The story of LNG in Nigeria is one of missed opportunities because of the failure of its leaders to build LNG plants and monetize the country’s huge gas reserves soon after independence from Britain in 1960.

Nigeria has reserves of associated and non-associated gas estimated in excess of 180 Tcf and is ranked seventh in terms of proven natural gas reserves in the world.

Geologists and oil experts say there is a lot more gas to be found in the country, potentially up to 600 Tcf if companies deliberately explore for more gas, rather than finding it while searching for oil.

Nigeria started commercial oil export in 1957 but only produced its first LNG 42 years later in 1999. The delay was apparently due a series of boardroom bickerings, government hesitation, political instability, lack of finance, difficulty in reaching salient agreements, and some initial partners withdrawing from LNG projects.

“History recorded that the windows of opportunity to build LNG plants disappeared in both the 1960s and 1970s – the two times we came so close to building an LNG plant in Nigeria. Due to delays in reaching decisions, other countries, especially in Europe (i.e., North Sea), got to the global market earlier than we did. But opportunities do not disappear; these go elsewhere, especially when we fail to utilize them,” Gen. Yakubu Gowon, a former head of state of Nigeria was quoted by BusinessDay as saying in an address during his visit to the Nigeria LNG (NLNG) plant site in Finima, Bonny Island, in the Niger Delta in September 2012.

Just as it took NLNG decades to get off the ground, the other two LNG projects Nigeria is planning to construct – Olokola LNG (OK-LNG) and Brass LNG - are also running well behind schedule.

NLNG shareholders, the Nigerian National Petroleum Corp. (NNPC), Shell, Total, and Eni, have upgraded the NLNG plant to six trains since 1999, when production operation started from the first two trains. Train 6 was completed in December 2007.

With six trains now operational, the entire NLNG complex is capable of producing 23.5 million metric tons per year (MMmt/y) of LNG, the company said.

NLNG management, in a release in November 2012, considered the company a major success story because “it is a world-class company operating to the highest global standards and transparency; it submits audited accounts to the relevant authorities annually; it was, until recently, the fastest-growing LNG facility in the world and today accounts for 8% of world LNG production, NLNG’s finances are solid and its credit rating impressive with assets worth over $13 billion.”

Management further explained that the NLNG contributes over 4% of Nigeria’s GDP; it has contributed to significant reduction of flaring from 65% to 25% of total gas produced; and it has a shipping subsidiary that owns 13 LNG vessels and has trained over 500 sailing officers, some of them to the ranks of captains and chief engineers.

“Plans for building Train 7, which will lift the total production capacity to 30 MMmt/y of LNG, are currently at an advanced stage,” NLNG management said.

The company has marketed its Train 7 volumes with sales and purchase agreements signed in 2007 with BG, Shell, Eni, Occidental Energy, and Total.

That was five years ago but the final investment decision (FID), which irrevocably commits the shareholders to constructing Train 7, has not yet been taken.

NLNG lost its place in front of the LNG-production queue to Qatar and Australia.

“Today, Qatar has become the biggest LNG producer in the world with a production capacity of 77 MMmt/y,” said Mohammed Bin Saleh Al-Sada, chairman of Qatar Gas board of directors.

Promoters of Brass LNG, which would be constructed in the Niger Delta, awarded the FEED contract to Bechtel Corp. in 2004. The award followed the heads of agreement (HOA) signed in October 2003 by shareholders for the development of the two-train LNG plant expected to export 10 MMmt/y of LNG a year. It was scheduled to begin production between 2009 and 2011.

The initial shareholders were the NNPC with 49% while Chevron, ConocoPhillips, and Eni Group had 17% each. ConocoPhillips has withdrawn from the project. Total also acquired Chevron’s interest in the project in 2006.

“Despite the divestment of ConocoPhillips from the project, discussions are already on with other critical stakeholders to key into the project. By April next year, the final investment decision on the project would be taken,” Andrew Yakubu, NNPC group managing director, said in a release the NNPC e-mailed to Hart Energy.

Studies on the 22 MMmt/y, four-train, OK-LNG project began in April 2005, but it has also suffered a delay. BG Group and other partners in the OK-LNG project signed a memorandum of understanding (MOU) in October 2006 for the project to be sited at the Olokola Free Trade Zone on the borders of Ogun and Ondo states in southwest Nigeria. Production was scheduled to begin in 2009. But oil and gas sources said the OK-LNG project may have to wait until 2014 to know the direction it is going. Other partners are Shell, Chevron, and NNPC.

Militancy in the Niger Delta, kidnappings, destruction of pipelines, apprehension about getting adequate gas supply for the new LNG plants, unrest by host communities, and political instability are some of the reasons the projects are on hold.

Attacks by armed militants are rising again in the Niger Delta, which highlights the dangers of working there. This can scare away potential LNG investors, and Nigeria may continue to lose opportunities to further monetize its abundant gas resources.

Obafemi Oredein