Germany’s Interest to Buy LNG, Import Hydrogen from Nigeria Not Realistic – Liebing

By Ndubuisi Micheal Obineme

Stefan Liebing, a German investor and Chief Executive of Conjuncta GmbH, has reacted to the speculations in the media space stating that Germany would be interested in buying LNG and importing Hydrogen from Nigeria following Chancellor Scholz’s visit to President Tinubu in Abuja recently.

Liebing has been involved in many energy projects on the continent and is a former Chairman of the German-African Business Association.

Reacting to the media reports, Liebing said neither of these is going to happen soon due to different reasons for the two commodities.

According to him, German energy utility companies usually are too small to sign long-term offtake agreements of significant size and they have never invested in gas production or liquefaction assets in Africa so far.

Liebing made this known in a post via his official LinkedIn handle, obtained by The Energy Republic, in which he said that Scholz’s announcement saying Germany would be interested in buying LNG as well as importing Hydrogen from Nigeria caused a lot of attention, but, neither of this is going to happen in the short to mid-term.

“A lot has been discussed about “business opportunities” that are not very realistic and no major investment agreement has been signed.”

“This is a phenomenon I have witnessed a lot during the past decade. Sometimes it is a bit difficult for political and media representatives to judge what is just an idea and what has a realistic chance to turn into a real project,” he noted.

Speaking on the root causes of the issues, he stressed that the German Government does not invest in these projects nor does it sign procurement/offtake contracts.

“The Chancellor has just indicated that there might be general interest if German and Nigerian private sectors could agree on terms of such transactions.

On the other hand, he maintained that most LNG produced in Nigeria is contracted on a long-term basis to oil majors (I0Cs) and they hold a share in Nigeria’s assets which makes them a key stakeholder in the business, while only small volumes of LNG come to the spot market, and they are sold at best price offers, not with political preferences.

He said, “It would make a lot of sense if Germany buys LNG on a long-term basis, however, it would be required for German private sector players to commit to long-term offtake arrangements which would be very difficult for them, given their small size and balance sheets compared to the oil majors, or invest in gas production assets which they have never done before in Africa. The fact that no agreement could be reached similarly in Qatar shows that it is very unrealistic to expect this to happen in Nigeria now.”

For hydrogen export from Nigeria, he pointed out that the key enabler of a hydrogen project’s commercial attractiveness is the price at which it is possible to generate (24/7) green electricity.

In his words, “All studies suggest that this requires very good wind AND solar characteristics at the same time which is not the case in Nigeria’s South anywhere close to potential export facilities. That is why most developers and investors are currently looking at South
Africa, Namibia, Angola, Mauritania, Morocco, Egypt.

“This has nothing to do with the fact that they are not interested in Nigeria, but just with natural givens, such as solar yield that is not optimal because of clouds and rainy seasons.

“So neither LNG procurement nor hydrogen has a realistic chance of happening because of structural challenges in Germany and natural disadvantages in Nigeria.”

However, he emphasized the need to adopt a strategic approach in dealing with African countries in terms of investments and financing projects in the continent.

“We therefore need a new realism in our dealings with Africa. We should not over-promise what we cannot deliver in the end.

“It is needed to look both at what Africa wants to do with us and what German business can realistically deliver, given its specific business models, financing, and risk-taking restrictions, but also on technical/natural characteristics,” Liebing added.