NLNG flags supply bottlenecks, seeks $60b investment to unlock sector

The Managing Director and Chief Executive Officer of NLNG, Leye Falade, has warned that the country’s ambition to turn its vast natural gas reserves into reliable electricity and industrial growth remains threatened by mounting debts in the power sector, inadequate domestic supply and regulatory bottlenecks, 
 
Falade, who disclosed that gas suppliers to power plants were owed about N3.3 trillion, warned that unpaid invoices were undermining gas supply to electricity generators despite the country’s estimated 215 trillion cubic feet of proven gas reserves.
 
Speaking at the Harvard Business School Association of Nigeria (HBSAN) Energy Conference in Lagos, he argued that Nigeria’s energy crisis was no longer simply a question of resource availability, but of failures in the commercial and institutional arrangements required to deliver energy to homes and businesses.
  
“The Nigerian gas paradox fits in one sentence. We are rich in gas, but we are short in energy,” he said.
 
The disclosure comes as Nigeria seeks to increase gas production to 12 billion cubic feet per day and attract $60 billion in new investment by 2030.
    
Falade said the target would remain difficult to achieve without reliable supply arrangements, payment guarantees and predictable regulation.
   
He explained that the failure to pay gas suppliers had consequences across the entire electricity value chain, as suppliers could reduce deliveries, power stations would struggle to operate and businesses would incur additional costs running diesel generators.
   
“When the invoice goes unpaid, the supplier simply closes the valve. Production slows down, power stations stay idle, homes and factories go down,” he said.
   
According to him, the government’s intervention to address outstanding obligations in the electricity market must be followed by a sustainable payment system that ensures suppliers receive payment for gas delivered to power plants.
    
“What we need next is payment built into the design of the system so that gas delivered is paid for,” he said.
 
Falade said approximately 70 per cent of Nigeria’s grid electricity came from gas, yet gas-fired power stations received less than half of their required gas in February.
   
The shortfall, he argued, illustrates the cost of failing to coordinate gas production, transportation, power generation and payment arrangements.
   
He said manufacturers and other businesses ultimately bear the consequences through higher production costs, which are passed on to consumers.

Beyond the power sector, Falade highlighted the disparity between gas resources and domestic cooking fuel supply, noting that NLNG supplied a record 500,000 metric tonnes of cooking gas to Nigerian homes last year, but that represented only about a third of national requirements.
 
He said the company had supplied cooking gas to terminal operators at between N800 and N900 per kilogramme, while prices in the market rose as high as N2,400 per kilogramme.
   
Falade added that cooking gas prices have since fallen by about 39 per cent from their peak in June but warned that storage, transportation, distribution and other charges continued to affect the price paid by households.
  
He also said NLNG had increased its year-to-date plant utilisation to about 81 per cent, from approximately 60 per cent over the previous two years, following improved gas supply supported by the government, security agencies and upstream producers.
  
However, he said a production gap remained, stressing that the country’s gas resources would not deliver their full economic value unless producers could secure reliable supplies, infrastructure operators could move gas efficiently and customers could pay for deliveries.