The Petroleum Industry in Nigeria 2023

Introduction

While Nigeria remains one of the biggest oil producers in Africa, crude oil production has declined in recent years due to underinvestment, sabotage and oil theft. Nigeria relies on imports for almost all its fuel needs, as all four state-owned refineries remain shut for maintenance. The 650,000b/d Dangote refinery, the largest on the continent, was commissioned in May 2023, and is expected to help reduce the country’s reliance on imports once it comes fully online. In May 2023, the government removed a fuel subsidy which critics said led to huge wastage and smuggling. Despite the sector’s numerous challenges, many remain confident that the Petroleum Industry Act, enacted in 2021, will help deregulate the downstream sector and encourage more investment in oil production. The government is also looking to promote natural gas as a transition energy, which could result in liquid natural gas (LNG) production being ramped up.

Opportunities

Development of LNG as a transition fuel to meet local and export demand. New onshore production. Nigeria could become a new refining centre when the Dangote refinery and four state-owned refineries come online. Oil major’s move to exit onshore oil blocks provide Nigerian petroleum companies with more opportunities. Setting up modal refineries. The scrapping of the fuel subsidy in May 2023 will help deregulate the downstream market and encourage competition.

Outlook

Nigeria has experienced years of declining oil production due to theft and sabotage and declining investment. Production may improve in 2023 following new offshore drilling activity and the resumption of operations at onshore export terminals. Experts are hopeful that the Petroleum Industry Act will help the industry to turn a corner by creating more investment certainty. The oil and gas sector could record significant growth in 2023 due to several measures by the government to address oil thefts, pipeline vandalism and illegal refining. The planned commencement of the Port Harcourt and Dangote refineries in 2023 are expected to increase domestic processing of crude oil produced by the country. The outlook for the downstream sector is positive given the end of the subsidy and coming on stream of the Dangote refinery.

Report Coverage

This report on the petroleum industry in Nigeria includes information on the state and size of the upstream, downstream and gas subsectors, infrastructure, economic contribution, reserves, production, consumption, wholesale, retail and distribution. There is information on new projects, investment, corporate actions and developments. There are profiles of 41 notable companies including state-owned Nigerian National Petroleum Corporation (NNPC), which is a major commercial player, multinational majors such as Chevron, Shell, TotalEnergies and ENI, local downstream companies such as Matrix Energy, Northwest Petroleum & Gas, Swift Oil, Mainland Oil & Gas, Optima Energy Resources, Ashrami Synergy and Pinnacle Oil & Gas, and companies operating in the gas sector such as NIPCO and Techno Oil.

Strengths

Nigeria was the biggest oil producer in Africa in 2022 (despite falling to third spot on the continent in some months). Nigeria’s oil is one of the most preferred due to its low sulfuric content, and low corrosiveness to refinery infrastructure. Presence of several oil majors. The Petroleum Industry Act is expected to create investment certainty and lead to deregulation.

Threats

Ageing and underutilised pipelines, which are often targeted by criminals Banks and other funders’ reluctance to fund new oil projects because of climate change and other issues. Corruption and political risk make the operating environment more difficult. Fuel sales could slow as consumers’ battle high unemployment high inflation and higher fuel prices following the removal of the fuel subsidy in May 2023. Jetties handling fuel imports are often compromised by the poor maintenance of waterways, while a lack of security has resulted in an increase in piracy. Oil majors are pulling out of onshore oil fields because of security concerns. Theft, sabotage and other criminal incidents.

Weaknesses

A lack of gas infrastructure such as pipelines and processing plants. Declining production due to lack of investment. None of the state’s four refineries are functioning currently. Oil production costs are among the highest in the world.