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Nigerian firm says it cannot ship natural gas after floods

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ABUJA, Nigeria — A major Nigerian energy company says it cannot deliver natural gas as promised in its contracts after deadly floods hampered its operations, raising concerns about the ability of Africa’s biggest economy to respond to increased local and international demand during an energy crisis caused by Russia’s war in Ukraine.

Nigeria LNG Limited, or NLNG, declared “force majeure” this week, meaning it is unable to meet its contractual obligations to supply the fuel used around the world to generate electricity, heat homes and operate factories after flooding caused “significant disruption”. gas supply. About 3.8% of global monthly supply could be affected, risking higher prices, Rystad Energy said.

The NLNG is a joint venture between the Nigerian government, which is the majority shareholder, and energy giants including Shell in London and Eni in Italy. With a production capacity of over 20 million tonnes of liquefied natural gas, or LNG, per year, it is the largest gas company in Nigeria, but its production capacity was only 68% due to oil theft and pipeline vandalism that is rampant in the country.

As Europe faces an energy crisis after Russia sharply cut natural gas flows during the war in Ukraine, Nigeria and other African nations have agreed to work to help meet the country’s increased needs. European Union on gas supply. Nigeria has the largest natural gas reserves in Africa, but its ability to meet these demands is in question, even as European storage levels have managed to reach 92% before the winter heating season and the gas prices have recently fallen.

This year’s floods – the worst in a decade – killed more than 600 people, displaced 1.3 million people and “worsened what was already a bad situation” for the national gas company, said Toyin Akinosho, a Nigerian energy consultant.

Floodwaters have also submerged many riverine communities in the oil-rich Niger Delta region, where Nigeria’s crude oil facilities are located, threatening the operation of local and international oil companies. Nigeria is a member of the OPEC oil cartel which produces crude for world markets.

Akinosho expressed doubts about how quickly the disruption could be resolved to allow Nigeria to resume gas shipments to the EU, which gets 14% of its LNG imports from the African nation, as well as other buyers in North America, the Middle East and Asia.

Analysts fear that if the gas supply disruption persists, it could lead to a further drop in government revenue at a time when Nigeria is facing a cash crunch caused by falling crude production over the years. .

Force majeure could “cause NLNG markets to tighten further” ahead of winter as it faces higher gas demand, said Olufola Wusu, an oil and gas expert who was part of a team that helped review Nigeria’s national gas policy.

“Chances are that if we are unable to meet local demand, it is highly unlikely that we will have enough gas to export. And that means some of our customers might have to source LNG from other suppliers,” Wusu said.

A spokesman for Timipre Sylva, Nigeria’s oil minister, declined to comment on the issue, and the gas company did not immediately respond to questions about its options for dealing with the floods.