Events that shaped Nigeria’s oil, gas sector in 2022

Nigeria’s energy sector was expected to gather momentum coming into 2022 following the passage of the Petroleum Industry Act (PIA) and mild recovery from a COVID-19-induced recession, rather it saw one of its most volatile years on record.

In 2022, the Nigerian government began commercial crude oil production in the North, completed bid rounds for marginal oil fields and began the implementation of the PIA, rebranding the national oil company and creating regulatory bodies for the petroleum upstream and midstream sectors.

It was also the year crude oil theft rose to the level of heists, forcing oil majors to step up divestment plans, and Russia’s war against Ukraine roiled global oil markets.

Messy downstream sector and fuel scarcity

The year began with the revelation that the Nigerian National Petroleum Company (NNPC) and its partners imported adulterated petrol, which destroyed private cars and caused some scarcity of the products, especially in Lagos and Abuja. The situation went downhill from there.

Scarce foreign exchange reduced NNPC’s ability to import even as it burns millions of dollars daily paying for subsidies. The scarcity worsened towards the end of the year again, and Nigerians spent the holidays worrying about fuel in their tanks.

Oil exploration in the North

President Muhammadu Buhari, in November, flagged off the Kolmani Integrated Development Project in the North-East. It is designed as a fully integrated in-situ development project comprising upstream production, oil refining, power generation and fertiliser. According to the NNPC, there are over one billion barrels of oil reserves and 500 billion cubic feet of gas in the Kolmani area and a huge potential for more deposits as it intensifies exploration efforts.

Oil theft and pipeline vandalism

Oil prices rose to as high as $130 per barrel in the global market on the back of Russia’s invasion of Ukraine in February, but rampant crude theft forced many producers in Nigeria to shut their fields, ensuring that the country fails to benefit.

In October, the NNPC uncovered an illegal four-kilometre pipeline from Forcados in Delta State to the sea and a loading port that was part of an elaborate crude theft operation for the last nine years.

The country lost its status as the largest oil producer for six months and has been unable to meet its OPEC quota since November 2021.

This forced the government to contract private security companies to secure the pipelines including one associated with a formerly wanted militant, Government Ekpemupolo, popularly known as Tompolo. The NNPC also said it was building a surveillance architecture similar to Saudi Aramco’s to monitor the pipelines.

Oil majors’ divestments

Multinational oil companies stepped up their plans to divest from the Niger Delta due to rising crude theft and pressure from their shareholders to seek cleaner energy sources. ExxonMobil, Chevron and Shell moved their divestment plans ahead, even as they encountered resistance from the NNPC and the Nigerian government.

NNPC blocked the sale of ExxonMobil Nigerian unit shares to Seplat Petroleum Development Company. A court case in Port Harcourt stymied Shell’s divestment plans.

In July, Panoro Energy, a London-based and Oslo-listed oil and gas company, announced the sale of its wholly owned subsidiaries, Pan Petroleum Services Holding BV and Pan-Petroleum Nigeria Holding BV, to PetroNor E&P ASA.

Ikike oil field production

TotalEnergies, which operates Oil Mining Licence 99 in partnership with the NNPC, started production from the Ikike field in Nigeria in July.

The company, which owns 40 percent of the oilfield located 20 kilometres off the coast at a depth of about 20 meters, said the Ikike platform is tied back to the existing Amenam offshore facilities through a 14km multiphase pipeline. According to TotalEnergies, it will deliver peak production of 50,000 barrels of oil equivalent per day by the end of 2022.

Oil bids

The Nigerian government completed oil marginal fields and in December announced it would offer seven deep offshore oil blocks for investors in its 2022 mini-bid round with the aim of spurring new exploration and drilling activities in the country’s prospective deep waters.

The regulator said the oil blocks under the bid exercise will cover an area of approximately 6,700 kilometre square in water depths of 1,150 metres to 3100 metres.

Agreement signed for Nigeria’s first Floating Liquefied Natural Gas project

UTM Offshore signed an agreement with United Kingdom’s Kellogg Brown and Root, Japan Gas Corporation and Technip Energies for the front-end engineering design for Nigeria’s first floating liquefied natural gas (FLNG) project.

The 1.52 million tonnes per annum FLNG facility, with a capacity to process 176 million standard cubic feet of natural gas per day and condensate, will have a storage capacity of 200,000 cubic metres, and would be located 60km from the shore of Akwa Ibom State, Nigeria, was conceived to serve the global energy market.