Nigeria Orders Gas Companies to Prioritize Supplies

By Dulue Mbachu

Sept. 26 (Bloomberg) -- Nigeria ordered oil companies including Royal Dutch Shell Plc and Exxon Mobil Corp. to come up with a plan to boost domestic gas supplies by the end of October, or risk a suspension of all liquefied natural gas export projects.

Gas Minister Emmanuel Odusina said the companies must set aside between 280 million and 350 million cubic feet of gas by the end of the year for domestic use, according to an e-mailed statement from the Nigerian National Petroleum Corporation, which represents state interests in the energy industry.

``We must prioritize domestic gas supply over any LNG project, since the country needs power,'' Odusina said. Nigeria, whose natural-gas reserves of 187 trillion cubic feet are the world's seventh-biggest, is also Africa's most populous country and suffers from chronic power shortages.

The country of 140 million people is currently generating only 3,000 megawatts of power, out of an installed capacity of 6,000 megawatts. Parts of the country go for days and weeks without power, leaving companies to rely on their own generators.

President Umaru Yar'Adua is concerned that oil companies ignored his April directive to boost domestic gas supplies, the minister was cited as saying. The ``federal government's policy and regulations on gas supply to the domestic market are not up for discussions or negotiations any more,'' Odusina said, according to the statement.

LNG Projects

The oil majors that run five joint ventures producing most of Nigeria's oil also produce most of its gas. They are Shell, Exxon, Chevron Corp., Total SA and Eni SpA. The biggest LNG project in the country is the $10 billion Nigerian LNG Ltd.'s plant on Bonny Island, in which the state-owned NNPC has a 49 percent stake, followed by Shell with 25.6 percent, Total's 15 percent and Eni with 10.4 percent.

The Nigerian LNG company has long-term contracts with buyers in Italy, Spain, Turkey, Portugal and France and also sells on the spot market.

Exxon and Chevron also run gas projects in the ventures they operate in which NNPC has majority stakes. Precious Okolobo, Shell's spokesman in Nigeria, had no immediate comment on the government directive. Gloria Essiene-Danner, Exxon's spokeswoman in Nigeria and Scott Walker, Chevron's spokesman in Houston, weren't immediately available for comment.

Gas projects in the planning stages include Brass LNG, in which NNPC has a 49 percent interest, leaving Total, Eni SpA and ConocoPhillips each with 17 percent, and OK LNG in which Chevron, Shell and British Gas are working with the NNPC.

To contact the reporter on this story: Dulue Mbachu in Lagos via the Johannesburg bureau at abolleurs@bloomberg.net