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Energy Insight: The Nigerian petroleum industry

Nigeria is the biggest producer of oil in Africa, and the third largest producer of gas. Their oil reserves rank 11th largest, and their gas reserves 7th largest, in the world.  So why are there news stories of dire petrol shortages in the country with long queues at the pumps?


Who runs the Nigerian petroleum industry?

The Nigerian National Petroleum Corporation (NNPC), the state oil corporation, oversees the industry and its projects. NNPC is the majority shareholder in most petroleum industry projects, with funding coming mainly through joint ventures, or production sharing contracts, with international oil companies (IOCs) such as Shell, ExxonMobil, Chevron, Statoil, and Eni.

A variety of acts and regulations govern the oil and gas industry in Nigeria.

Restructuring the industry was proposed with the introduction of The Petroleum Industry Bill  in 2008, and was still facing delays in July 2019 despite having been broken into several parts (ie. Petroleum Industry Administation Bill 2018; Petroleum Industry and Governance Bill 2018; Petroleum Industry Fiscal Bill 2018) to ease its passage.  When the legislations is finally passed there might be changes, amongst other things, to tax and royalty structures, and some of the contracts with IOCs might be renegotiated.  

This uncertainty has contributed to a reduction of investment in new oil and gas projects - the last licensing round being held in 2007. Despite this, attempts to reorganise NNPC have continued – sometimes resulting in strikes, or threats of strikes, by NNPC workers.  The oil workforce is willing to strike over many causes.


How much oil does Nigeria have?

Source: OPEC Annual statistical bulletin 2019
(Note - OPEC's list differs from the BP Statistical Review of World Energy.  Canada does not appear in OPEC's top 20 as Canada's tar sands are not included) 

According to OPEC, Nigeria has proven reserves of 36,972 million barrels of oil -  BP, estimates their reserves as being  approximately 37,500 million barrels * (but please note official reserves figures are disputed for all countries) 


How much oil do they produce?

In 2017 Nigeria was ranked 14th in the world for oil production, producing 1,536,000 b/d – Norway was only just ahead with 1,588 b/d.Production, it is reported, reached 1.8mbd at the start of 2018.


Source: OPEC Annual statistical bulletin 2019

Production is hindered by oil theft and pipeline sabotage, and other security problems. On their website, Shell Nigeria gives an overview of security, theft, sabotage and spills. They report that in 2017, approximately 9,000 barrels of oil a day were being stolen.


How about Gas?

Reserves

Source: OPEC Annual statistical bulletin 2019

OPEC ranked Nigeria 10th for gas reserves in 2018, with 5,675 billion cubic meters (again note official reserves figures are disputed for all countries). 

Production, consumption and exports of gas

Of the 44,250.8 million cubic meters of marketed natural gas produced, 28,625.6 million cubic meters were exported.

But Nigeria loses an estimated N868m daily to gas flaring because the oil fields do not have associated facilities to capture the gas produced. The Federal Government announced, in November 2018, new regulations to end gas flaring. This, it was stated, “would increase the country’s gas production from 22 million tonnes per annum to 30 metric million tonnes per annum”.


How much oil do they export – and to where?

Nigeria exported 1,979,500 b/d crude oil in 2018 (Nigeria regularly reports more exports of crude than it produces and the IEA reports zero imports).

Destination1,000 b/d 
 TOTAL 1,979.5 
 Europe  1,058.4 
 North America  172.0
 Asia and Pacific  387.2
 Latin America  52.3
 Africa  309.5
 Middle East  0.0

Source: OPEC Annual statistical bulletin 2019  


What about refining their own oil?

Nigeria has 5 oil refineries with a throughput capacity of over 446,000 b/cd. But they have to swap their crude oil for petroleum products to meet domestic demand as the output from the refineries is only 33,100 b/cd while the demand is for almost 445,500 b/d (including 337,400 b/d for gasoline).  

In 2018 Nigeria imported 442,000 b/d of petroleum products, and exported 21,300.b/d.

Despite the discrepancy between the throughput caacity and output from the refineries, the throughput is set to increase to 1.1mbpd according to the Minister of State for Petroleum Resources, Ibe Kachikwu.

NNPC holds the majority interest in each refinery, although there are plans for privatisation. These plans are being hampered as the government still has the power to fix the prices of the petroleum products produced 


What’s the petroleum industry worth to Nigeria?

Oil was first discovered in Nigeria in 1956 and by 2018 the oil and gas sector accounted for about 10% of Nigeria’s GDP and 86.5% of their export earnings -$54,513million.  With such a high dependence on the petroleum sector for income, the price of oil is vital. 


How does their Membership of OPEC help?

Nigeria has been a member of OPEC since 1971 – 9 years after OPEC’s foundation. It qualifies for being a member as it is a substantial net exporter of crude oil.

OPEC’s mission is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry".


Further reading and sources of information

Energy Institute Africa branch

Nigeria facts and figures. OPEC

Nigeria – CIA World Factbook.  Central Intelligence Agency (CIA)

Nigeria. Energy Industry Administration (EIA)

Nigeria- key facts and figures. Energy Industry Administration (EIA)

Key stats for Nigeria, 1990-2016.  IEA

World Energy Outlook 2014, Part C – Africa Energy Outlook. IEA, 2014. 

Marine&Petroleum Nigeria - Daily newsletter to sign up for and Website with lots of information about the Nigerian oil industry

African Energy - Consultancy service producing market research on all forms of energy in all African countries, producing a monthly ejournal and occasional reports, eg Nigeria Power Update.

The Need for Strong Caveats on Proved Oil Reserves, and on R/P Ratios. RW Bentley, September 2018 


Abbreviations

b/d - barrels a day
b/cd - barrels a calendar day
EIA - Energy Information Administation (USA)
IEA - International Energy Agency
IOC - International oil companies
NNPC - Nigerian National Petroleum Corporation


Energy Insight details


Countries: Nigeria -

Subjects: Oil and gas

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