Nigeria LNG's Twin Goal: New Train, Plus Marketing T1-3
Nigeria LNG is looking to launch a new Train 7 at the same time that it needs to remarket volumes from its first three trains built between 1999 and the early 2000s, a double challenge that could be tough to pull off. NLNG has 22mn mt/yr of LNG export capacity, and the seventh would bring the total to 29mn mt/yr.
CEO Tony Attah said in a company statement November 29: “With Nigeria’s proven reserves of about 192 trillion ft³ of natural gas, and another 600 trillion ft³ in potential, this milestone development is coming at a crucial time."
He described however the scale of the challenge at a press briefing on the fringes of the CWC LNG conference in Lisbon that same day – namely the remarketing of 9mn mt/yr from trains 1 to 3, and the marketing just over 7mn mt from any train 7 on which NLNG wants to take FID at the end of next year. If built, the train could start up about 2023 as the global LNG glut starts to disappear. He said he was "not too worried" about securing financing, as NLNG enjoys "high credibility" among lenders.
Attah said the Train 7 now envisaged would be actually be configured of two trains, one of 3mn mt/yr, another of 4mn mt.
He declined to give a likely dollar cost. A spokesman added that the existing six trains had each cost roughly $1.5bn to build.
Attah also said that much of T7 was pre-sold into North America roughly a decade ago, conditional on an FID that was not taken then, and that this market was no longer importing, so that new markets would be required.
He gave no indication what proportion of those pre-sold volumes would hold, and how much remained to be placed. When originally planned a decade ago, T7 and a further planned T8 were each to have had 8mn mt/yr capacity.
Attah also said that the Nigerian government – as owner of the 49% NNPC stake in NLNG – “is hungry for new investments” and that Shell, Total and Eni had all expressed “positive support.” However Total’s vice president for LNG, Laurent Vivier, on the fringes of the same CWC conference declined to comment on Attah’s 4Q 2018 FID target for T7, although he said the project could be relatively low-cost as it would be a brownfield venture.
Remarketing of train 1 to 3 volumes
On the remarketing of T1-3 volumes, Attah said that market conditions 20 years ago were different from today, and that NLNG would not be “rigid” in its offer.
NLNG commercial general manager Godwill Dike, with Attah at the press briefing, said NLNG was “open to all forms of indexation; we are open to free-on-board deliveries, as well as delivered-ex-ship (DES); we already provide destination flexibility.” For EU markets, this was a requirement set by the European Commission in 2002. NLNG’s original contracts were all DES-based, using some of the 23 NLNG-owned LNG carriers.
However many of the buyers from T1-3 are European utilities that originally signed up to oil-indexed pricing, but now will be either looking to reduce their offtake, or else switch to European gas hub-indexation. Of that 9mn mt/yr coming up for renewal, a sizeable 5.1mn mt/yr is due to lapse – or be renewed -- between 2020 and 2022. Some of these buyers may only want shorter-duration contracts, if they renew, rather than ones of 20-22 year duration.
Attah did not name any T1-3 contract as having already been agreed for extension.
Another problem will be developing upstream gas for any T7. Although Attah said there are 193 trillion ft³ known reserves in Nigeria that could be sold through a NLNG T7, one issue is the government’s 2017 Nigerian Gas Policy which places the emphasis on developing gas for Nigeria’s own power sector, to supply a planned doubling of gas-fired generation capacity from under 5 GW now to a target 10 GW by 2020.