Nigeria is set to lead among countries with eight estimated new projects.
The year 2022 ended with the landmark drilling of oil in the northern part of the country.
Africa’s large chunk of oil exploration activity is predicted to take place Nigeria, where developments such as the Bonga South West deepwater are expected to soon reach final investment decision.
The Nigerian National Petroleum Company Limited, NNPCL, which is spearheading this drive has signed key deepwater oil exploration with operating major oil companies in the country.
The group chief executive officer of the company, Mallam Mele Kyari, has forecasted that the country’s oil production would rebound to 1.8 million barrels per day (bpd) by the end of the year and to increase further in 2023.
“Output could reach 1.8 million bpd by the end of December, but hopefully by the end of November, up from 1.45 million bpd now, with a further increase to 2.2 million bpd any time from the middle of next year,” he added.
Infrastructure issues, pipeline leaks and oil theft have squeezed Nigeria’s output this year, leaving the country consistently below its Organisation of Petroleum Exporting Countries (OPEC) output targets.
Nigeria’s submission to the OPEC Secretariat put September crude oil output at just 938,000 bpd, just over half its quota for the month, while total liquids production was only 1.14 million bpd.
Nigeria produced 1.17 million bpd of crude in September, 40,000 bpd higher than in August. The discrepancy is partly down to differences in the classification of the Agbami grade as crude or condensate.
Improved security conditions and contract terms are helping to restore interest in Nigeria’s upstream sector from international oil firms, Kyari said, adding that the Petroleum Industry Act (PIA) of 2021 which laid the groundwork for fiscal, regulatory and legal reform would support the future investment plan.
President Muhammadu Buhari had given the oil ministry a mandate to ensure energy security and Kyari revealed recently that NNPC will deploy a protection model similar to Saudi oil giant Aramco’s to curb oil theft.
“If Nigeria is successful in increasing its oil production, it may again broach the subject of adjusting the baseline production figure that determines its quotas within the OPEC+ group.Engagement is based on the capacity to produce Kyari. OPEC+ is not going to stop you from production, as long as that capacity is there. That’s not the issue. The issue is the baseline, and that baseline will change, immediately, as we bring back more production.
“Everyone is coming back to the table now,” Kyari said about potential investments from International Oil Companies (IOCs). Companies are reassured by “improved security and also improved fiscal terms, it’s a perfect opportunity for businesses so the companies are coming back, particularly in the deepwater,” he added.
Should investments move ahead, Kyari said Nigeria would reach 3 million bpd within two to three years, and then 4 million bpd in five years.
Although Nigeria’s production fell below 1 million bpd in recent times, there have been some promising signs, with Forcados now back online.
The NNPC head was bullish about the possibility of new investments.
“The world is looking for energy,” Kyari said, striking an upbeat tone on future LNG production from additional projects. “NLNG is progressing with Train 7 with a target startup date of 2025,” he added.
The NNPC head noted that NLNG shareholders were keen to add more capacity, with Train 8. “There’s so much gas, the possibilities are endless,” Kyari said.
As the country looks forward to boosting production, the NNPCL, is keenly leading oil majors through Nigeria’s deepwater hydrocarbon potential.
Already, the country has inked new production sharing contracts (PSCs) for six offshore licences with oil majors.
The execution of fully termed agreements for the renegotiated PSCs was revealed on 12 August 2022, less than a month after President Muhammadu Buhari launched on 19 July, 2022, the Nigerian National Petroleum Company (NNPC), a development which saw the firm officially transiting into a limited liability entity as enshrined in the provisions of the Petroleum Industry Act (PIA) 2021.
Legal and fiscal uncertainties presented a hurdle for oil majors when it comes to investing in new PSCs in Nigeria, which means that many previously signed PSCs by Shell, ExxonMobil, Chevron, Eni, TotalEnergies, and Equinor were due to expire soon.
As the PIA stipulates that new PSC agreements under new Heads of Terms will be signed between NNPC as a concessionaire and its contractor parties within one year of signing the PIA into law with a deadline of 15 August 2022, this paved the way for the resolution of lingering disputes which created investment uncertainty and stifled new investments in Nigeria’s deepwater assets.
Therefore, NNPC used the parties’ interest to renew the PSCs as they were due to expire to sign the renewed ones, which are expected to provide several benefits such as improved long-term relationships with contractors, elimination of contractual ambiguities, especially in relation to gas terms, and enable early contract renewal, amongst others.
Kyari explained that renegotiations were in line with the provisions of the PIA with other improvements to the PSCs aimed at driving performance in the PSC operations. Kyari outlined that the negotiations were completed within the timeframe specified by the PIA for all renegotiated PSCs, stressing that “the meaning of this is that there is now a great deal of clarity between NNPC and its partners in the deepwater space.”
During a signing ceremony, parties renewed their agreements in five oil Mining Leases (OMLs) 128, 130, 132, 133, and 138 a development that is anticipated to generate further investments in the upstream sector and boost investors’ confidence while also unlocking over $500 billion in revenue for the country.
These recently inked PSCs offer more opportunities for boosting Nigeria’s crude oil production and revenue base.
Commenting on this, Osagie Okunbor, Shell Nigeria Country Chair, described the execution of the OML 133 PSC contract as “a significant progress towards harnessing the deepwater resources of Nigeria.”
Richard Laing, ExxonMobil Nigeria Chairman/Managing Director pointed out that the renewal of the Usan and Erha leases validates ExxonMobil’s commitment to maintain a deepwater presence in Nigeria, through its subsidiary, Esso Exploration and Production Nigeria.
The African Energy Chamber (AEC) has said that Nigeria’s crude oil production is expected to grow to 1.75 million barrels per day (bpd) in 2023.
According to AEC, Nigeria’s crude oil production is expected to grow from 1.65 million bpd in 2022 to about 1.75 million bpd in 2023.
The report highlighted the fact that although there were outages recorded in the country’s crude production in 2022, which saw Angola overtake it as the largest crude oil producer on the African continent, production rates would increase in the coming year.
The AEC report outlines some challenges facing Nigeria’s production output as follows: a lack of fiscal reforms eventually leading to a lack of deep-water developments, disagreements between International Oil Companies (IOCs) operating in the Niger Delta and local administrations, pipeline vandalism, crude oil theft, crude oil spills, and pollution. However, these issues have not affected Nigeria’s hydrocarbon output.
Expanding Gas Output
Nigeria, Morocco, and their partners expect to make a final investment decision in 2023 on what would be the world’s longest offshore gas pipeline from Nigeria to Morocco and onto southern Europe.
The pipeline, expected to cost between $20 billion and $25 billion, is planned to run for 3,840 miles (5,600 kilometers) from Nigeria along the West African coast to Morocco before connecting with pipelines in Italy and Spain and potentially delivering more non-Russian gas to Europe.
Nigeria wants to monetise and export more of its vast natural gas resources, which are now currently only exported by Nigeria LNG, a joint venture of NNPC and international oil and gas majors. More gas exports for Nigeria would also mean diversifying the African producer’s gas export routes and eliminating gas flaring, according to Nigerian officials.
Already, the NNPC and the Moroccan Office National of Hydrocarbons and Mines have signed the Memorandum of Understanding for the construction of the Nigeria-Morocco gas pipeline.
“We will take a final investment decision next year,” Kyari, said.
According to him, the huge pipeline will be built in stages, with the first one expected to take three years to complete. The other phases of the construction would take five years, Kyari said.
Nigeria, Morocco, and other stakeholders are currently discussing terms of financing with potential financial partners and lenders, he added.
Nigeria plans to significantly boost its gas production, and quadrupling output in the next four years is “very realizable,” he said.
The longest offshore pipeline – if completed on time – could supply more pipeline gas from Africa to Europe by the end of this decade, when the EU will have freed itself from Russian gas, according to its current plans.
Downstream
The year 2023 will possibly end petrol scarcity in Nigeria, based on ongoing investments that hopefully would come to fruition before end of Q3 of same year.
As 650,000 barrels Dangote refinery is scheduled to come on stream in the Q3, of 2023, the Federal Government has assured that petrol importation would end same year.
Minister of State for Petroleum Resources, Timipre Sylva said all necessary actions are being taken to actualise that.
A refurbished refinery in Port Harcourt in the Niger Delta is expected to be producing 60,000 barrels a day, bpd of refined crude oil per day by the end of next month, and the new Dangote refinery is expected to come online in the first quarter of next year.
Nigeria has been mostly unable to take advantage of high crude oil prices because it swaps crude oil for refined products which also saw a huge price jump this year.
Nigeria, Africa’s largest oil producer just two years ago, has been surpassed by Libya and Angola and has a considerable breakeven cost for producing crude. As crude oil prices rose, the petrol subsidy that Nigeria kicks in ended up costing Nigeria ten times what it had originally budgeted this year, $9.6 billion.
What this means is that Nigeria swaps this high-priced crude for gasoline, which it sells at a loss. On top of that, Nigeria imports nearly all of the gasoline it consumes–$43 billion’s worth in 2020.
But that could be about to change. “We’re expecting that we will actually be exiting the importation of petroleum products from maybe about third quarter next year if I was to give it a longer timeframe, but I believe that even before the third quarter next year,” Sylva said.
Nigeria’s four crude oil refineries, with a combined nameplate capacity of 445,000 barrels per day, would be enough to meet demand, but the refineries are in a state of disrepair. The Port Harcourt refurbishment, at a cost of $1.5 billion, and the new Dangote refinery if successfully completed on schedule will go a long way to alleviating the burden of Nigeria’s costly fuel imports.
Energy Transition To Boost Power Sector Restructuring
Emphasis in Nigeria’s electricity industry is shifting towards energy transition with focus on renewable energy.
Nigeria’s job growth in the decentralised renewable energy is expected to exceed 76,000 in 2023, up from 32,000 in 2019 and overtaking the oil and gas sector, by 2023.
A report by Power for All, the global campaign to end energy poverty, in collaboration with Clean Technology Hub Nigeria, showed that Nigeria has built a strong market position in the area and is poised to reap the benefits.
According to the just-released document, the distributed renewables energy sector in Nigeria has been growing rapidly and delivering clean and affordable energy, particularly to remote rural communities and is now also a major source of good and stable jobs, nearly matching those in the county’s oil and gas sector.
It includes the deployment of Solar Home Systems (SHS), which the report said currently employs 50,000 people compared to 65,000 in Nigeria’s oil and gas sector.
Furthermore, the demand for clean energy products in the country, it said, is expected to create more than 76,000 new jobs by 2023. “This is over twice the number of jobs created in 2019 as reported in the powering jobs census 2019,” it added.
The sector is further expected to grow following the recently launched Nigeria Energy Transition Plan which outlines the country’s ambitions and plans to achieve net-zero emissions by 2060, while also ending energy poverty, the report said.
“It demonstrates the health and viability of the distributed renewables energy sector to help not only accelerate the country’s energy access agenda but also to help alleviate unemployment, especially in rural areas,” said Power for All’s Director for Campaigns and Partnership, Suranjana Ghosh.
The report, partly sponsored by the Rockefeller Foundation, is based on a survey of more than 350 companies across five countries: Ethiopia, India, Kenya, Nigeria, and Uganda.
It provides a comprehensive picture of employment in the sector, including recruitment, the skill levels of the workforce, availability of and investment in training, compensation levels, women’s participation, and workforce retention.
Of the countries analysed, it pointed out that Nigeria enjoyed the fastest post-pandemic recovery and growth in jobs in the sector.
“ The country lost almost 2,000 decentralised renewable energy jobs in 2020 from short-term pandemic impacts. However, the sector bounced back strongly in 2021, registering approximately 50,000 jobs, nearly twice the number of jobs observed in 2020.
“The demand for solar home systems products, which was already on a fast upward trajectory before the pandemic, was key to the rapid recovery and growth,” it added.
The report indicated that the sector was maturing, with the percentage of formal and skilled workers comprising over half of the decentralised renewable energy workforce in the country, at more than 56 per cent.
“However, the renewable energy sector in Nigeria, similar to the other study countries, is still failing to adequately integrate women into the workforce, and this was only exacerbated by the pandemic.
“ The share of women working in the decentralised renewable energy sector in Nigeria was 37 per cent behind Kenya’s 41 per cent which was also the highest. Notably, in the countries studied, female participation was higher in decentralised renewable energy than in the traditional energy sector at only 22 per cent, and in the broader renewable energy sector at 32 per cent.
“This shows the role that decentralised renewable energy can play in bringing more women into more meaningful workforce positions,” it added.
Despite the growth in the number of jobs, it noted that decentralised renewable energy companies surveyed as part of the study indicated that they struggle to fill critical roles due to a lack of qualified applicants.
The shortage of skilled workers, the document pointed out, is expected to get worse as the sector grows and the world transitions away from fossil fuels.
“This report is coming at a very auspicious time because with the very recent release of Nigeria’s Energy Transition Plan, the report provides a great opportunity for decision makers in government as well as industry actors to apply a job and economic growth lens in implementing the plan.
“ This #PoweringJobs report makes this easier because it provides the data, and the numbers for what is possible when decentralised renewables is a core part of the transition,” noted the Chief Executive of Clean Technology Hub, Ifeoma Malo.
In another major initiative, the federal government is eyeing 11,000 megawatts of electricity supply by 2023 after signing an agreement with German multinational company Siemens to improve the country’s erratic power supply.
Under the roadmap, the German conglomerate will work with Nigeria’s power providers to modernize the country’s electricity grid and supply systems.
The roadmap is divided into four phases. Phase one and phase two of the agreement will focus on distribution and transmission issues in power supply.
Nigeria already has an installed supply capacity of 12,522 megawatts but currently has only an average 4,000 megawatts that reach consumers.
The roadmap is setting ambitions high with a target of 7,000 megawatts in 2021, just under two years from now.
Phase three and phase four of the roadmap involves actual power generation. Under the roadmap, the country will increase the capacity of the national grid to 25,000 megawatts.
“We all know how critical electricity is to the development of any community or indeed any nation,” president Muhammadu Buhari said.
“Whilst we are blessed to have significant natural gas, hydro and solar resources for power generation, we are still on the journey to achieving reliable, affordable and quality electricity supply necessary for economic growth, industrialization and poverty alleviation,” he added.
Addressing this challenge of electricity generation has been a problem for Nigeria over the last two decades.
Meanwhile the Nigerian Bulk Electricity Trading Plc, is working on an ambitious plan to increase power supply to 5, 500 Megawatts (MW) in 2023 to boost electricity in the country.
