…But oil output woes persist
Nigeria’s refining renaissance and the removal of petrol subsidies delivered key wins in Africa’s biggest oil-producing country this year, though persistent issues like underinvestment and underperforming oil output threatened to undermine the country’s energy sector’s progress.
The 2024 kickoff of the Dangote Refinery and Petrochemicals was almost like a dream in Nigeria’s energy sector as skeptics saw the $20 billion project as fanciful – after waves of state-built refineries had failed to make a dent on Nigeria’s petrol import dependence.
“This is one of the largest refineries that has ever been built, so the pace at which it ramps up is the difference between margins staying good for refiners or deteriorating,” said Dan Evans, head of fuels and refining at S&P Global Commodity Insights.
So far, the plant has shown great promise. In January when it came on stream, it crashed the price of diesel by 38 percent, from N1,600 to N1,000 while petrol price moved from N970 per litre to N899.50 per litre in December as part of measures to provide the much-needed relief for Nigerians ahead of the holiday season.
Read also: Shell’s $1.3bn asset sale to Renaissance: Implications for Nigeria’s energy security
Growing refining capacity has already tipped Nigeria into becoming a net exporter of jet fuel, naphtha, and fuel oil. Next year, the country could ship almost 50,000 bpd more gasoil from Lagos than it imports, with volumes to almost triple again in 2026, according to Commodity Insights forecasts.
From January to October this year, the refinery has delivered the majority of its supply to the Lome transhipment hub off Togo, while South Korea has emerged as its single-largest export location, drawing 23,000 bpd of naphtha.
Large volumes of gasoil have flowed to Ghana and other West African countries, while for the first time in history, Nigerian-made jet fuel has found its way to airports ranging from Iceland to Tenerife and London’s Heathrow.
Apart from refining, one of the most impactful changes has been the full removal of fuel subsidies, a policy shift that began in 2023 and is now firmly entrenched.
This decision has freed up billions of dollars for the federal government, alleviating a decade-long fiscal burden.
The subsidy removal has also created a more competitive energy market. Fuel prices now reflect global market trends, attracting private sector investments in the downstream sector.
“We’re finally seeing the market work as it should,” said an analyst with a Lagos-based energy consultancy. “The reforms are paving the way for efficiency and growth.”
Kaduna and Warri refineries have also come back on stream, improving the nation’s refining outlook.
Green lights for divestments
Final Investment Decisions on strategic projects, such as the Bonga North, a deep-water project off the coast of Nigeria and Ubeta oilfield (OML 58) development, are set to boost crude oil output and gas production.
Nigeria also recently approved a $1.3 billion deal that would see a group of local companies purchase Shell’s onshore assets in the country, Nigeria – Africa’s largest crude producer.
This asset sale to one of Africa’s foremost energy companies, Renaissance, exemplifies Nigeria’s wholehearted confidence in its homegrown companies.
Renaissance is a consortium that includes ND Wester Ltd.; Aradel Holdings Plc; Petrolin Group; FIRS Exploration and Petroleum Development Co.; and Waltersmith Group, all leading companies that efficiently operate a diverse mix of oil and gas assets with a focus on socioeconomic impact in Nigeria.
“The African Energy Chamber is supportive of the Nigerian government’s commitment to supporting local companies operating in the oil and gas sector. Nigeria is continuing its focus on becoming a leading force in the global energy market, and this approval is poised to steadily improve the positive impact the industry will have on domestic companies operating in the country,” N J Ayuk, executive chairman of African Energy Chamber, said.
Recall that in October, the government had announced four divestment requests from Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited divestment, Equinor Nigeria Energy Company Limited to Project Odinmin Investments Limited, TotalEnergies EP Nigeria Limited to Telema Energies Nigeria Limited, and the Nigerian Agip Oil Company Limited to Oando Petroleum and Natural Gas Company Limited divestment.
Struggling oil production
According to the latest S&P Global Commodity Insights estimates, Africa’s largest oil producer has pumped at an average of 1.5 million bpd so far this year, having seen crude output fall below its estimated 2.2 million bpd capacity due to theft, underinvestment and technical issues at ageing fields.
Nigeria has consistently struggled to produce up to its maximum capacity in recent years and in January saw its Organisation of Petroleum Exporting Countries (OPEC) quota lowered by some 200,000 bpd after months of underproduction — a symbol of declining African influence within the bloc.
President Bola Tinubu, who campaigned on a promise to reform the country’s oil sector, declared a state of emergency in the industry in June, directing security agencies to go after thieves and vandals in the Niger Delta.
“These measures have directly improved the uptime of the Trans Niger Pipeline in the eastern Niger Delta, and today, all operating companies along the TNP can produce into this major trunkline,” Olu Verheijen, presidential adviser on Energy said November 14 at an industry event.
The oil sector reforms included an improved fiscal framework for producers, she added, including in the deepwater, and were set to attract new investments that would unlock around 1.3 billion barrels of oil equivalent in oil and gas resources.
Data sourced from the National Liquid Hydrocarbon Production reports by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed the country’s oil output increased to 1.485 million barrels per day (bpd).
According to the NUPRC data, output rose by 152,334 bpd in November — a 11.43 percent increase compared to 1,333,322 bpd produced in October.
With the addition of condensate, Nigeria’s oil production increased to 1.69 million bpd in November from 1.53 million barrels in October.
Read also: FG to tap World Bank, AfDB hybrid initiative to fix energy access
Natural gas
With 209.5 trillion cubic feet of proven gas reserves, Nigeria ranks 9th among gas-rich countries in the world. However, this abundant natural resource remains largely untapped for both domestic use and export.
Since he came into power on May 29, 2023, President Tinubu has shown eagerness to change Nigeria’s energy story using the potential of the country’s gas deposits.
Last May, Tinubu inaugurated three milestone projects, which are the expanded AHL Gas Processing Plant; the ANOH Gas Processing Plant, and the 23.3km ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline.
“When these projects become fully operational, approximately 500MMscf of gas in aggregate will be supplied to the domestic market from these two gas processing plants, which represents over 25 percent incremental growth in gas supply,” Tinubu said at the commissioning.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
