LNG spot prices have risen by over 40% since start of Israel-Hamas conflict 

Liquefied Natural Gas (LNG) spot prices have risen over 40% since the beginning of the Israel-Hamas conflict which set off on October 7 after Hamas attacked festival goers.  

S&P Global Commodity Insights recently reported a surge in spot Liquefied Natural Gas (LNG) prices, reaching $18.345/MMBtu on October 16.

This spike of over 40% since October 6 is attributed to the Israel-Hamas conflict, which escalated on October 7, causing geopolitical concerns and a tragic loss of thousands of lives.  

The conflict remains a critical issue, with the United States urging caution to prevent further escalation. In Europe, natural gas prices are experiencing volatility due to anxieties regarding sufficient supply for the upcoming winter.  

The Israel-Hamas conflict and Chevron’s operational challenges in Australia have exacerbated market uncertainty. Chevron Corp, a US oil giant, halted production at the Tamar natural gas field off Israel’s northern coast.  

The Tamar field holds a significant gas reserve, providing most of Israel’s energy for power generation.

A prolonged shutdown at Tamar could disrupt Israeli gas exports to neighbouring countries, including Egypt, a key gas exporter to the European market.  

While the European Union (EU) is not anticipated to face severe supply issues this winter, the persistent global gas disruption is expected to sustain high prices, presenting a potential opportunity for African LNG exporters like Nigeria.

However, Nigeria is grappling with its own local feed gas supply challenges.  

Recall that Dr. Philip Mshelbila, the Managing Director of the Nigeria Liquefied Natural Gas (NLNG) Limited recently told Nigeria’s Minister for Gas, Ekperikpe Ekpo, that presently, the company’s most pressing concern lies in feed gas supply, a critical issue affecting both current operations and future expansion plans. 

According to Dr. Mshelbila, Trains 1 to 6 are currently operating at only about half of their potential capacity, and this has been an ongoing challenge. The primary culprit behind this challenge is crude oil theft, impacting the supply of associated gas.  

The plant’s capacity is not fully utilized, not due to a lack of capability, but rather due to the inadequate availability of feed gas. He also said that the company envisions sourcing the necessary gas from deep-water reserves; however, addressing the terms for extraction is a vital prerequisite for progress. 

The MD, NLNG also highlighted the fact that presently, the existing Production Sharing Contracts (PSCs) governing deep-water exploration do not present commercially viable terms for producers in Nigeria.

  It follows therefore that resolving these challenges is crucial for realizing NLNG expansion goals and ensuring a reliable and sustainable supply of feed gas for their operations.