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NIGERIA - Nigeria To Supply More Than 40M Tons/Year Of LNG Before 2010.

Four different joint ventures in Nigeria would raise LNG exports to more than 40 million tons/year before 2010. Shell, the world leader in LNG business, would raise the capacity of Nigeria Liquefied Natural Gas Ltd (NLNG) to more than 21m t/y if world demand remains strong.

These, along with many other LNG export projects across the globe, come against an easing of take-or-pay (ToP) and other rigid supply rules around the world. The European Union is moving against the ToP and destination clauses in gas supply contracts affecting the EU market. With the US and other gas markets deregulated and the assets of integrated supply majors unbundled, shorter term than 20/25-year contracts now are acceptable to LNG exporting ventures.

On Dec. 12, 2002 The European Commission said it had reached agreement with NLNG on ending restrictive clauses in contracts on the resale of gas. The Commission, the executive arm of the EU, has been trying to end such restrictions with various suppliers including Nigeria, Algeria and Russia. It statement said: "The Commission has reached a landmark agreement with NLNG Ltd, which agreed to delete a clause preventing one of its European customers to resell the gas outside its national borders".

Nigeria's reserves of natural gas, mostly associated with oil discoveries made so far, exceed 160 TCF. Nigeria has not been explored for gas as yet. If properly explored, its reserves could make Nigeria one of the world's richest gas countries.

NLNG, Nigeria's first LNG venture, began exporting liquefied gas on a large scale in October 1999. The first train went on stream in June 1999, four months ahead of schedule. The second train was ready in October 1999. The third train started up in December 2002, three months ahead of schedule, when the first cargo was loaded for the Gas Natural's receiving terminal at Huelva in south-western Spain. The fourth train will begin production in 2004 and the fifth train should be ready by mid-2005.

The first NLNG unit, Train A, began an initial delivery in June 1999. Train B brought the plant's combined capacity to 7.15 BCM/year. Train C is bigger with a capacity of 3.7 BCM/year. Trains D and E will have a unique state of the art design and the capacity of each will be over 5.55 BCM/y, the biggest of their kind in the world. NLNG's capacity by mid-2005 will be over 17m t/y of LNG, 2.3m t/y of LPG and 1m t/y of condensate.

NLNG said in March 2003 it will spend $1.25 bn on a sixth unit, Train F, which will be on stream by 2007. NLNG Managing Director Andrew Jamieson said shareholders in the company will provide 50% of the amount. The other half will come from third-party sources. He said the planned investment would raise the total amount invested in the LNG plant to $10 bn.

The NLNG complex at Finima, on Bonny Island, uses associated and free gas from the east Niger Delta. Later associated gas should account for a major part of the feed. This will cut gas flaring in Nigeria considerably.

Firm clients for the capacity of the first five trains have been lined up by Shell, the technical and business manager of NLNG. With clients for Train F being lined up, Shell believes all the six trains will have firm markets across the Atlantic and in the Mediterranean. The six trains will be able to produce about 20% over their design capacity, with the surplus to be sold on spot basis to various markets. This means NLNG is to become a key player in LNG trade on both sides of the Atlantic and in the Mediterranean. Some of the surplus will be sold to east of Suez markets, with Shell being the leader in the brand LNG business. One key to Shell's brand LNG business is the rapidly expanding US market.

Under a deal with El Paso Corp. signed in early 2002, Shell has acquired the 2.5m t/y additional capacity offered by Southern LNG in its expanding Elba Island LNG terminal near Savannah, Georgia. This will enable Shell to access premium gas markets in Georgia, Florida and South Carolina.

Shell says Atlantic and Mediterranean demand for LNG will grow from about 8 BCM/y in 2000 to 15 BCM/y in 2005, on a low demand outlook, and possibly to 25 BCM/y on a high demand scenario. As soon as the high demand scenario gets close to reality, before end-2005, construction of Train F will begin and Shell will make sure its output will be sold. Long-term buyers from Trains D&E will include Gaz de France (GdF), Botas of Turkey, Gas Natural (GN) of Spain, Transgas of Portugal and ENI and Enel of Italy.

On June 3, 2003 NLNG signed a memorandum of understanding (MoU) for the supply of 2.5m t/y to British Gas (BG) via the Lake Charles import terminal in Louisiana from Trains D&E. The deal is for 20 years beginning in 2005/06. In addition, the MOU allows for BG to take surplus LNG from Trains A-C from end-2003. BG has 80% capacity rights at Lake Charles until September 2005 and 100% thereafter. NLNG will use its own and chartered LNG tankers for the supplies to BG.

The TSKJ consortium - Technip-Coflexip of France, Snamprogetti of Italy's ENI group, Kellogg Brown & Root (KBR) of the US, and JGC Corp. of Japan - which built the first three trains - is the EPC contractor for Trains D&E. On behalf of NLNG, TSKJ in early 2003 selected the consortium of Chicago Bridge & Iron (CB&I) of the US and Bilfinger Berger of Germany for a $100-plus million sub-contract to provide civil and mechanical erection services for the two trains.

In March 2003 NLNG raised a $460m loan for its shipping unit Bonny Gas Transport (BGT) to expand its fleet. NLNG needs eight additional vessels to meet the shipping requirements for Trains D&E. BGT will have 18 owned and chartered LNG tankers for NLNG's business (see Vol. 57, No. 7).

In December 2002 NLNG signed loan agreements for $1.06 bn with four export credit agencies and a consortium of international and local banks for the financing of the two trains, known as NLNG-Plus.
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Publication:APS Review Gas Market Trends
Date:Aug 18, 2003
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