LNG traders hit with huge losses due to LNG plants disruptions in Nigeria, US and Australia
Nigeria’s liquified natural gas (LNG) facility at Bonny Island has seen production decline in recent months as a result of a shortage of natural gas supply due to rampant theft and sabotage of oil and gas pipelines. Also unplanned disruptions at LNG plants in the United States and Australia have wrong-footed traders, including BP and Shell, forcing them to pay inflated costs for alternative supplies.
As a consequence of several outages that hampered efforts to fill European storage ahead of the winter heating season, major energy traders are taking hundreds of millions of dollars in losses as they scramble to plug the ensuing LNG supply gap. In a market already struggling to meet global demand for natural gas after Russia sharply reduced pipeline supplies into Europe, the lost LNG cargoes which can be transported by ship, have pushed global prices sharply higher in recent months.
In June, a sudden shutdown of Freeport, the second-biggest U.S. LNG export plant and a major supplier of BP, meant that the latter took a more than $500 million hit to replace the lost LNG cargoes. France’s TotalEnergies said it would replace eight cargoes of LNG it was scheduled to receive from Freeport by buying in the spot market in the third quarter of the year. Shell, the world’s largest LNG trader with a 20% market share, cut its LNG production volumes in the second quarter by 4%, mainly due to supply losses from the Sakhalin-2 plant in Russia, where it exited operations after the Russia-Ukraine war flared up.
Meanwhile, Philip Mshelbila, managing director and CEO of Nigeria LNG Limited, has recently cautioned against pipeline vandalism, oil theft, illegal refining and illegal bunkering as the global energy crisis worsens: “We have people who are participating in this activity, masquerading as though this is a community problem, and pretending to be immature modular refineries. That is not the case, this is criminality, outright criminality, and it needs to be dealt with as such.”