Force majeure on NLNG sends global LNG prices crashing

Shell’s declaration of force majeure on gas supply to Nigerian Liquefied Natural Gas Limited, NLNG, has sent global prices of liquefied natural gas tumbling.
Last week, Shell said the reason behind the force majeure, was because of “a leak”, causing a decline in exports.
“The pipeline has been shut down for a joint investigation visit into the cause of the leak and repairs,” Natasha Obank, a Shell spokeswoman.
Report said the leak occurred on the Eastern Gas Gathering System, or EGGS-1, pipeline which supplies the bulk of Shell’s gas to the Nigeria LNG plant on Bonny Island.
According to report, Asian spot liquefied natural gas (LNG) prices fell for a second week as Pacific producers added supply and curbs on Nigerian output were to be lifted by the end of the month, amid thin demand. Prices for September delivery fell to around $5.60 per million British thermal units (mmBtu), 20 cents below last week’s levels, with October trading five to 10 cents below September.
In Nigeria specifically, Shell declared force majeure on gas supplies to the Nigeria LNG export plant last week, raising the possibility of shipment delays or even cancellations owing to inadequate feedstock.
A source said that up to seven cargoes could be delayed as a result of the force majeure, with some long-term buyers potentially already notified of postponements.
“The plan is to lift the force majeure by the end of the month,” the source said.
Elaborating on how Nigeria LNG may apportion cargo postponements, he said: “I think different (offtake) contracts will be treated differently. NLNG will take a view on which cargoes it cancels depending on the underlying prices in each contract.”
Another source also told Reuters that Indian Oil Corp. is seeking two cargoes for October delivery in a tender valid until Aug. 23, while peer Petronet closed a tender to buy a September cargo on Thursday.

Experts say any reduction in LNG exports would be a blow to Nigeria as it is already suffering the economic effects of low oil prices and militant attacks.
The NLNG project has a capacity to process 22 million metric tons a year of the liquefied fuel- about 7 percent of world supply- and 5 million tons of natural gas liquids, according to Shell’s website. The Nigerian National Petroleum Corporation, NNPC, holds 49 percent share and Shell has 25.6 percent.
This report comes on the heels of NNPC’s newest release that Nigeria’s gas supply to power plants between the period of July 2015 and June 2016 averaged 650.39 mmscfd, or 65.58 percent.
According to the report, for the period July 2015 and June 2016, an average of 991.72 mmscf/d of gas was supplied to the domestic market, was an average of 650.39 mmscf/d, or 65.58 percent as gas supply to the power plants and 341.32 mmscfd, or 34.42 per cent as gas supply to industries.
A total of 363.19 billion cubic feet (BCF) of gas was supplied for domestic use during the period, while 1,219.49 BCF was exported.
Out of the 212.58 BCF of gas produced in June 2016, a total of 115.88 BCF was commercialized, comprising of 16.50 BCF and 99.38 BCF for the domestic and export market respectively.
This means an average daily supply of 550.10 mmscf/d of gas to the domestic market and 3,312.40 mmscfd of gas supplied to the export market, with about 54.51 per cent of the total gas produced commercialized and the balance of 45.49 per cent either re-injected, was used as upstream fuel gas or flared.