Nigeria's oil and gas industry

Nigeria: African powerhouse

Nigeria’s hydrocarbons sector has come a long way since oil was discovered in the Niger Delta in 1956, with the nation now boasting the largest reserves of both oil and gas in sub-Saharan Africa. The sector is the breadwinner for the country in terms of foreign exchange earnings and represents around 80% of the nation’s budget revenues.

The oil and gas sector is dominated by NOC Nigerian National Petroleum Corporation, which participates in all areas of the value chain. While the country contains many hydrocarbons-rich basins, the majority of producing assets are crowded around the prolific Niger Delta Basin in the south of the country. The government aims to raise crude oil output by 1 million bopd by 2026 under Project 1 MMBOPD.

The country’s regulatory issues and fiscal uncertainties have long been challenges for international investors looking to participate in the market and have led to significant delays or cancellations of prospective projects. The government has continuously reformed its policies to address these issues and open the market while successfully increasing safety of its assets. Meanwhile, local-content promotion and IOC divestments are driving a shift toward indigenous operators in the upstream.

Traditionally an oil producing country, Nigeria has struggled to transition towards gas and beyond fossil fuels as the global industry moves towards reducing carbon emissions and utilising more green energy sources. To address this, the government set up the Gas Master Plan in 2008. This has propelled the country to develop gas infrastructure, including gas processing plants, pipelines and gas-to-power and petrochemicals facilities. Nigeria plans to produce 10 bcf per day by 2030, with NNPC leading USD 60 billion in related investments.

The country aims to establish itself as a refining hub for the region through several large projects, including the 650,000-bpd Dangote Refinery. However, nearby countries have also made efforts to up their refining potential and could potentially take a large share of regional refining.