UTM Offshore Ltd. has received official approval to proceed with Nigeria’s first floating liquefied natural gas (LNG) facility, marking a pivotal step in the country’s ambitions to boost its gas sector. The Nigerian Midstream and Downstream Petroleum Regulatory Authority has issued the license for the construction of the facility, which is set to have an annual production capacity of 2.8 million metric tons of LNG.
“This is a critical achievement that aligns with the government’s vision for expanding the gas sector,” remarked Farouk Ahmed, head of the regulatory agency, highlighting its importance in advancing Nigeria’s energy goals.
Nigeria, as Africa’s leading oil producer, is striving to diversify its economy by shifting its focus from crude oil to harnessing its vast and mostly untapped gas reserves, which amount to 200 trillion cubic feet. Currently, a large portion of the country’s gas production is either flared or reinjected into wells, which wastes valuable resources.
Upgraded Project Scope
UTM Offshore was originally granted a license in 2019 to develop a smaller-scale LNG plant with an annual production capacity of 1.2 million tons. However, due to a surge in global demand for LNG, the project was expanded to 2.8 million tons. This reflects Nigeria’s efforts to position itself as a significant player in the global LNG market, leveraging its vast natural gas reserves.
Commissioning by 2028
Located offshore in Akwa Ibom state within the Niger Delta, the facility is expected to be commissioned by 2028, with LNG production expected to begin by 2029. The plant will also produce petroleum gas and condensate, adding further value to Nigeria’s energy output.
UTM has secured financial backing to move the project forward, including a memorandum of understanding signed with the African Export-Import Bank in 2021 to raise up to $2 billion. The bank has already granted preliminary approval for a $350 million investment, with a final investment decision anticipated by the end of this year, according to UTM CEO Julius Rone.
The company has also engaged in partnerships with Japan’s JGC Corp. and U.S.-based KBR Inc. for the design of the facility, and signed an off-take agreement with Vitol Group, a major player in the LNG sector. Furthermore, in 2022, Nigerian National Petroleum Co. Ltd. (NNPC) acquired a 20% stake in the project, further solidifying local involvement.
Gas Supply and Strategic Partnerships
The gas for the floating LNG facility is expected to be sourced from an offshore oil field currently operated by Exxon Mobil Corp. This asset, however, is being sold to Seplat Energy, which has expressed ambitions to further develop its own gas reserves. Talks between UTM and Seplat are ongoing to discuss Seplat’s potential role in supplying gas for the midstream portion of the project.
“This is a stranded gas opportunity that can only be monetized through floating LNG technology,” Rone said, emphasizing that it would be mutually beneficial for Seplat, as it provides a ready buyer for their undeveloped gas reserves.
Seplat has yet to respond to the ongoing discussions, but industry experts suggest that this collaboration could significantly enhance Nigeria’s gas production capacity and further integrate the country into the global LNG market.