Africa's 'big five' LNG exporters optimistic for growth despite recent slump

Despite a weakening monthly export trend out of Africa's five biggest LNG exporters -- Algeria, Angola, Egypt, Libya and Nigeria – sources and analysts at S&P Global Commodity Insights still remain optimistic for the 'big five's' outlook.

Combined LNG exports in February stood at 2.67 million mt, down from 3 million mt in January, according to data from S&P Global Commodity Insights. The volumes exported in January were the highest levels since last May.

Nigeria, the largest LNG exporter in West Africa, saw its shipments fall 16% in February from a two year high in January, according to S&P Global data.

Angola's LNG exports increased 14% year-on-year in 2023. "Compared to the other major gas producer in the region, Nigeria, which is eager to use natural gas to support its domestic market, Angola's local industries are not as strong," the analysts at S&P Global said in a report, stating that Angolan LNG would be prioritized for export.

For Nigeria, export volumes fell 9% on year in 2023.

A force majeure declared in Nigerian October 2022 has yet to be lifted, but the NLNG facility continues to produce and export LNG.

Nigeria -- already home to the 22.5 million mt/year six-train Nigeria LNG plant -- plans to expand the NLNG plant to 30 million mt/year with the construction of a seventh train. The new train was expected to be online in 2025.

Despite the force majeure, the state-owned Nigerian National Petroleum Corp. (NNPC) offered some six cargoes in the market.

Additionally, there are some long and mid-term SPAs with Nigeria expiring in the coming years, according to a market source.

"There are opportunities on further extension of SPAs and even inking more long-term SPAs, despite the ongoing force majeure in Nigeria LNG," said an Atlantic-based market source. "There could be a bidding war of sorts."

North African flows

"Legacy upstream and infrastructure positions and historically low-cost feedstock give Algeria a competitive position, particularly given the proximity of Algeria's liquefaction plants to Southern Europe terminals," analysts at S&P Global said in a 2024 report. "A trade pattern that has been heightened from 2022 as Europe has increased LNG imports to replace Russian pipeline volumes, and with European gas prices rising in response to market concerns related to the Israel-Hamas war."

Algerian LNG exports saw a 28% increase between 2022 to 2023. The analysts at S&P Global added that new sources of gas production, in part facilitated by the 2019 hydrocarbon law taking effect, appear to be driving the increases.

Egypt saw a sharp decrease year on year, between 2022 to 2023, with around a 53% decrease of LNG exports. However, Egypt remains highly attractive to upstream investors, with ExxonMobil and Chevron among companies due to drill wells this year. The arrival of the UAE's ADNOC in a new joint venture with BP also demonstrates international interest, Samir Raslan, under-secretary at the ministry of petroleum and mineral resources, said in an interview with S&P Global Commodity Insights.

Raslan, who is under-secretary for exploration, also rejected the suggestion that halts in LNG exports in the summer risked denting Egypt's attractiveness, against a backdrop of difficulties raised by a number of industry participants.

Catherine Hunter, director of petroleum sector risk at S&P Global said that "in theory, Egypt could also allocate the gas to its export facilities to help revive LNG production, which has dropped to minimal levels and seasonal operations." However, given current supply and demand trends, the likelihood of a surplus from the addition of further Tamar gas alone is limited. As a result, domestic use, particularly from the power sector, is always Egypt's first priority.

Although LNG exports out of Libya have faced scarce support, analysts at S&P Global said that "the Gulf of Sirte's Treila well, a huge gas prospect to be drilled by Eni and BP PLC, may be one of the most exciting wells of 2024 (or, more likely, of 2025)."

European attractiveness

While year-on-year exports out of the 'big five' have fallen from 2021 to 2023, Algerian LNG exports in 2023 were the highest levels seen since 2010, S&P Global data showed. Analysts at S&P Global stated that Algeria exported around 11% of the natural gas consumed in Europe.

Although exports out of the "big five" fell on the month from January to February, the largest sum of volumes were exported to Europe, with nearly 64% delivered to Europe. Traders suggested despite the monthly decline, exports are forecasted to rise in March and near the multi-month highs seen in January. The exports are expected to predominantly feed into the European and Mediterranean markets.

Exports from North Africa can help to fuel East Mediterranean demand, especially with reduced volumes from Qatar. In 2023, North African exports to the East Med, including Turkey, Greece and Croatia accounted for 35% of the total 17.12 million mt of North African exports.

With stronger prices, netbacks to Europe and the Med have improved and could incentivize further selling interest from Africa. Platts, part of S&P Global, assessed the East Mediterranean marker for April LNG at $8.555/MMBtu on March 5. At the same time the Mediterranean marker for April was assessed at $8.305/mt. Both were the highest prices seen since Feb. 2.