The plummeting prices of crude oil have taken a toll on the price of Liquefied Natural Gas (LNG) in the international market as the latter also slumped by over 50 per cent due to the correlation between the prices of the two products, THISDAY has learnt.
THISDAY gathered that LNG buyers in Europe, who use to pay $9 per unit of LNG, now pay $5 or $6 per unit, after the price of crude dropped from $115 per barrel in June 2014 to less than $50 per barrel in May 2016.
It was also learnt that Asian LNG buyers that used to pay $15 per unit of LNG, now pay about $6 per unit because of the corresponding drop in the prices of crude oil.
The Managing Director and Chief Executive Officer of Nigeria LNG Limited, Mr. Babs Omotowa, who confirmed the drop in LNG price, told THISDAY in an exclusive interview that the gas prices were affected by the global slump in oil prices because gas prices were linked to oil price, as both were energy sources.
Omotowa revealed that there was a 70 per cent correlation in the price of oil and the price of gas.
“So, when you look at NLNG’s Facts and Figures publication, which we released a few weeks ago, even the revenue of 2015 was 40 per cent lower than 2014 and even this year, our revenue will even be lower than in 2015. So, the gas market has seen a big drop. This year, for example, in Asia where we use to get up to $15 per unit of gas, we get today about $5-$6. In Europe where we used to get $9 per unit, we get about $5 -$6. So, the price of gas has also come down; revenues have dropped,” he explained.
“But we are working very hard to make sure that we still remain profitable. We are working hard to make sure we find new opportunity areas; higher value markets and we are also making sure that we drive operational efficiencies and we are reducing our costs so that we can still be profitable and continue to return good revenues to the coffers of the government and our shareholders,” he added.
Omotowa added that based on the support of President Muhammadu Buhari and the Minister of State for Petroleum, Dr. Ibe Kachikwu, NLNG’s shareholders hope to take the Final Investment Decision (FID) for the Train 7 before the end of the tenure of this administration on May 29, 2019.
“In 2008, we were ready to take the Final Investment Decision (FID). But due to some discussions at that time around other priorities, especially from the federal government side, the FID could not be taken at that time. What that has meant is that overtime, the contracts that should have been put in place – the bids have all elapsed. So, we have to go back to the starting block,” he said.
He said the shareholders were currently on ‘the basis for design stage’ of the project, adding that the next stage would be the Front End Engineering Design (FEED) before the shareholders would move into tendering for the activities- engineering procurement and construction (EPC).
“That will enable us take the FID. We are working hard because we have so much support now from the government. Both the President and the Minister of State for Petroleum are very supportive and we want to take FID during this administration. Having said that, the current low price of oil, of course, makes it more challenging. So, we also have to work at reducing the cost of the project. We are very determined and we are making all the progress now to take this FID during this administration,” Omotowa explained.
He debunked insinuations that Nigeria does not have sufficient gas to meet the needs of LNG projects, saying that the country has much more than enough gas as one of the top 10 countries in the world with gas reserves.
According to him, Nigeria has over 180 trillion cubic feet of proven gas reserves, while only 30 trillion cubic feet would be required by NLNG for 25 years.
“It is known by analysis that Nigeria has about 600 trillion cubic feet of gas. Just to give you an idea; out of the 180 TCF of gas that we have, the whole requirement of NLNG for 25 years will be less than 30 TCF. So, it is small when you think of 30 out of 180 or 30 out of 600; it is not much. So, Nigeria has more than enough gas for export; for domestic power and for petrochemical,” he added.