UTM Offshore license to build Nigeria’s first floating LNG a milestone: experts
Nigeria has licensed UTM Offshore to develop its first floating LNG facility, boosting production capacity to 2.8 million tonnes annually and tapping into flared gas.
The Nigerian government’s issuance of a license to local player UTM Offshore to develop the country’s first floating liquefied natural gas (LNG) facility, which will produce 2.8 million tonnes per annum, marks a milestone but brings environmental concerns, say experts.
ExxonMobil oil field flared gas will be tapped in the Niger Delta for this facility to function at full capacity.
Farouk Ahmed, the CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, said the plant’s capacity had been upgraded from 1.2 million tonnes per annum (MTPA) to 2.8 MTPA due to growing LNG demand.
“The NMDPRA issued a Licence to Construct (LTC) to UTM Offshore Ltd for the first floating liquefied natural gas (FLNG) in Nigeria. The project, which is located in Akwa Ibom State, is aimed at processing 324 MMSCF/D of natural gas and producing LPG, condensate, and 2.8 million tonnes of LNG per year,” said the official statement.
UTM Offshore CEO Julius Rone said the engineering work will be completed in 2028, and production will roll out in the first quarter of 2029. “This is just the engineering phase, and there are other variables. So it is not possible to give you the cost, but it is a multibillion dollar project.”
At the official event last month, the Minister of State for Petroleum Resources Ekperikpe Ekpo, described the milestone as a reflection of the federal government’s vision to transform the country’s gas industry. Ekpo reiterated the administration’s commitment to ensuring that gas becomes a key driver of Nigeria’s economy by 2030.
This project marks a significant step in Nigeria’s journey to becoming a global player in the gas industry. The UTM floating LNG facility is expected to enhance Nigeria’s capacity to export LNG, create jobs, and further solidify the country’s position as a key energy supplier.
Gas Outlook interviewed experts who noted that this project is a significant milestone and aligns with the government’s gas expansion ambitions. They said it would also affect Nigeria’s reliance on oil by promoting investment in its largely unexploited proven gas reserves and reducing either gas flaring or re-injection into wells.
Offshore reserves
Dr Ayodele Oni, a partner at Bloomfield Law Practice, noted that the offshore project plays a pivotal role in supporting Nigeria’s governmental objectives for gas expansion. He told Gas Outlook that by bolstering Nigeria’s LNG export capabilities, this facility will address the growing international demand for natural gas.
“Should operations be managed effectively, Nigeria stands poised to emerge as a key global natural gas player, fostering significant economic diversification.”
Oni said the facility capitalises on Nigeria’s extensive offshore gas reserves, aligning seamlessly with the government’s goals to curb gas flaring and elevate gas revenue streams.
“Utilising such reserves underscores a strategic use of the country’s natural resources, optimising benefits and sustainability. The establishment of the UTM Offshore FLNG facility marks a considerable achievement, demonstrating Nigeria’s proficiency in leveraging advanced infrastructure for gas-related endeavours.
“This development not only showcases the nation’s technical adeptness but also has the potential to attract further investment. Success here could unlock the door for subsequent projects, perpetuating a cycle of growth and innovation within the sector,” he added.
Reducing dependence on oil
Elizabeth Obode, Senior Strategy Consultant at Oliver Wyman for the Middle East and Africa, told Gas Outlook that Nigeria has robust gas development and utilisation programmes covering domestic and export markets. She said the Nigerian Gas Flare Commercialisation Programme (NGFCP) allows for the utilisation of flared gas using commercial technologies for both the import and export markets, of which LNG is mainly an export market product.
“The UTM FLNG plant aligns with both domestic and export market uses as it would provide LNG — 2.8 MTPA, if it functions at 100% capacity — and 500kT of LPG. For context, NLNG produces about 22 MTPA; the 2.8 MTPA facility is slightly above 10% of current production.
The plant is “fully aligned with Nigeria’s gas expansion and flare utilisation programmes, and it is a welcome development,” she said.
“The Yoho field is a mature asset whose development started in 2002 – so it won’t be the poster child for increasing development of unexploited proven reserves. However, it is a very significant project in that it shows the profitable economics of gas flare utilisation. If this type of project that utilises potential flared gas becomes more common, Nigeria could become a gas economy – gaining more revenues from gas than oil,” she added.
Oni also noted that the new facility will boost gas investment and cut infrastructure costs.
It will “help uncover more reserves, drawing significant investment into Nigeria’s gas sector. Thanks to the FLNG’s setup, which skips the complex and costly infrastructure usually needed, building, operating, and maintaining the facility becomes far cheaper and quicker. This affordability is appealing to both local and international investors, lowering the initial capital requirements.
“Large volumes of gas in Nigeria are traditionally re-injected into oil wells to boost oil production and maintain well pressure. Redirecting this gas to the FLNG facility ensures it is used productively, generating financial returns rather than being re-injected.”
Environmental concern
However, Katong Alex, an energy analyst at the African Energy Council, told Gas Outlook that while the project promises environmental benefits, concerns regarding its impact on local ecosystems exist. He said the construction and operation of the floating facility may affect marine life and habitats in the surrounding waters, necessitating thorough environmental assessments and mitigation strategies.
“Effective communication with local communities is essential to address any concerns about environmental impacts and ensure they benefit from the project. Engaging stakeholders early in the process can foster trust and collaboration between the facility operators and local residents.”
“The floating LNG facility represents a significant step forward for Nigeria’s energy sector, aligning with government initiatives to reduce flaring and promote sustainable practices. While it offers numerous environmental benefits and economic opportunities for local communities, careful consideration must be given to potential ecological impacts and community engagement strategies to ensure that the project contributes positively to both the environment and local livelihoods,” he concluded.
Decade of gas initiative
Obode noted that the UTM FLNG is much aligned with the decade-long gas initiative, which has the key pillars of increasing domestic gas utilisation, expanding gas infrastructure, growing gas exports, and attracting foreign direct investment into the gas sector. She said this project supports at least two pillars — growing gas exports and attracting foreign direct investment into the sector.
Oni also added that the facility is a key player in enhancing Nigeria’s decade of gas initiative. He noted that the FLNG facility aligns perfectly with this goal by tapping into offshore gas reserves and developing previously untapped gas fields.
“Its function in extracting and converting natural gas offshore directly contributes to increased gas production, which, in turn, addresses power and industrial energy requirements. This alignment also supports the Nigerian Gas Expansion Program.”
He further said the project will enable efficient gas distribution that will significantly improve gas distribution by expanding Nigeria’s LNG export capabilities.
“It eliminates the necessity for extensive onshore infrastructure such as pipelines and processing plants, which are typically essential for gas transportation. Essentially, the FLNG facility streamlines the gas value chain, encompassing only production and export,” he added.