Overview

Unit: USD Millions

Total Market Size for Oil and Gas

	2019	2020	2021	2022 (Estimate)
Total Local Production	9.23	8.82	7.23	7.17
Total Exports*	0.93	0.89	0.88	0.87
Total Imports	157.50	150.57	148.8	147.46
Imports from the U.S.	20.86	19.94	19.78	19.62
Total Market Size	165.79	158.49	155.15	153.4
Exchange Rate: 1 USD	360	379.5	416	445

 

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources: Estimation for 2022 was made based on estimated GDP trends across the sector.

Total Local Production:  Industry contacts and other local sources such as National Bureau of Statistics Petroleum Technology Association of Nigeria and Ministry of Petroleum Resources

*Total Exports: excluding crude sales

Total Imports:  UN Comtrade

Imports from U.S.:  UN Comtrade

In the first quarter of 2022, Nigeria recorded an average daily oil production of 1.49 million barrels per day (mbpd), accounting for 6.63% of total GDP. Nigeria is among the world’s top five exporters of liquefied natural gas (LNG). The country’s exports of natural gas rose by 14% in 2021, accounting for 9.24% of total exports.

Nigeria is facing unprecedented adverse economic challenges stemming from the impact of theft of large volumes crude oil. The problem has progressed to the extent that the country is unable to meet its increased OPEC quota. The country has been unable to capitalize on the rising energy prices following Russia’s invasion of Ukraine. Industry observers indicate that the country is losing as much as 80% of its oil production to theft, though other analysts claim a figure around 60% is more accurate. According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), in the first quarter of 2022, the country lost an estimated $1 billion in revenue to crude theft. In the same quarter, the country saw average daily oil theft increase from about 108,000 barrels per day (bpd), up from 103,000 bpd it lost in 2021. Since mid-June 2022 the Trans-Niger oil pipeline which hauls 180,000 bpd across Nigeria has not transported crude due to theft, however Shell reported in April 2023 that after a year that TNP was shut down, it has plugged 460 illegal pipelines on the TNP and has resumed operations.

In December 2021, the Nigerian government passed a $41.8 billion (17.13 trillion naira) budget for 2022. The budget represents a 25% increase from the previous, premised on a crude oil production level of 1.86 million barrels per day, average global oil price of $57, exchange rate of 410.15 naira to the dollar, GDP growth rate of 4.2%, and 13% inflation rate. The country spent about 108% of its revenue to service debt in the first half of 2022. Due to this and other worsening macroeconomic variables, the government downwardly revised its economic growth forecast from 4.2% to 3.55% in July 2022. The government approved a supplementary budget of $2.39 billion (2.557 trillion naira) in June 2022 to maintain the government expenditures, including a costly gasoline subsidy, from June to December 2022.

In November 2021, the country exceeded OPEC’s directives, increasing its production volume by about 2.55 million (bpd). But by July 2022, this figure dropped to range between 1.08 million bpd to 1.233 million bdp. OPEC raised Nigeria’s crude production quota from 1.77 million barrels/day (bpd) to 1.83 million bpd in September 2022.

Nigeria remains one of Africa’s key oil producers producing high-value, low sulphur crude oil.  Although the country is currently struggling to cope with stagnant revenues, liquidity and convertibility issues, supply chain disruption, and impacts of COVID-19, it is adopting measures to overcome economic downturn and exploring various alternative revenue sources, especially through natural gas commercialization and infrastructure development.

After more than 10 years of delay, the Nigerian National Assembly in July 2021 finally passed the Petroleum Industry Act (PIA), which seeks to overhaul the regulations and fiscal structures governing Nigeria’s oil and gas sector. Industry observers hope that the passage of the PIA will resolve certain issues associated with production sharing agreements (PSCs), enabling several projects. As called for in the PIA, the Nigeria National Petroleum Corporation (NNPC) has transited to a commercial entity operating as NNPC Limited. Under the regulatory reforms are institutional changes that transformed the previous upstream and downstream regulators into the Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA).

The PIA repealed several laws including:

• Associated Gas Reinjection Act
• Hydrocarbon Oil Refineries Act
• Motor Spirit (Returns) Act
• Nigerian National Petroleum Corporation (NNPC) (Projects) Act
• NNPC Act (where NNPC ceases to exist under section 54(3) of the Act)
• Petroleum Products Pricing Regulatory (Establishment) Act
• Petroleum Equalization Fund Act
• Petroleum Profit Tax Act (PPTA)
• Deep Offshore and Inland Basin Production Sharing Contract Act

In 2019, President Buhari assented the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Act, which requires an adjustment of the revenue due to Nigerian government from PSCs whenever the price of crude oil exceeds $20 per barrel in real terms. The amended law further provided for the replacement of the existing production and price-based royalty regime and mandates the Minister of Petroleum Resources to cause the NNPC to call for a review of the PSCs every eight years. The new laws have reduced investment commitments in the Nigerian oil and gas sector from the major oil companies. Some may reach final investment decision (FID), including Total’s Preowei, Eni’s Zabazaba-Etan, Chevron’s Nsiko, and ExxonMobil’s Bosi and Uge. Industry observers see great opportunities in service contracts for these ongoing and upcoming deep-water projects, which are expected to offer substantial ancillary service for drilling and production systems.

Although the industry saw delays of many projects during the pandemic, several are beginning to gradually resume. These include Shell’s Assa North/Ohaji South Gas Project (ANOH), one of the largest greenfield gas condensate development projects in Nigeria. Seplat Energy, one of the partners in the project, intends to restart its portion of the stalled project by mid-2022 and anticipates achieving first gas by first half of 2023 following third-party pipeline projects. The project secured necessary financing to complete construction of its proposed gas plant, which will process wet gas from unitized Assa North-Ohaji South onshore gas and condensate field.  In May 2021, the Nigerian government, through NNPC, signed a new PSC with its partners on the $16 billion Shell led Bonga South-West Aparo Oil Project, which sent out invitation to tender in 2019. The new PSC will run for 20 years. Several international oil companies have continued divestments and sale of their onshore and shallow water assets to Nigerian operators, creating opportunity for enhancing indigenous participation and capacity. ExxonMobil is in the process of selling its shallow water assets at a value of $1.6 billion.

The Nigerian government is continuing its prioritization of gas and gas-based infrastructure development in the country, moving ahead on the Nigerian Gas Flare Commercialization Program (NGFCP). The latest data from the project indicates that 203 companies have passed the statement of qualification stage (2nd stage of the bidding process). The Nigerian government has identified that partnership with the U.S. government and other stakeholders create opportunities to convert flared gas to ammonia either for use as fertilizer or for export. The project would also greatly reduce carbon emissions. This offers investor opportunities for gas infrastructure and development equipment and services. In June 2021, the Nigerian government joined the Nigerian LNG Limited at a ceremony to mark the start of the construction of the $10 billion Train 7. The project is expected to produce 8-30 million tons per annum (mpta) of liquefied natural gas. In March 2020, the project reached FID and awarded front-end engineering design (FEED). The engineering, procurement, and construction (EPC) contracts were signed with the SCD JV Consortium, comprising affiliates of Saipem, Chiyoda. and Daewoo. The EPC triggers the commencement of the detail, design, and construction phase of the project. This creates opportunities for:

• Gas infrastructure development
• Gas technologies
• Dredging
• Fabrication and procurement of liquefied natural gas (LNG) vessels, storage tanks, transmission pipelines, gas equipment, and terminals
• and supply of ancillary engineering and construction services. 

In July 2021, the Nigerian government declared it was seeking over $1 billion funding to continue the $2.8 billion 614-kilometer Ajaokuta-Kaduna-Kano (AKK) gas pipeline. The project was inaugurated in July 2020 as one of the nation’s biggest domestic gas transmission infrastructures to supply gas to Europe through the proposed Trans-Sahara Gas Pipeline (TSGP) and Nigeria Morocco Gas Pipelines. Sources indicate that the government is negotiating with Chinese lenders to cover $1.8 billion of project cost following delays in disbursement of earlier pledged funds. EPC contract for the pipeline was signed in April 2018. 

In May 2021, NNPC awarded 57 marginal fields to 161 successful bidders following a bid process that commenced in May 2020. These marginal fields are located on land, swamp, and shallow offshore terrains. Marginal fields are oil fields that the international oil companies abandoned because of limited commercial potential, but which provides opportunities for local players to gain oil exploration experience. With these awards, successful bidders and their technical and financial partners can jointly develop the fields. It is of note that international investors may have direct and indirect participation through services or technical assistance contracts from technology providers or capital injections from funds or private equity investors. Marginal fields in Nigeria have an average economic life of between 8 and 15 years and can produce between 4,000 barrels of oil equivalent per day (boepd) to 30,000 boepd per field. About nine marginal fields are currently producing.

Over the next decade, Nigeria hopes to increase its reserves through field optimization, as well as encouraging investments in the development of marginal fields, deep water offshore, and exploitation of bitumen reserves. The Nigerian government continues to prioritize investment in natural gas and gas-based industries, as outlined in the Gas Master Plan. The plan is a comprehensive gas infrastructure development program which targets new investments in gas processing and pipelines, gas-to-power projects, petrochemical facilities, and the NGFCP policy. The government’s ongoing power sector reform and privatization is also in need of investments in new gas supply for independent power producers (IPPs) and refurbishment of former state-owned generation assets. Several gas commercialization projects include the existing Notore Chemical Industries fertilizer plant, Indorama Eleme’s petrochemicals plant, and the proposed Dangote $10 billion oil and petrochemical refinery, which has experienced delays in becoming operational. Dangote’s integrated project is expected to cost up to $15 billion in total, with $10 billion invested in the refinery, $2.5 billion in a fertilizer factory, and $2.5 billion in an underwater pipeline infrastructure to connect Nigeria’s Niger Delta to other West Africa markets.  The project will generate 2.5 billion standard cubic feet of gas per day. Investment opportunities range from financial services, gas transmission pipelines, pipe milling, fabrication yards, upstream gas development, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) plants, gas processing facilities, and gas-based manufacturing industries. All these upcoming projects offer opportunities for foreign firms for the sale of equipment and services. Many local companies are getting involved in gas projects and look to the U.S. as a source for expertise, equipment, and services.

Nigeria’s oil and gas industry remains a lucrative and viable investment opportunity, as observers believe that the oil and gas sector will continue to offer opportunities for marketing essential capital equipment and technology, for both extraction and production. Despite a challenging environment, U.S. exporters can continue to find opportunities in drilling equipment, gas technology, and the supply and services sector. The Nigerian government has shown preference to foreign investors willing to invest in Nigeria’s oil and gas industry.  Although American companies continue to maintain a degree of dominance of the high-end oilfield machinery market share, European and Asian suppliers are also increasing their market share mainly due to the attractive financing models they offer. These companies continue to make inroads into various areas of the upstream industry due to their business model (offering short-term capital equipment and project funds with favorable repayment terms) which is appealing to Nigerian stakeholders.

In terms of challenges, the Central Bank of Nigeria’s foreign exchange controls and Nigerian local content rules present significant barriers to foreign participation and imports in the oil and gas sector. The Nigerian Content Act imposes limits on foreign management and the content of the petroleum sector, and stipulates specific indigenous participation in engineering, welding, and fabrication projects. These present significant barriers to foreign participation and imports in the sector. While this does represent a significant barrier to entry, it is one that international companies can successfully manage with the right strategy.

In addition, foreign companies seeking to operate in Nigeria’s oil and gas industry are also expected to register with the regulatory agencies the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and/or the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA), as appropriate. The Nigerian government is also taking steps to improving transparency in the procurement process through the Nigerian Petroleum Exchange (NipeX) portal. In February 2021, the government announced it plans to overhaul the exchange for transparency on inventory management.

Leading Sub-Sectors

Within the oil sector in Nigeria, the upstream and the downstream subsectors are the most lucrative with activities expected in the future when the refinery capacity is increased when the additional projects come online.

The upstream segment currently accounts for the highest share of revenue, capital expenditure, and investments. Given its capital-intensive nature, this subsector is dominated by large multinational companies, wealthy local investors, and major Nigerian companies. The subsector provides more opportunities for equipment sales, service contracts, and procurement agreements. The downstream subsector is mostly controlled by local investors who set up logistics companies for the transportation of imported fuel, as well as service stations or filling stations where petrol, kerosene, and diesel are sold to the final consumers.

Oil and gas machinery has potential as a source of investment opportunities for U.S. businesses in Nigeria.  Business observers believe that the oil and gas sectors offer opportunities for marketing essential capital equipment and technology, for both extraction and production.  Training services is another area where U.S. service companies have comparative advantage, especially in exploration and production, engineering, and seismic techniques.

The Nigerian oil and gas sector is consolidated with majority of its market share held by five major players: NNPC, Chevron Corporation, Total Energies SE, Shell Plc., and ExxonMobil Corporation. The latter is currently negotiating the sale of the entire share capital of their Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Limited at an estimated fee of $1.3 billion.

Opportunities

In the upstream subsector of the Nigerian oil and gas sector, several opportunities are available, including:

• Provision of gas-to-liquid technology for approved bidders of the NGFCP
• Technical service contracts with already existing gas producers
• Opportunity to bid and own marginal oil fields which were recently auctioned by the government
• Opportunities to access ancillary services accruing from the Nigerian LNG (NLNG) Limited’s Train 7 project
• Steel pipe supply for the on-going gas pipeline construction projects ongoing in the country

Additional opportunities to offer services to the downstream sector exists from provision of insurance services for oil shipments, truck supply, service station equipment supply, storage equipment, consulting services, and legal services.

Within both the upstream and downstream segments, opportunities abound in exploration and production, drilling and manufacturing equipment, support services, marketing, construction, engineering and consulting services, transportation and storage of crude oil, insurance, legal services, facilities maintenance, and environmental management. NNPC’s commercialization activities offer opportunities for investment in pipelines and storage depots (tank farms) which are critical for the downstream sector.

Additional opportunities exist in the fabrication of pipes and the water services sector. Nigeria’s estimated average demand for steel pipes range 1 to 1.2 million tons annually and offer an opportunity for partnership for the pipe milling and fabrication services. The Nigerian government’s prioritization of growing domestic gas sector to support power generation and gas-based industrialization presents a major opportunity for U.S. manufacturers and suppliers of modular gas stripping and treatment plant equipment, LNG, compressed natural gas (CNG), liquefied propane gas (LPG), and methanol and fertilizer plant equipment. American firms with advanced scalable technology and associated service experience in the industry will be well-positioned to meet this requirement.

Opportunities in Mining

Nigeria offers other excellent investment opportunities for U.S. companies involved in the extractive industries including mining of solid minerals. Opportunities especially exist in sales of mining equipment, machinery, and associated technology and services. The solid minerals sector in Nigeria also provides an opportunity for U.S. companies to export to the Nigerian market. The Ministry of Solid Minerals Development (MMSD) is working actively to attract local and international investment into Nigeria’s mining sector. Currently, investments are being made in gold, baryte, tin, lead, and zinc mining and processing. Lithium deposits have also been found in the Northern part of the country and there are indications that this opportunity will be explored by local mining companies. The increased mining activity experienced by local and foreign investors provide U.S. firms with the opportunity for sale of mining equipment such as excavators, dredgers, drillers, and trucks to companies operating in the sector.

As part of its efforts to diversify revenue sources and exploit its non-oil sectors, the Nigerian government has undertaken substantial institutional and legal reforms to address the underutilized potential of its solid mineral wealth and make the sector more attractive for investment. The Ministry of Mines and Steel Development secured a $150 million World Bank loan for enhancing mining projects and infrastructure development and has also drawn down funds from the Nigerian government’s $73 million (30 billion naira) Natural Resource Intervention Fund, which it will use to explore new minerals and enhance regulatory framework. The Nigerian government also signed an MOU with the U.S. Geological Society to accurately map Nigeria’s estimated 34 potential minerals to open the country for investment. The plan focuses on eight sub-sectors: iron ore, gold, copper, coal, tar-sands/bitumen, barite, lead-zinc, and dimension stone. Nigeria has proven reserves of coal estimated at over two billion metric tons, and coal-fired electrical power is being explored by the government as an additional source of power. The Nigerian Coal Corporation (NCC) indicate it has a mandate to identify U.S. technical partners for clean coal development and conversion, coal gasification, manufacture of coal briquettes, and coal to power generation to help meet the government’s proposed national power target of 14,000MW. HTG-Pacific Energy (a Chinese consortium) signed an MoU with the Nigerian government for the exploration and mining of coal bricks. The MOU is expected to be followed by a power purchase agreement (PPA) which will boost investors’ confidence in the proposed 1,000 MW, coal-fired plant project. Several states in Nigeria, especially Ondo State, which has the second largest deposits of bitumen in the nation, is seeking foreign investors and technical partners for its exploitation and development. The Nigerian government announced it will auction bitumen blocks in the four rich states of Ondo, Ogun, Lagos, and Edo in the third quarter 2021, however this date was moved to 2022 and is pending. Despite these efforts, however, mining production in Nigeria decreased 10.6% as of September 2021 over the previous year. There have also been calls to the federal government to rescind the proposed ban of mining activities within the country.

Resources

Nigerian Upstream Petroleum Regulatory Commission

Nigerian Midstream and Downstream Petroleum Regulatory Authority

The Nigerian National Petroleum Corporation Limited

Trade Events

• Sub Saharan Africa International Petroleum Exhibition and Conference, February 21-23, 2023, Lagos (SAIPEC- https://saipec-event.com)
• NOG Energy Week, July 2-6, 2023, Abuja (https://www.nogenergyweek.com/)
• Nigerian International Energy Summit (NIES), April 16-20, 2023, https://nigeriaenergysummit.com/ February 27 -March 3, 2022, https://www.nigeriapetroleumsummit.com/
• OTL Africa Downstream Week, October 24-26, 2022, https://otlafrica.com/
• Oil & Gas Supply Value Chain Management Conference and Exhibition, September 2022
• Oil & Gas Upstream & Downstream Conference & Expo, July 28-30, 2021, (http://oilandgasexpos.com/)
• Society of Petroleum Engineers SPE Nigeria International Conference & Exhibition, August 2-4, 2021
• The Nigerian Association of Petroleum Explorationists (NAPE) international conference & exhibitions, November 14-18, 2021 - https://nape.org.ng/

For more sector information, e-mail: Benedicta N. Nkwoh, U.S. Commercial Service, U.S. Consulate General, Lagos, Nigeria at Benedicta.Nkwoh@trade.gov