Disquiet in NLNG over concession to IOC equity lifters

Philip Mshelbila, the incoming managing director of the Nigeria Liquefied Natural Gas (NLNG) Ltd, will meet with a big controversy when he assumes duty month-end: in-house disquiet over the lifting concession given to IOC shareholders.

Under “equity lifting” in the project, the joint venture partners — Shell, Total and Eni — have an obligation to off-take, transport and market.

The Nation reports that deferrals, defaults and cancellation of cargoes are creating an in-house crisis and market tension for the NLNG.

More than 20 LNG cargoes have suffered deferrals despite demand surge in the international market, a market source briefed journalists at the weekend.

There are fears that the deferrals and defaults may affect the Nigerian market among international customers.

The federal government plans to increase Nigeria’s LNG production by 35 per cent with Train 7, but this is already facing threats with the latest development.

Gas supply targets have been impacted owing to Eni’s AGIP 50 per cent supply mark to the plant, the source said, describing it as “very poor”.

Shell and Total have recorded over 90 per cent each “in the past few months”, he said.

“There is disquiet within and from the market in NLNG over cancellation of cargoes and unnecessary deferrals,” the source said.

“This is one of the issues which the board and the new management need to address for a smooth take off.”

Giving insight into some of the challenges in NLNG supply chain, he said: “The Nigerian LNG production capability is still at an impressive level of close to 90 per cent, which, if managed properly and concessions are made by the international oil shareholders lifters, could well lead to an avoidance of performance reputational risk the Nigerian LNG is currently been plagued with in global markets. Independent third party gas supply could also be a solution.

“In the last six months over 20 LNG cargoes have been affected, with an estimated increase to 50 cargoes by year end. Traditional buyers such as Galp, Enel, Gas Naturgy have struggled.

“Deferral notices are sometimes made just weeks prior to Vessel arrival at Bonny Terminal. This practice, except for rare situation of force majeure, is very well below international acceptable standards.”

The board of the NLNG, chaired by Edmund Daukoru, a former minister of petroleum resources, is said to be “worried”.