There are three issues to consider when looking at the situation of Nigeria’s oil and gas industry; Production slumps, COVID-19 pandemic, and the non-passage of PIB in 2021.
Based on this, it may be safe to conclude that, Nigeria’s oil industry is facing difficult 2021 occasioned by the delay or otherwise failure to implement certain important reforms as well as the impact of the COVID-19 global crisis.
Based on a recent forecast, The Nigerian oil and gas market is expected to register a CAGR of more than 2% during the forecast period of 2021 – 2026.
However, the country-wide economic impact of the COVID-19 global pandemic, crude producers are faced with a decline in both price and demand for crude, Â resulting in an oil slump.
In its industry circular of 2020, the Department of Petroleum Resources (DPR) considers the situation occasioned by the COVID-19 pandemic a serious threat and further instructed all operators to limit the number of personnel at project sites. This has the potential of leading to a breach of specific contract terms.
As we all know, Nigeria is an important oil supplier to the United States who imports between 9-11 percent of its crude oil from Nigeria. According to the International Energy Agency, in 2011, approximately 33 percent of Nigeria’s crude exports were sent to the United States, making Nigeria its fourth-largest foreign oil supplier.
Today, total crude imports into the United States are falling, imports from Nigeria have declined at a steeper rate as the United States import data for the first half of 2012 show that Nigerian crude is down to a 5 percent share of total United States crude imports.
I most appreciate the fact that Nigeria’s cessation of the gasoline subsidy is likely to save the country a lot of money, the deregulation of the country’s downstream oil sector was a much-needed change for a country that depends almost entirely on imports for its gasoline, increasing investments in the upstream sector and the development of large-scale and modular refineries in the country.
Meanwhile, Nigeria’s offshore oil and gas industry continues to expand, even though not very fast, but opening more market opportunities. The growth of Nigeria’s offshore exploration and production activities may likely be attributed to the Government’s efforts of improving the nation’s hydrocarbon industry.
Unfortunately, Oil and gas production in Nigeria had been hampered by the increasing attack on oil and gas facilities by militants, oil theft has been one of the major issues and resulted in huge losses to operating companies in the country, these and many other factors are likely to have a negative impact on the market growth during the forecast period.
I find it difficult to say this, but it is the simple truth that the Lack of infrastructure, uncertainties in regulations, security concerns, and more recently, the COVID-19 has led Nigeria to underutilize its refining capacities, thereby pushing the country to become a net importer of refined petroleum products.
Presently, Dangote Refinery is in near completion which many expect to become the refining center in Africa; but given Nigeria’s position of being among the world’s largest oil-producing state, is one refinery going to serve the purpose?
Nigeria’s crude and condensate production slumped to around 1.79 million b/d last year from 2.04 million b/d in 2019, according to S&P Global Platts estimates.
This was the lowest output since 2016 when Niger Delta militants repeatedly attacked key oil infrastructure pushing the country’s production to as low as 1.4 million-1.5 million b/d at points that year.
President Muhammadu Buhari recently admitted that the country has been suffering heavily following a sharp drop in output and depressed global oil prices.
“We are being squeezed to produce at 1.5 million b/d against a capacity to produce 2.3 million b/d… now the oil industry is in turmoil,”
In its industry circular of 2020, the Department of Petroleum Resources (DPR) considers the situation occasioned by the COVID-19 pandemic a serious threat and further instructed all operators to limit the number of personnel at project sites. This has the potential of leading to a breach of specific contract terms.
As we all know, Nigeria is an important oil supplier to the United States who imports between 9-11 percent of its crude oil from Nigeria. According to the International Energy Agency, in 2011, approximately 33 percent of Nigeria’s crude exports were sent to the United States, making Nigeria its fourth-largest foreign oil supplier.
Today, total crude imports into the United States are falling, imports from Nigeria have declined at a steeper rate as the United States import data for the first half of 2012 show that Nigerian crude is down to a 5 percent share of total United States crude imports.
I most appreciate the fact that Nigeria’s cessation of the gasoline subsidy is likely to save the country a lot of money, the deregulation of the country’s downstream oil sector was a much-needed change for a country that depends almost entirely on imports for its gasoline, increasing investments in the upstream sector and the development of large-scale and modular refineries in the country.
Meanwhile, Nigeria’s offshore oil and gas industry continues to expand, even though not very fast, but opening more market opportunities. The growth of Nigeria’s offshore exploration and production activities may likely be attributed to the Government’s efforts at improving the nation’s hydrocarbon industry.
Unfortunately, Oil and gas production in Nigeria had been hampered by the increasing attack on oil and gas facilities by militants, oil theft has been one of the major issues and resulted in huge losses to operating companies in the country. These and many other factors are likely to have a negative impact on the market growth during the forecast period.
I find it difficult to say this but it is the simple truth that the Lack of infrastructure, uncertainties in regulations, security concerns, and more recently, the COVID-19 have led Nigeria to underutilize its refining capacities, thereby pushing the country to become a net importer of refined petroleum products.
Presently, Dangote Refinery is in near completion which many expect to become the refining center in Africa; but given Nigeria’s position of being among the world’s largest oil-producing state, is one refinery going to serve the purpose?
It is in my opinion that, Nigeria needs more than just one refinery, and that we don’t have to build new ones. We already have refineries, let us revive them again so that together with privately owned like that of Dangote we can become the refining hub in Africa.
Despite the COVID-19 threats, despite the militancy and oil theft, as well as other challenges, I can see both a bright and difficult future for Nigeria’s oil and gas industry, depending on how we handle the problems.
Meanwhile, it is also a time for Nigeria to stop overreliance on oil because it’s obvious that proceeds of oil will soon stop funding our numerous needs. For decades we have been living on billions of dollars without knowing; Gold in almost all Northern states, cocoa, and timber in almost all southern states vis a vis agricultural opportunity in many parts of the country.
Alternatively, we need to go back to where we were before the discovery of oil. We have abundant natural resources in various states of the Federation.
However, Nigeria is on the edge of altering refined products’ supply dynamics in the region with the help of the upcoming Dangote Refinery, and it is expected to become the regional refining hub in the coming years.
Once completed, the country is planning to become the refinery hub in Africa. This, in turn, is expected to attract foreign players to tap into the country’s downstream market in the near future.
CHUKWUNONSO NWOBI IS A NIGERIAN BUSINESSMAN BASED IN LAGOS.
