The Nigeria LNG said yesterday that despite the Force Majeure it declared on its production, it is still producing and exporting liquefied natural gas.
Early in the week, the gas company had declared force majeure on its product supplies from its production facilities on Bonny Island, Nigeria, blaming the surging flood in Nigeria, which has affected its facilities.
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.
In the statement hitherto pasted on the company website, and signed by the NLNG general manager, external affairs and sustainable development, Andy Odeh, the company had said the notice by the gas suppliers was a result of high flood water levels in their operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG.
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“Consequently, NLNG activated force majeure clauses in accordance with the Sales and Purchase Agreements (SPA) provisions. NLNG is currently reviewing the situation with gas suppliers to ascertain the extent of the disruption to its operations but would, as a reasonable and prudent operator, endeavor to mitigate the impact of the force majeure to the extent reasonably possible,” Odeh continued.
But in a new development yesterday, during a television interview, the LNG spokesman said the company made the legal declaration earlier this week amid the worst flooding in 12 years, adding that all of its upstream gas suppliers had declared force majeure.
Sources said the force majeure was pre-emptive in case the flooding continued for much longer and did impact loadings.
In the TV interview, Mr. Andy Odeh said that while the company was “not getting enough gas” due to the impact of the flooding on its suppliers.
He said NLNG would work to protect facilities from future flooding, which he said was worse than usual due in part to climate change.
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Portugal relies heavily on NLNG gas and oil major Shell, NLNG’s largest single offtaker, are at most risk from the outage, according to investment bank Jefferies.
Odey stated however that the force majeure it declared does not affect the supply of Liquified Natural Gas supply in the market.
NLNG provides about 40% of LPG used in the domestic market, while the rest is imported.
Flooding across the country has disrupted economic activities and displaced thousands. Over 600 people have been confirmed dead by the Nigerian Government.
According to the National Emergency Management Agency, 2,504,095 persons have been affected by the disaster.
Flood has affected the oil-rich Niger-Delta region with Bayelsa, Delta and Anambra worse hit in the region.
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Odeh said, “We are aware of the flooding in part of the country specifically the Niger Delta area. But just to assure that the notification is that our facility in terms of production has not been impacted. We are still producing LNG or exporting LNG.
“However, the notice of force majeure that was issued was clearly to say that our upstream gas suppliers have been impacted by the flooding where the gas is coming from and as a result of that, we are not getting the gas coming into our facility to liquefy and export.”
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