Nigerian LNG Achieves Highest Dividend in 8 Years as Output Rises; Faces Challenges in Production
Nigerian LNG Limited (NLNG), the largest gas exporter in Nigeria, has reported its highest dividend payout to the Nigerian National Petroleum Company Limited (NNPC) in eight years. Despite facing challenges in production due to gas supply constraints and force majeure, NLNG’s revenue surged, reaching $7.59 billion in 2022.
Key Points:
- Dividend Growth: NLNG’s dividend to NNPC rose by 52 percent to $1.10 billion in 2022, the highest since 2014. The company’s revenue experienced a notable increase of over a third, reaching $7.59 billion.
- Output Challenges: NLNG’s production output faced a decline due to gas supply constraints, leading to a force majeure that has persisted for over a year. The force majeure event, declared on October 17, 2022, resulted from high flood water levels disrupting gas production.
- Revenue Impact: The force majeure declaration has raised concerns about a potential decline in NLNG’s revenue for the current year. The event has suspended the company’s performance obligations and financial benefits, impacting its financial projections.
- Commodity Trader Response: Following the temporary easing of sanctions by the U.S. on October 18, 2022, oil traders rushed to buy Venezuelan crude, positively impacting NLNG’s outlook. Major commodity trading companies quickly re-entered the Venezuelan oil market, contributing to increased demand for crude.
- Capacity and Future Plans: NLNG, with six operational trains, has a capacity to produce 22 million tonnes per annum (mtpa) of LNG. The company is progressing with the construction of Train 7, aiming to increase total production capacity to 30 mtpa. The ongoing Train 7 project reached 52 percent completion.
- Production Challenges: NLNG’s output from the six-train plant fell below 50 percent of its nameplate capacity due to gas supply shortages. Challenges include recurrent vandalism of supply pipelines, facility failures, and low production from aging wells.
- Mitigation Efforts: NLNG is exploring various options to address production challenges, including partnering with security agencies to curb pipeline vandalism and collaborating with joint venture partners to enhance gas production. The company is also considering procurement of gas from international and indigenous producers.
Summary: NLNG’s achievement of its highest dividend payout in eight years reflects its resilience despite production challenges. The force majeure event and gas supply constraints have raised concerns about revenue impacts, but NLNG remains committed to mitigating challenges through strategic partnerships and exploration of alternative gas sources. The ongoing construction of Train 7 and the company’s focus on increasing production capacity underscore its commitment to long-term growth and stability.
