The crash in demand for liquefied natural gas in Europe has posed a threat to the Federal Government’s revenue from the exports of the commodity.
The Nigeria LNG Limited, which was established to harness Nigeria’s vast natural gas resources and produce LNG and natural gas liquids for export, is jointly owned by the Federal Government and three international oil companies.
The country generated $1.03bn (N314.15bn) from gas exports in 2019, according to data obtained from the Nigerian National Petroleum Corporation.
The collapse in crude oil price has added to pressure on the LNG prices, some of which are linked to oil.
The Group Managing Director, Nigerian National Petroleum Corporation, Mele Kyari, said in March that over 12 LNG cargoes were stranded in the market globally, for the first time ever.
“The LNG cargoes that are stranded with no hope of being purchased because there is abrupt collapse in demand associated with the outbreak of coronavirus,” he had said.
The NLNG told our correspondent earlier this month that the market realities of low prices and economic lockdown induced by COVID-19 scourge had changed the business landscape including the LNG business.
“the NLNG continues to closely monitor the global impact of COVID-19 and adapt as appropriate to meet our contractual obligations and achieve resilience,” it said.
Nigeria, which is among the top 10 largest exporters of the LNG in the world, has a capacity of 22 million tonnes per annum.
The country, which is one of Europe’s key LNG suppliers, is said to have seen demand for its cargoes in Europe tumble in the coronavirus pandemic as buyers defer deliveries.
Europe’s comparatively transparent pricing has long made it a favoured destination for cargoes. Now, with demand there slumping, more gas is going into storage facilities, and those are filling up fast, according to WorldOil.
Over the past two months, Nigeria continued to send the LNG cargoes to one of its main markets, Europe, but with many major European economies in lockdown, demand has plunged, and customers with options to defer have been postponing the offloading of the cargoes, according to oilprice.com.
This has created a fleet of tankers carrying the LNG that are now just floating storage, according to commodity tracking firm Kpler.
The report said the LNG prices at their lowest in years had forced traders to keep LNG on the tankers, waiting for demand to improve.
“The worst is yet to come, we will likely see super low prices in late June, July, August,” Bloomberg quoted the Managing Director for Energy at Accenture, Manas Satapathy, as saying.
Rystad Energy said in a report that the crash in the LNG demand in Europe during the pandemic and the high storage levels would likely mean that the continent would struggle to act as a sponge to absorb excess LNG supply this year as it did in 2019.
Last year, Europe became the “de facto global LNG sink,” when milder winter in Northeast Asia slowed down LNG demand growth there, the energy research firm said.
In 2019, Europe’s total LNG imports surged by 80 per cent compared to 2018, while in January and February 2020 – before the European lockdowns and when the coronavirus hit Asia – Europe’s LNG imports jumped 35 per cent, thanks to the UK, Spain, and Belgium.
Rystad Energy said, “We still don’t have an end date for when Europe will completely re-emerge from lockdown, and the impact will probably be deeper coming into the summer months.
“With gas storage tanks already almost filled to the brim, Europe’s capacity to import and actually use the same amount of the LNG as in 2019 seems like a tall order, especially if we see another mild winter.”