Nigeria’s LNG Crossroads: Navigating Challenges and Charting a Sustainable Future

Nigeria, Africa’s largest oil producer and a key exporter of liquefied natural gas (LNG), finds itself at a pivotal moment. Once heralded as a rising star in the global LNG arena, the country now grapples with a complex mix of aging infrastructure, fluctuating production levels, chronic underinvestment, and intensifying competition from emerging LNG producers worldwide. The stakes could not be higher: LNG remains a cornerstone of Nigeria’s energy strategy and a critical source of foreign exchange revenue vital to its economy.

As global demand for natural gas continues to climb—driven especially by growing consumption in Asia and Europe—Nigeria faces a fundamental choice. Will it reinvest and reform its LNG sector to reclaim its position, or will it fall further behind in an increasingly competitive and dynamic energy market?

The Role of LNG in Nigeria’s Energy Economy

Nigeria's LNG sector, largely operated by Nigeria LNG Limited (NLNG), contributes roughly 10% of global LNG supply. NLNG is a joint venture involving the Nigerian National Petroleum Corporation (NNPC), Shell, TotalEnergies, and Eni. Its flagship Bonny Island plant, located in Rivers State, boasts a production capacity of approximately 22 million metric tons per annum (mtpa).

Beyond export revenues that generate billions annually, LNG supports Nigeria’s domestic gas utilization efforts and plays a critical role in reducing harmful gas flaring by monetizing associated gas that would otherwise be wasted. Moreover, LNG is widely viewed as a transitional fuel that can facilitate a cleaner energy mix, helping Nigeria align with global climate goals while meeting growing energy demand.

Current Struggles: Infrastructure, Funding, and Production

Despite an early lead in Africa’s LNG landscape, Nigeria faces significant challenges undermining its growth trajectory:

1. Aging Infrastructure

The Bonny Island LNG plant, commissioned in the 1990s, is showing signs of age. Maintenance difficulties, equipment downtime, and operational inefficiencies have led to output declines. Limited modernization efforts and the slow pace of capacity expansion put Nigeria at a disadvantage compared to newer, more efficient facilities in the U.S., Qatar, and Australia.

2. Delayed Expansion: Train 7

The highly anticipated Train 7 expansion, which aims to add 8 mtpa to capacity, is years behind schedule. Construction started in 2021 but has been delayed due to logistical hurdles, inflationary pressures, security challenges in the Niger Delta, and contractor disputes. Initially slated for completion in 2024, the project now faces probable delays extending to 2026 or beyond.

3. Gas Feedstock Shortages

A critical bottleneck remains the inconsistent supply of feed gas to LNG facilities. Many upstream gas projects have stalled or regressed due to pipeline vandalism, oil theft, insufficient investment, and regulatory uncertainty. Alarmingly, Nigeria still flares roughly 300 million cubic feet of gas daily—quantities that could otherwise bolster LNG production.

4. Security Risks and Sabotage

Persistent insecurity in the Niger Delta—marked by pipeline sabotage, oil theft, and militant activity—disrupts gas supply chains and undermines investor confidence. These risks increase operational costs and complicate long-term project planning.

5. Regulatory Bottlenecks

The 2021 Petroleum Industry Act (PIA) was designed to simplify regulations and attract investment, but its implementation has been slow. Investors frequently cite bureaucratic delays, unclear licensing terms, and inconsistent regulatory enforcement as significant obstacles to scaling production.

Global Competition and Market Pressures

Nigeria’s LNG sector now faces stiff competition on multiple fronts:

• Qatar and the U.S. are rapidly expanding LNG capacity, offering competitively priced and reliable supply options.

• Mozambique, an emerging African LNG producer with significant offshore reserves and foreign investment, particularly from TotalEnergies, is quickly becoming a regional contender.

• Renewable energy growth and long-term decarbonization policies in key markets cast uncertainty on future gas demand.

Given this landscape, Nigeria can no longer rely solely on legacy infrastructure and strategic location; sustained innovation and investment are imperative.

Government Response and Strategic Reforms

In response, the Nigerian government and NNPC have introduced several initiatives:

1. Revamping Gas Infrastructure

Plans are underway to rehabilitate aging facilities and develop new gas processing plants. The government has allocated funds for critical pipeline networks, including the ambitious Ajaokuta–Kaduna–Kano (AKK) pipeline, aimed at boosting domestic gas distribution.

2. Decade of Gas Initiative

The Buhari administration launched the “Decade of Gas” campaign to promote gas as Nigeria’s fuel of choice. This strategy emphasizes:

• Investment in gas-to-power projects

• Expanding LNG use in domestic transportation (autogas)

• Supporting small-scale LNG plants for local consumption and energy access

3. Gas Export and Regional Integration

Nigeria is actively exploring new export routes and regional pipeline projects targeting neighbors such as Niger, Ghana, and Morocco. Projects like the Trans-Saharan Gas Pipeline and Nigeria-Morocco pipeline reflect this vision, though progress has been slowed by geopolitical complexities and financing challenges.

4. Public-Private Partnerships (PPPs)

Building on NLNG’s successful joint venture model, the government is encouraging broader private sector participation throughout the gas value chain, particularly in midstream and downstream operations, to enhance efficiency and capital inflow.

Opportunities Ahead

Despite current headwinds, Nigeria possesses significant untapped advantages:

• Proven gas reserves exceeding 200 trillion cubic feet—the largest in Africa

• Rising LNG demand in Europe, especially following the Russia-Ukraine conflict which reshaped global energy flows

• Strategic geographic position facilitating Atlantic Basin and intercontinental trade

If Train 7 and subsequent expansion phases are completed on time, Nigeria could reclaim a top-tier spot in the global LNG market.

Additionally, developing small-scale LNG projects and decentralized distribution systems could enhance both export potential and domestic energy access, supporting socioeconomic development across Nigeria.

Social and Environmental Considerations

While LNG is cleaner than coal or oil, Nigeria must carefully manage the environmental footprint of gas development. Methane leakage, land use, and flaring remain key concerns. Transparency and strict adherence to Environmental, Social, and Governance (ESG) standards are increasingly prerequisites for attracting major investors.

Moreover, meaningful benefits for local communities in the Niger Delta—through employment, environmental safeguards, and community engagement—are essential for maintaining the social license to operate amid a history of tension and conflict.

Conclusion: The Clock Is Ticking

Nigeria’s LNG sector stands at a crucial crossroads. The pressures of the global energy transition and mounting international competition raise the stakes for decisive action. Yet Nigeria holds all the necessary ingredients for resurgence: vast reserves, established infrastructure, and a strategic position in global energy trade.

To regain momentum, Nigeria must shift from rhetoric to reliable, transparent execution. The timely completion of Train 7, full implementation of the Petroleum Industry Act, and revitalization of feed gas supplies are indispensable.

Failure to act swiftly risks ceding market share permanently to more agile competitors. Conversely, successful reform and reinvestment could propel Nigeria back to the forefront of the LNG world—fueling economic growth and securing a more stable energy future for Africa and beyond.