Nigerian Company Eyes Historic Gas Supply Agreement with South Africa
If negotiations between Riverside LNG and counterparts in South Africa are successful, Nigeria is poised to begin the export of gas to South Africa. This development would mark the first time in the history of trade relations between the two nations and could have significant implications for energy cooperation and economic ties between Nigeria and South Africa.
“We’d probably very early in the year close out another segment of the market, an off-take for South Africa,” Bloomberg quoted David Ige, the CEO of the Lagos-based energy firm, as saying in an interview.
“There’s a massively evolving gas market in the region, anything around 3,000 nautical miles of Nigeria. So that covers southern Africa, western Africa, all to northwest Europe and the Caribbean and South America broadly.”
In November, Riverside LNG agreed with Johannes Scheutze Energy Import AG in Germany. The deal encompasses aspects of renewable energy and includes a gas export arrangement valued at $500 million. This agreement signifies Riverside LNG’s efforts to expand its presence in the international energy market and foster collaborations for both renewable energy and gas exports.
Nigeria is actively working to attract foreign interest in its oil and gas industry, aiming to address longstanding issues such as crude theft, pipeline vandalism, aging infrastructure, and structural bottlenecks that have led to the exit of international oil companies.
The government is implementing new measures and incentives to court investors and reduce barriers to entry, with a focus on improving the overall cost of doing business, boosting production, and increasing revenue.
One of the recent measures involves the inclusion of signature bonuses—fees paid by new investors after signing contracts—within the lump sum that oil and gas companies pay based on production.
As part of these efforts, Riverside LNG in Nigeria is engaging in talks to potentially export gas to South Africa. However, South Africa would need to build a plant first to receive liquefied natural gas (LNG) from Riverside LNG, and supply is expected to commence in 2027.
This initiative could be beneficial for South Africa in addressing its electricity challenges, given the ongoing power crisis and frequent load-shedding experienced by the state-owned electric utility, Eskom.
Corrupt practices at Eskom, the state-owned electric utility in South Africa, are estimated to cost the country $55 million every month. This financial toll adds to the challenges faced by Eskom, which is already dealing with the strain of old infrastructure and a power crisis, leading to frequent load-shedding and disruptions in electricity supply across the country.
In Nigeria, there is a significant push for gas to play a more prominent role in the country’s energy mix and exports as part of its broader energy transition. The Nigerian government has declared the ten years leading up to 2030 as “the decade of gas.”
Nigeria holds the largest proven natural gas reserves on the African continent, with 209.5 trillion cubic feet (tcf), accounting for one-third of Africa’s total of 620 tcf, according to the Nigerian Upstream Petroleum Regulatory Commission.
This month, NNPC Limited, UTM Offshore, and Delta State signed a deal to develop Nigeria’s first floating LNG (Liquefied Natural Gas) project. The project, with an investment cost of $5 billion, is set to handle 1.8 billion metric tons per year for the international market. The facility will be constructed by Wison Heavy Industry in China.
Additionally, NNPC Prime LNG Limited, a subsidiary of the state-owned energy company, has entered into a supply, installation, and commissioning agreement with SDP Services Limited for an LNG project. This project aims to produce 421 tonnes per day, contributing to increased domestic consumption of LNG.
However, the government faces challenges in gas production, some of which have the potential to pose environmental hazards. Balancing the development of the gas sector with environmental considerations will be crucial for sustainable growth.
“What is causing this gap (is) majorly theft on our pipelines. Some people get it, thinking it’s an oil line or a condensate line, unknown to them that it is a gas line,” Nigeria LNG’s general manager, production, Nnamdi Anowi, said in October, referring to vandals mistaking gas pipelines for those carrying crude and condensate.
Nigerian LNG is a joint venture involving Nigeria, Shell, TotalEnergies, Eni, and Electricity Holdings. The company, currently at 50% completion in its Train 7 Project, faces challenges with limited gas supply from upstream companies, leading to its trains 1 to 7 operating at only half capacity.
The Train 7 Project, upon completion, will increase production capacity from 22 million metric tonnes per annum (mtpa) to 30 million mtpa, positioning Nigeria among the top gas-producing countries globally.
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One significant concern is the volume and impact of flared gas by companies on host communities, resulting in substantial losses for the country. Over the past decade, Nigeria has flared 80 billion standard cubic meters of gas, equivalent to N9 trillion in lost revenues, causing health and environmental hazards in host communities.
To address these issues, the government has established the Nigerian Gas Flare Commercialisation Programme, which has generated N346 billion in penalties over the past five years.
