The Global Perspective & Effect On Abuja.

There is a mounting glut of LNG on both sides of Suez, not only due to a global recession which has hit the world hard since mid-2008 but also because of supplies from so many new liquefaction plants out-stripping demand which has shrunk. The LNG glut is expected to be worse in 2010, even if a US economic recovery allows the American market to absorb a major part of the surplus.

The global LNG volume will increase by 8,100 MCF/day in 2009-10. Besides Qatar, Russia and Yemen are two countries where new LNG production capacity is coming up this year. A fall in world demand will force LNG producers to lower their price further. LNG markets will become over-supplied in 2009-10 as an additional 100m t/y of production capacity comes on stream from several countries including Australia.

The LNG market is relatively young. Its business began in 1964 with a first shipment from Algeria to the UK. By the summer of 2008, with paper WTI hitting a peak of $147.27/b on July 11, LNG had accounted for less than 15% of world gas supply. Yet as world demand for energy has kept falling since then, IOCs are struggling to sell surplus LNG at discounted spot prices. But the LNG glut is not affecting paper oil prices, with futures trading almost totally disconnected from that of refrigerated methane (see omt7NigrExpGlobalPerspvAug17-09).

With LNG prices falling, in October 2008 Abuja imposed an embargo on the supply of gas to NLNG's Train 6. An un-named Energy Ministry official then said: "Even though Train 6has started production since January, there has not been approval from the President for export of LNG output from the train The government wants to send the message that the multinational oil companies must show commitment and seriousness in making gas available to the domestic market, to generate power". Train 6, with a capacity of 4m t/y, has required an additional 670 MCF/day of gas as feedstock, bringing the total gas needs of the 22m t/y complex to 3,500 MCF/d.

State Minister for Natural Gas Emmanuel Odusina had warned in September that Abuja may consider suspending the new LNG projects unless the IOCs involved submitted a detailed plan to supply gas for domestic power generation. He said: "The federal government's policy and regulations on gas supply to the domestic market are not up for discussions or negotiations any more".

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