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Nigeria Oil and Gas Report Q1 2010
Business Monitor International, Dec 2009, Pages: 99
Nigeria Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Nigeria's oil and gas industry.
The latest Nigeria Oil & Gas Report forecasts that the country will account for 11.95% of African regional oil demand by 2014, while providing 22.36% of supply. African regional oil use of 2.98mn barrels per day (b/d) in 2001 rose to an estimated 3.60mn b/d in 2009. It should average 3.66mn b/d in 2010 and then rise to around 4.13mn b/d by 2014. Regional oil production was 7.84mn b/d in 2001 and in 2009 averaged an estimated 9.79mn b/d. It is set to rise to 12.52mn b/d by 2014. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.86mn b/d. This total had risen to an estimated 6.19mn b/d in 2009 and is forecast to reach 8.40mn b/d by 2014. Angola has the greatest production growth potential, with Nigerian exports set to soar if it can resolve recent quasi-political issues.
In terms of natural gas, the region in 2009 consumed an estimated 124bn cubic metres (bcm), with demand of 191bcm targeted for 2014. Production of an estimated 248bcm in 2009 should reach 385bcm in 2014, which implies net exports rising from 124bcm in 2009 to 193bcm by the end of the period. Nigeria in 2009 consumed an estimated 14.57% of the region’s gas, with its market share forecast at 27.69% by 2014. It contributed 18.18% to estimated 2009 regional gas production and, by 2014, will account for 21.06% of supply.
For 2009 as a whole, we have assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year (y-o-y). This represents an upgrade from the US$55.00/bbl forecast we were using in the previous quarter. For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00/bbl in 2011 and to US$90.00/bbl in 2012 and beyond. For 2009, the authors have assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The gasoil forecast is for an average price of US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put at US$52.66/bbl, down 39.7% from the previous year’s level. Nigerian real GDP is estimated to have risen by 4.0% in 2009, compared with 6.0% growth in 2008. We are assuming average annual growth of 6.0% in 2010-2014. We expect oil demand to rise from an estimated 376,000b/d in 2009 to 493,000b/d in 2014, representing up to 3%-5% annual growth. Stateowned Nigerian National Petroleum Corporation (NNPC) accounts for more than 50% of oil production and over 40% of gas supply, but has a large number of international oil company (IOC) partners contributing to a forecast rise in oil and liquids production from an estimated 1.98mn b/d in 2009 to 2.80mn b/d by 2014 – subject to rebel attacks on infrastructure and OPEC quota policy. Gas production should reach 81bcm by 2014, up from an estimated 45bcm in 2009. Consumption is expected to rise dramatically from around 18bcm to 53bcm by the end of the forecast period, allowing exports of no more than 28bcm. This threatens the country’s liquefied natural gas (LNG) export business unless fresh supplies can be located and developed.
Between 2009 and 2019, we are forecasting an increase in Nigerian oil and gas liquids production of 71.7%, with volumes rising steadily to 3.40mn b/d by the end of the 10-year forecast period. Oil consumption between 2009 and 2019 is set to increase by 88.4%, with growth slowing to an assumed 7.5% per annum towards the end of the period and the country using 708,000b/d by 2019. Gas production is expected to rise to 125bcm by the end of the period. With demand rising by 288.9% between 2009 and 2019, there should be export potential increasing to 55bcm, largely in the form of LNG. Details of the 10-year forecasts can be found in the appendix to this report.
Nigeria now takes second place in the updated Upstream Business Environment rating, behind only Libya. It may struggle to keep Angola at bay over the short term, as the West African neighbour is just one point behind. Nigeria’s score benefits from its substantial oil and gas reserves, its oil and gas production growth outlook, and high reserves-to-production ratios (RPR). The competitive landscape features numerous non-state companies, while licensing terms are generally acceptable, although potentially under review. However, negative country risk factors undermine the hydrocarbons-specific strength. The country is in the upper half of the league table in the Downstream Business Environment rating, with a few high scores but near-term progress further up the rankings deemed unlikely. It is ranked fourth behind Algeria, thanks largely to poor country risk factors that undermine further a regulated and largely state-controlled industry. Algeria is five points above it in the regional rankings and looks set to stay out of reach. Angola below represents a medium-term threat.
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