How Nigeria’s First FLNG Project Can Add Value to the Nigerian Economy

In a bid to transform Nigeria’s economy and energy sector, UTM FLNG Limited, the developer of Nigeria’s first floating liquefied natural gas facility, has set a target of final investment decision (FID) on its floating liquefied natural gas project in the fourth quarter of 2024.

This strategic investment promises to improve energy security by lowering gas prices, increasing foreign exchange earnings, creating jobs and boosting GDP growth in Africa’s fourth-largest economy.

“This development pushes us further towards achieving our potential in the Decade of Gas. The facility will increase forex inflows into the country, boost supply and strengthen the naira. The liquefied petroleum gas (LPG) produced will boost the adoption of clean cooking and reduce our need for forex for LPG imports,” said Oreoluwa Owolabi, Partner at Mach Advisory.

“I foresee that its success will influence further investments in the use of gas, which is essential to ensure the success of the Presidential CNG initiative and to reduce Nigeria’s carbon footprint from transportation.”

Julius Rone, Managing Director and CEO of UTM FLNG, has assured that the company has put all processes in place to ensure a smooth start-up and achieve a targeted production capacity of 2.8 million metric tons per year by the fourth quarter of 2028.

“Our company is ready for FID before the end of this year and upon completion, in the fourth quarter of 2028, it will have a production capacity of 2.8 million tons of natural gas, 450 tons of LPG and other liquids per year for export and domestic consumption.”

Rone said this development is a huge step that will leapfrog the economy by ensuring availability of gas at a lower cost for domestic, automotive and industrial use. “It will also generate huge employment and millions of Naira business opportunities for Nigerians.”

Energy security will benefit significantly from this project. By diversifying Nigeria’s energy mix and increasing the availability of natural gas, the country can reduce its dependence on oil, reduce supply disruptions and improve energy stability.

This development would in turn provide a hedge against volatile crude oil prices, which is especially crucial as global energy markets become increasingly volatile and the need for sustainable energy sources grows.

Gas resources are a critical driver of economic growth and development for Nigeria, with nearly 209 trillion cubic feet (TCF) of natural gas reserves, the ninth highest in the world. The FLNG project, if executed correctly, will generate significant export revenues from Nigeria’s abundant natural gas reserves.

Globally, LNG is in high demand and Nigeria’s entry into this market opens up new revenue streams. According to Shell LNG Outlook 2024, “Global demand for liquefied natural gas (LNG) is expected to increase by more than 50 percent by 2040 as industrial conversion from coal to gas in China and South Asian and Southeast Asian countries use more LNG to support their economic growth.”

The oil giant added that global LNG trade reached 404 million tonnes in 2023, up from 397 million tonnes in 2022, with tight LNG supplies limiting growth. This is an opportunity that Africa’s fourth-largest economy cannot afford to ignore, as higher export revenues will contribute to a more robust trade balance and strengthen the country’s financial position on the global stage.

The economic impact extends to GDP growth. The FLNG project is expected to create numerous jobs in various sectors, from construction and engineering to operations and logistics. Furthermore, the influx of investment and improved energy infrastructure will stimulate economic activities and promote industrial development.

Ayodele Oni, Energy Partner at Bloomfield Law Practice, said the development of the UTM FLNG facility holds promise for Nigeria and its citizens as it would boost Nigeria’s economic growth.

“A FLNG facility would inherently facilitate Nigeria’s ability to export liquefied natural gas without the need for extensive onshore infrastructure. The convenience created by such exports would be reflected in Nigeria’s foreign earnings, thereby boosting our economy, trade and balance of payments,” the energy expert said.

Ayodele Oni added that it is critical to have comprehensive environmental and safety measures and policies in place to prevent possible oil spills or leaks and, if they do occur, to have effective clean-up plans for the affected areas.

“It is also critical to ensure that the logistics of the required transport networks and ports are adequately considered as this is important to the overall success of the UTM FLNG facility project,” Oni said.

For Joshua Olorunmaiye, Legal Adviser on Energy and Natural Resources, Projects and Infrastructure at Banwo & Ighodalo, the UTM FLNG is certainly a big deal for the sector as we are in dire need of intensive infrastructure development, especially with regard to gas extraction.

“We already know that Nigeria has enough natural gas reserves. However, the challenge remains how to develop and utilize this vast resource for the greater good of our country. I see it as a great opportunity that will cut across various spheres such as domestic gas availability, technology transfer, local content and capacity development, and even Nigeria’s clean energy commitments,” Olorunmaiye said.

“This is because FLNGs offer rapid, commercially attractive and environmentally sustainable solutions for monetizing stranded offshore gas fields and associated gas.”

In terms of challenges, Olorunmaiye said it was expected that the usual technical concerns would arise, such as offloading, the technical ability to modularize, operability and safety. “All these can certainly be addressed by ensuring that the best technology and equipment are deployed and that personnel pay careful attention to the various dynamic situations that arise at a time,” the energy advocate said.