One of Europe’s key liquefied natural gas (LNG) suppliers, Nigeria, has seen demand for its cargoes in Europe crash in the coronavirus pandemic as buyers consistently defer deliveries.Now, Nigeria’s LNG is idling on tankers that serve as floating storage, analysts tell Bloomberg.
Over the past two months, Nigeria continued to send LNG cargoes to one of its main markets, Europe, but with many major European economies in lockdown, demand has plunged, and customers with options to defer have been postponing the offloading of the cargoes.
This has created a fleet of tankers carrying LNG that are now just floating storage, according to commodity tracking firm Kpler, cited by Bloomberg.LNG prices at their lowest in years have forced traders to keep LNG on the tankers, waiting for demand to improve.
But prices are not set to improve in the summer, according to Manas Satapathy, managing director for energy at Accenture. “The worst is yet to come, we will likely see super low prices in late June, July, August,” Satapathy told Bloomberg.
The crash in LNG demand in Europe during the pandemic and the high storage levels will likely mean that the continent will struggle to act as a sponge to absorb excess LNG supply this year as it did in 2019, Rystad Energy said in an analysis last week.
Last year, Europe became the “de facto global LNG sink,” when milder winter in Northeast Asia slowed down LNG demand growth there, the energy research firm said. In 2019, Europe’s total LNG imports surged by 80 percent compared to 2018, while in January and February 2020 – before the European lockdowns and when the coronavirus hit Asia – Europe’s LNG imports jumped 35 percent, thanks to the UK, Spain, and Belgium.
“We still don’t have an end date for when Europe will completely re-emerge from lockdown, and the impact will probably be deeper coming into the summer months. With gas storage tanks already almost filled to the brim, Europe’s capacity to import and actually use the same amount of LNG as in 2019 seems like a tall order, especially if we see another mild winter,” Rystad Energy said.
Recall also that The New Diplomat had recently projected that with escalating glut in oil supplies and stretched storage capabilities, exacerbated by tension among some key oil-producing countries even in the face of dwindling global demand, global energy experts had come up with grim outlook that the world may be heading towards Oil price crash as low as ever per barrel in the coming weeks if urgent talks were not held.
For Nigeria, Africa’s most populous nation, whose externally generated revenue is about 97% dependent on external earnings from crude oil, the grim outlook was further compounded by the recent downgrading of the country’s credit rating from stable to negative by Standard & Poor (S&P).
It would also be recalled that Nigeria’s Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed had disclosed that Nigeria may slide into recession if the Covid-19 crisis continues unabated for the next six months.
Last month, president Muhammadu Buhari had to approve a withdrawal of $150m from Nigeria’s Sovereign Wealth Fund to augment FAAC disbursements to the FG, States and Local government councils. The FAAC receipt, according to Finance Minister had depleted drastically because of COVID-19 coupled with severe crash in oil prices.
Experts say the problem confronting the country has its roots in Nigeria’s inability to save her petroleum revenues especially at a time when global price of oil per barrel surged to all time high during the administration of former president Goodluck Jonathan.
But some political analysts however countered that it was the Nigerian Governors Forum (NGF) that objected to saving oil revenue, and even threatened legal action against the federal government at the time.
