Flood: Gas Scarcity Looms as NLNG Shuts Operations

A spokesman for Nigeria Liquefied and Natural Gas said the company has declared force majeure due to widespread flooding that has disrupted supply.

Force majeure is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or sudden legal changes prevents one or both parties from fulfilling their obligations under the contract.

According to Reuters repot, the declaration could worsen Nigeria’s cash crunch and would curtail global gas supply as Europe and others struggle to replace Russian exports due to the invasion of Ukraine in February.

Also Read: Inflation Rises Again for the 8th Time in 2022

NLNG said all of its upstream gas suppliers had declared force majeure, forcing it to make the declaration as well.

“The notice by the gas suppliers was a result of high floodwater levels in their operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG,” spokesperson Andy Odeh said.

Odeh said NLNG was determining the extent of the disruption and would try to mitigate the impact of the force majeure.

Flooding in Nigeria has killed more than 600 people, displaced 1.4 million and destroyed roads and farmland.

Officials have warned that the flooding, caused by unusually heavy rains and the release of water from a dam in Cameroon, could continue into November.

Also, Refinitiv data had revealed that NLNG’s supply had already been limited due to prolific oil theft that has slashed output from what is typically Africa’s largest exporter. NLNG had exported roughly 18 cargoes in September.

Nigeria relies on fossil fuel exports for 90 per cent of its foreign exchange and roughly half its budget. Crude oil exports fell below one million barrels per day on average in August, the lowest level since the 1980s, due to theft that has exceeded 80 per cent on certain pipelines.