There are indications that gas prices will rise further and Nigerians will pay more, as marketers have indicated that the high dollar-to-naira exchange rate is having a negative impact on importation.
Mike Osatuyi, National Operations Controller of the Independent Petroleum Marketers Association of Nigeria, IPMAN, told The PUNCH on Sunday that independent marketers sourced dollars for importation from the black market, so gas prices would continue to rise until the naira strengthened in the exchange market.
“Our members who still sell gas paid around N11 million for 20,000 metric tons last month, but the price has now risen to N12.3 million per 20,000 metric tons,” he said.
He noted that as long as the dollar remains strong, gas consumers face further price increases.
Apart from low international gas supplies caused primarily by the Russian/Ukraine war, The PUNCH has learned that gas production from Nigerian Liquefied Natural Gas Ltd, NLNG, has plummeted.
According to sources close to the situation, the drop in output was primarily caused by high-level theft as well as oil and gas pipeline vandalism, leaving NLNG operating at 60% capacity.
One of the causes, according to the source, is “feed gas constraint and high maintenance activities.”
NLNG’s six-train Bonny plant output and export had fallen to 16.8 million tonnes in 2021, from 20.7 million tonnes in 2020 and 2019.
According to the company’s General Manager, Production, Adeleye Falade, who spoke at the 45th Nigeria International Conference and Exhibition 2022, NLNG has lost nearly $7 billion in revenue so far in 2022 due to gas supply constraints.
Natural gas markets around the world have been tightening since 2021, and global gas consumption is expected to fall by 0.8% this year due to a record 10% contraction in Europe and flat demand in the Asia Pacific region, according to the IEA’s quarterly gas market report.
In recent years, Nigeria’s oil and gas sector has been plagued by persistent underinvestment, as well as the perennial problem of oil theft from pipelines.
Oil majors have reduced their investment in Nigerian supply, and many foreign firms have either sold assets or signaled plans to divest.
According to OPEC statistics, Nigeria’s crude oil exports fell to as low as 900,000 bpd in August, the country’s lowest level on record. In August, the country was 700,000 bpd short of its OPEC quota.
As a result, The PUNCH has learned that foreign customers who had reserved gas supplies are now concerned as the country’s Bonny Island output falls to a record low.
Portugal, a major importer from Nigeria, has expressed concern about supply.
Duarte Cordeiro, Portugal’s European Union, EU Environment and Energy Minister, said his country could face supply problems this winter if Nigeria does not deliver all of its supplies.
“We may have a problem from one day to the next, such as not being supplied with the volume of gas that is planned,” he said in Lisbon, adding that the country was already considering alternative supplies.
Due to the uncertainty surrounding NLNG, the PUNCH has learned that Nigeria’s other European countries are also considering alternative supplies.
Dr. Dauda Garuba, an oil and gas expert and analyst, described the low gas production as a “double tragedy for Nigeria,” adding that the country was facing tougher times in terms of revenue.
“This means that the country can expect lower revenue.” “These are difficult times for Nigeria because when we have less to export, we will be counting our losses,” he explained.
Dr. Austin Nweze, Faculty Member at the Lagos Business School and Head of the Centre for Applied Economics at Pan African University, told The PUNCH that “it is unfortunate that Nigeria has been unable to meet its customers’ demand.”
He stated that this meant a loss of revenue for the country, noting that everything should be planned so that the country does not rely on a single source of production.
“And, disappointing one’s customers is not a good business strategy because they will be forced to look for alternatives, just as it is now,” he said, adding that the Federal Government should have a business recovery plan that allows the country to bounce back so that it does not wallow in revenue losses.
