Stakeholders seek innovation as volatility dims prospects for LNG business

Operators and stakeholders have promoted the need to investigate novel solutions as the demand for liquefied natural gas (LNG) increases globally, particularly as producers face new long-term contracts.

Many of the operators claim that despite volatility posing a short-term danger to the LNG industry, overall investment has increased.

Nigeria’s situation is mixed, as it can command a premium price for its goods but is unable to take use of the chances presented by the current global economic crisis to increase output and expand its market reach.

Even while Wood Mackenzie predicts a decline in demand, it noted that there is still some uncertainty because severely cold weather this winter or reduced Russian flows could change Europe’s course.

Massimo Di Odoardo, Vice President of Gas and LNG Research at Wood Mackenzie, said: “Should Nord Stream flows not resume following September maintenance, European inventories might still end up at 26 per cent by the end of this winter, although they might only be able to get to 81 per cent ahead of next winter.”

But, according to Wood Mackenzie, the weather will be the largest concern. If the northern hemisphere experiences an exceptionally cold winter, the increased demand for heating in Europe and Asia could increase winter demand by up to 30 billion m3 and increase the risk of European storage inventories falling to 4% by March and up to only 63% ahead of the start of the following winter, which would inevitably lead to demand reductions.

According to Eni’s deputy chief operating officer for natural resources, the Italian energy company has already announced intentions to invest about 4.5 billion euros ($4.47 billion) in upstream activities annually from now through 2025, with a concentration on various nations.

“We are fully committed to invest 4.5 billion yearly in the upstream to bring on line new gas supplies,” Cristian Signoretto said at the Gastech conference in Milan.

Speaking during a panel session on ‘Bridging the project funding gap in a time of geopolitical uncertainty, Group Executive Director, Gas and Power,’ Mohammed Ahmed, confirmed that investment has been consistent in Nigeria, adding that financing upstream investment is key.

“Someone has to do it. Several efforts have been put in place to enhance investment. The transitioning of the NNPC is expected to aid investment”, he said.

He did, however, point out that the country’s infrastructure continues to pose a barrier to expanding gas utilisation.

“Feed gas into many gas plants being built cannot happen without the upstream segment. We need to depart from main export to domestic consumption. Also, gas-based industries need to mature to aid offtake. There is a large potential in domestic market consumption but needs investment. Identified projects need funding. We seek investment in the sector. There’s a level playing ground with the liberalisation in the upstream through the PIA for investors,” he added.

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