In the Nigeria oil and gas market, the market for gas attained a volume of 1.37 million metric tones in 2023 and is expected to grow at a Compound Annual Growth Rate
CAGR of 5.30 per cent between 2024 and 2032, to reach 1.85 MMT in 2032. Meanwhile, the Nigeria oil market attained a volume of 441 thousand barrels per day and is expected to grow at a CAGR of 3.60 per cent between 2024 and 2032, to reach 542 thousand barrels per day in 2032.
Key Trends
Oil and gas refer to the mining and refining of crude oil and natural gas, converting them into useable petroleum products. The production of oil and gas is a multi-stage process which includes discovering, transporting, and turning them into finished products which are then sold to various sectors. oil and gas are formed natural from organic materials that have accumulated, broken down, and transformed over a period of millions of years.
The increasing investments towards increasing the natural gas production in the country, to maximise the output of residential and commercial sector operations are driving the growth of the market and expanding the Nigeria oil and gas market size.
The growing penetration of foreign players in the downstream segment of oil and gas in Nigeria is likely to be a major trend in the market.
More Nigeria oil and gas companies are expected to cultivate cooperation and innovative strategies to enhance the supply and quality of downstream oil and gas products.
According to the Nigeria oil and gas industry analysis, the increasing application of oil and gas in gas flaring processes across the country is further fuelling the market growth.
Additionally, the favourable gas flaring commercialisation programmes are expected to provide impetus to the Nigeria oil and gas market in the coming years.
Over the forecast period, the anticipated increase in expansion of petroleum refineries in Nigeria is likely to generate a high demand for oil and gas.
The downstream segment, based on sector, is on its way towards reaching its full potential, accounting for a significant share of the oil and gas market in Nigeria.
This can be attributed to the increasing investments towards petroleum product refining, marketing, storing, and distributing to maximise the reach of the downstream products.
However, inappropriate product pricing, irregular gas supply, and non-functional refineries, are some of the factors which may negatively influence the Nigeria oil and gas market price. Oil and gas are crucial for the production various downstream components such as kerosene, heating oil, lubricant, LPG, and wax, among others, which are gaining traction in the commercial and residential Nigerian markets.
Meanwhile, the upstream segment is expected to occupy a healthy portion of the Nigeria oil and gas market share in the forecast period.
Upstream production of oil and gas is necessary for providing raw materials to the downstream sector to bolster the supply chain and enhance production capacities across refineries.
Competitive Landscape
At the center of the push are key international oil companies, like ExxonMobil which is a leading natural gas company which caters to the energy demands of various sectors across the world. This company discovers, produces, and sells crude oil, natural gas, petroleum products, and various oil and gas-related resources. It was founded in the year 1999 and is headquartered in Texas, United States.
Also, TotalEnergies, is a petroleum company which explores and produces oil and gas, renewable energies, bioenergies, electricity, refining and petrochemicals, specialty chemicals, and trading and shipping services, among others.
Equally, the Nigerian National Petroleum Company Limited, NNPCL, is a for profit oil company and currently is one of the largest oil producers and suppliers in Africa. The services offered by the company include upstream and downstream oil and gas products, gas and power, new energy, and non-energy services, among others.
Other market players include Shell PLC, and Chevron Corporation, among others.
Pushing For New Production Heights
The Nigerian National Petroleum Company (NNPC) Limited has pledged to achieve two million barrels of crude oil (bpd) from 2024.
The newly appointed board and management team made the company headed by Pius Akinyelure, NNPCL non-executive chairman, promised collective efforts from the team “to turn around the fortune of the oil and gas company.
“And to make it a company that we will all be proud of and a company that will help sustain the economy and make sure we create some element of prosperity for Nigerians,” Akinyelure said.
Akinyelure said Tinubu has pledged to lend his support to the board in successfully carrying out their duties.
“He has assured us of his support and on our own part too, we have given him our 100 percent assurance.
“We will do the best we can to make sure that the key performance in the oil and gas industry in Nigeria probably will become number one in Africa and probably compete with the leading oil and gas industry around the world.
“It is not an easy task but we know we had the challenge of oil stealing, vandalisation of our pipelines.
“Our commitment is to produce at the rate of two million barrels per day anytime from next year.
“But to do this, we have to overhaul our security architecture, so that the incidences of stealing, vandalisation of pipelines can be reduced.
“And this will possibly help to keep all our cash book and we will become a better nation,”he said.
Akinyelure said the board will restructure NNPC security framework to reduce pipeline theft and vandalism.
On December 12, Heineken Lokpobiri, minister of state petroleum resources (oil), had said Nigeria will achieve its 2024 crude oil production benchmark of 1.78 million barrels per day (bpd).
Lokpobiri reiterated Nigeria can increase crude oil production to two million bpd and issues hindering this are being worked on.
Also, the group Chief executive officer of the company, Mele Kyari, rejected the move by the Senate Committee on Appropriation to increase the crude oil production benchmark in the 2024 Appropriation Bill from 1.7million barrels per day to 1.8million per day.
The chairman, Senate Committee on Appropriation, Solomon Olamilekan Adeola, dropped the suggestion at the budget defence session between his committee and the management of the NNPCL.
The federal government in the Appropriation Bill gave an average crude oil production benchmark of 1.78mb/d and a crude oil price benchmark of $77.96.
The NNPCL GCEO told the committee that the oil giant would stick to the benchmark approved by President Bola Ahmed Tinubu in the Appropriation Bill.
Power Sector
Experts in the coming year have envisaged the full introduction and commencement of the trading of electricity/gas on the commodity exchange. The exchange will enable the sale of energy at terms prescribed by the exchange. Undoubtedly, this will support the growth of independent power producers who can sell to a wide range of buyers at fair market rates. Expectedly, this initiative will enable transparent price discovery and risk management in power markets through standardized contracts. Well-designed trading platforms will bring efficiencies that facilitate the integration of renewable energy at scale into grids.
The Nigerian Electricity Regulatory Commission, NERC will fully disaggregate the distribution and supply licenses under the Electricity Act, EA.
This initiative is expected to foster more competition and innovation on the retail side. Separating the distribution wires monopoly from customer supply opens up free consumer choice and enables easier adoption of renewable energy. Suppliers can differentiate their offerings based on renewable energy mix, smart technologies, and other value-added services.
With independent power suppliers and the distribution-supply separation, consumers can seamlessly procure electricity from renewable energy projects or producers. Overall, this electricity trading and licensing reforms will create the right environment for clean energy to thrive. They encourage transparent costs, competition, empowered consumers, and technology innovation.
Following the decentralisation of the NESI based on an amendment of the Nigerian Constitution and the passage of the Electricity Act 2023 prescribing full modalities for a transition to state-based electricity markets, it is expected that from coming year state governments will begin to establish their respective electricity regulators. Notably, Enugu and Ekiti States have enacted their own Electricity Laws, Ondo State has set up its own State Electricity Regulatory Bureau and reportedly written to Nigerian Electricity Regulatory Commission (NERC) and Lagos State is currently working on its own Electricity Bill. Given these important regulatory developments, industry operators envisage that 2024 will see a take-off of these new State Electricity Markets and businesses must therefore be ready to be among the first movers in these emergent markets.
Also given the take-off of State Electricity Markets, SEMs, these emergent SEMs are likely to initially struggle with dearth of transmission infrastructure considering the nature of investments required in constructing transmission infrastructure.
An estimated USD$1M is typically required for the development of 1 KM-long transmission infrastructure at 330KV velocity – that cost drops to USD$400K where the velocity is 132KV. In light of this, the SEMs will therefore require off-grid and distributed energy sources to strengthen their capacity to meet the varying electricity demand. Accordingly, they expect a further growth and expansion of the off-grid and distributed sector with the entrant of new market players, willing to supply the energy sources required by generation companies and new companies licensed by the state electricity regulators.
While Nigeria lacks grid-scale renewable energy facilities, it boasts of a substantial decentralised renewable energy sector. Given the introduction of significant provisions in the Act relating to renewable energy generation obligations and renewable energy purchase, we envisage a further growth of the renewable energy industry.
This important statutory introduction indicates that more stakeholders will now be statutorily obligated to generate and purchase power generated from renewable energy sources thereby translating to a sharp rise in renewables’ contribution to Nigeria’s energy mix. Noting the emergence of more players manufacturing solar panels, it is expected that solar and renewables-based electricity will be further expanded.
Notably, NBET was intended to act as an interim/transitional structure in the power sector to provide assurance of payment to GenCos, as well as to provide assurance electricity supply to DisCos post-privatization of the nascent electricity market. NBET was issued its operational trading license in November 2011 for the term of 10 years, which lapsed in 2021 and was subsequently renewed for another term of 3 years which will lapse in 2024.
The Act provides that103 preparatory to the initiation of medium term and long-term electricity market stage, NERC shall by its directive and within such period as it may specify, direct NBET to cease to enter into contracts for the purchase and resale of electricity and ancillary services and novate its existing contractual rights and obligations to other trading licensees. In view of the pending expiration of NBET’s license next year, it is therefore anticipated that more trading licenses will be issued and the transition to phase out NBET will commence next year.
