply.

Flooding in different parts of Nigeria left over 600 people dead and more than a million people displaced last year. However, at the time, the NLNG stated that the force majeure will not affect the supply of the product to the market.

“We are aware of the flooding in parts of the country, specifically in the Niger Delta area. But just to assure that the notification is that our facility in terms of production has not been impacted. We are still producing LNG or exporting LNG.

“However, the notice of force majeure that was issued was clearly to say that our upstream gas suppliers have been impacted by the flooding where the gas is coming from and as a result of that, we are not getting the gas coming into our facility to liquefy and export,” Odeh told Arise TV last year.

But Odeh said yesterday  that “NLNG continues to collaborate with its customers to minimise the impact of the consequent gas supply shortage,”

The company did not cancel cargoes despite the force majeure, which was only pre-emptive to protect it and notify clients if the situation persists for much longer, Reuters said.

NLNG, with a production capacity of 22 million tonnes per annum, delivers most of its shipments to clients in Europe including Galp and Endesa with whom it has long-term contracts. It also operates over 70 spot agreements across major LNG markets.

Meanwhile, oil prices hit new peaks on Wednesday with the global Brent benchmark touching its highest since January as Saudi and Russian output cuts offset concerns over slow demand from China and a steep drawdown in US fuel stockpiles.

Brent crude, Nigeria’s oil benchmark, was up over 44 cents and more than 0.51 per cent, at $86.59 a barrel in the afternoon, having earlier touched $87.65, its highest since January 27.

Also, West Texas Intermediate crude (WTI) gained 39 cents, or 0.5 per cent, to $83.34. The US benchmark touched $84.65, its highest level since November 2022.

Supporting prices, however, were top exporter Saudi Arabia’s plans to extended its voluntary production cut of 1 million barrels per day for another month to include September. Russia also said it would cut oil exports by 300,000 bpd in September.

Crude posted its sixth consecutive weekly gain last week, helped by a reduction in Organisation of the Petroleum Exporting Countries (OPEC) and allies ‘ supplies and hopes of stimulus boosting oil demand recovery in China.

On Tuesday, Saudi Arabia’s cabinet said it reaffirmed its support for precautionary measures by OPEC to stabilise the market, state media reported.

In Nigeria, it would be a mixed bag in the coming months, with revenue from crude oil likely to increase. However, on the other hand, the pump price of petrol will also rise due to the recent withdrawal of the subsidy regime.