The sanctioning of Russia’s 9% global gas supply and 7% global crude oil supply has pushed gas prices to unprecedented levels of $40/MMBtu in Europe, and crude oil prices to over $100/barrel. Russia is the largest gas exporter of 23bcf/day, and 2nd largest crude oil exporter with 5mb/d, only behind Saudi’s 6.6mb/d.
Although sanction is not always adhered to, as some countries like China ignore them and others use the black market to access the oil due to its enticing huge discount (Russia crude trading $25 below market). However, Europe would be hugely impacted by the sanctions as Russia supplies 40% of its gas and 30% of its oil needs. Europe would be taking steps to mitigate this including looking inward (e.g., reversing plans to close coal and nuclear plants, and drilling) and turning to other supplies like LNG from Canada, Australia, etc, along with logically looking at Africa which is geographically best placed to supply to Europe.
In Africa, Nigeria has one of the largest oil and gas reserves and should have been in a pole position to step in to provide additional oil and gas to Europe and gain huge revenue at the current high energy price levels. However due to past missteps like disorderly JV funding, crude theft, pipeline attacks, and a 20-year delay in passing a Petroleum Industry Act (PIA), we currently only produce 1.4mb/d against a production capacity of 2.5mb/d and compared with a target of 4mb/d. These have led to the loss of tens of billions of dollars that would have accrued from the current high price and a lost opportunity to fill the current ‘desperate gap’ in Europe that could have provided us leverage for other strategic benefits.
On gas, but for the 11-years delay in taking FID on Train 7, the 35% increased capacity would by now have come on stream rather than where we are of just starting construction. Had we made the timely decision, it would have enabled us by now to be taking advantage of the record high gas price level (over $40/MMBtu) with the huge volumes, and NLNG would have been earning annual revenues in excess of $15billion, and be a “beautiful bride” and strategic partner for Europe.
This was the “window of opportunity” (ahead of energy transition) message we espoused many times in the last decade which political leaders failed to enable but rather allowed other interests to trump the economic and sustainable long-term benefit for the country. In the interim, other African countries like Mozambique have stepped up and, are on the way, to filling the huge gap we left with our missteps, with their $20billion two-train project.
Sadly, despite the effect of the skyrocketing global energy prices on local diesel and aviation prices and inflation, our low oil production and delay in adding new LNG volumes, means that as a nation we are not really benefiting from the high energy prices as our crude oil revenue at the current production level is eroded by a crippling subsidy regime. Had additional oil and gas volumes been in place, our Federation revenue and State allocations would have been much bolstered now.
However, whilst it is too late to benefit from the current high global energy prices due to our past ‘missteps’, it will be unconscionable if we continue similar “missteps” and not act proactively and continue to miss the window of opportunity. Thus, on LNG, whilst Train 7 is now under construction (kudos to this regime and current NNPC top echelon), we should now as part of the “Decade of Gas” aggressively progress the next Train 8 and 9 (vision is 12 Train – 50mtpa – Qatar growing from 77mtpa to 110mtpa) to take more advantage of the window of opportunity before the energy transition takes hold. The IOCs are pulling out of their ventures in Russia (e.g., Shell out of Sakhalin and Salym) and would be keen to find other countries to invest in to maintain their market share. NNPC should proactively engage these IOC partners to prioritize this expansion and position Nigeria as the investment destination for LNG, with PIA now in place, NNPC now a Limited Liability company, and NLNG’s top-notch performance over the years.
We can still harness the window of opportunity and now is the time to accelerate investments in our oil and gas including Train 8 and 9!
–Omotowa, former Managing Director of NLNG writes from Lagos
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