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Nigerian Oil and Gas Sector Report 2024 | Unraveling Nigeria's Oil and Gas Tapestry

Executive Summary

Nigeria, a member of OPEC since 1971, boasts of substantial crude oil reserves of 37.1 billion barrels at the start of 2023, with a production capacity of 2.5 million barrels per day. The country heavily relies on crude oil production as a cornerstone of its economy, constituting a significant source of foreign exchange. Nigeria primarily exports light low-sulphur (sweet) crude oil, with 79.63% of total exports in Q1:2023 attributed to crude oil.

 The Nigerian Oil and Gas industry comprises three main sectors: Upstream, Downstream, and Midstream. The Upstream sector, primarily led by international oil giants such as Shell, Chevron, and Total, accounts for over 80% of global crude oil production. Meanwhile, the Downstream and Midstream sectors are predominantly controlled by domestic companies like Ardova, Conoil, Eterna, and MRS. Noteworthy efforts, including those by the Nigerian Content Development and Monitoring Board, have resulted in a notable surge in local involvement in Upstream activities.

 Since the early days of Exploration in the Niger Delta region, Nigeria has faced challenges of crude oil theft and pipeline vandalism, leading to disruptions in production. These issues have significantly impacted Nigeria's ability to produce crude oil to its maximum potential, resulting in consecutive contractions in the sector's growth rate.

 Despite being the 13th largest crude oil producer in the world, Nigeria's downstream sector faces challenges including mispriced products, security concerns, and dilapidated infrastructure. Efforts by the government to revitalize this sector involve removing PMS  subsidies, deregulating the downstream sector, and implementing progressive regulatory and taxation frameworks through the PIA.

 Nigeria's refining capacity, although substantial, has been hindered by outdated infrastructure and mismanagement. Recent efforts to establish modular refineries have increased refining capacity, but it still falls short of meeting domestic demand. The commissioning of the Dangote Refinery with a capacity of 650,000 bpd presents a significant milestone, potentially transforming the downstream sector.

 Nigeria holds vast natural gas reserves, yet significant quantities are either flared or re-injected due to lack of infrastructure and demand constraints. Through its Gas Master Plan, the government aims to become a Liquified Natural gas (LNG) export hub in Africa, with plans to expand infrastructure, including the Ajaokuta-Kaduna-Kano pipeline, to increase natural gas exports.

 The PIA, enacted in 2021, aims to overhaul the petroleum sector in Nigeria. It establishes new regulatory bodies, commercializes the NNPC, and introduces a fresh tax system. The Act addresses tensions with host communities, emphasizing community development, and introduces a national grid system for land rights.

 The global energy transition towards renewable sources is impacting Nigeria's oil and gas sector. Major companies are divesting from fossil fuels, prompting questions about the sector's attractiveness amid the transition. The Nigerian government has enacted long-term policies towards energy transition, with commitments to reduce emissions and ambitious plans for renewable energy generation.

 In conclusion, Nigeria's oil and gas industry stands at a critical juncture, with challenges and opportunities intersecting, amid a rapidly changing global energy landscape. Adapting to this transition will require strategic policies, technological innovation, and collaborative efforts from stakeholders across the sector.