Underperformance of Upstream operators threatening Nigeria’s energy sector- minister

The Minister for State, Petroleum Resources (Oil), Heineken Lokpobiri, has decried the underperformance of Upstream operators, citing it as a major threat to achieving sustainability in the nation’s oil and gas sector.

Lokpobiri who disclosed this in a keynote address at the ongoing 8th edition of the Nigeria International Energy Summit (NIES 2025) held in Abuja on Wednesday, stressed that the success of the oil and gas industry is predicated on the success of the upstream.

“The reason why we are struggling in the entire sector is because the upstream is underperforming. And once the upstream succeeds, the midstream will succeed and the downstream will succeed,”Lokpobiri said.

He highlighted the challenges facing the sector, to include domestic crude oil supply obligations and the need to increase production to meet both domestic and external demands.

“I believe that the only way we can increase our upstream development is by investments. We have a challenge about domestic crude oil supply obligation, which is provided for in the Petroleum Industry Act (PIA) but we can not keep what we do not produce and you can not keep what you have already committed. I do know that most of the companies operating in Nigeria have commitments when they are raising funds for investment.

“But if we increase our production, we will be able to get more volumes, satisfy both our domestic obligation and also satisfy our own external obligation.

“Let’s work together to change the narrative so that we can have a successful upstream that will translate to a successful midstream and downstream. And ultimately transforming these hydrocarbon resources to economic prosperity. Transforming these resources to revenue to be able to finance critical sectors of our economy.,” he said.

According to him, the Tinubu-led administration has continued to make progress in guaranteeing a stable and predictable regulatory and legal framework. This for him is critical for the development of the sector.

Lokpobiri noting the impact of the deregulation of the dowstream sector, said that it has created a level playing field for all operators with pricing finding its level.

He called on operators to work together with the government, particularly in the upstream sector.

“As governments, we are willing to always partner and engage. We’ve always emphasised sustainable engagement. Instead of us dragging ourselves to arbitration, instead of us dragging ourselves to the public, let’s sit together and build consensus so that together we can find solutions to the problems of the industry,” he said.

In his remarks, Gabriel Ogbechie, Group managing director of Rainoil stated that with Nigeria confronting the regulation of its downstream sector, true product costs are now impacting supply, pricing, and market behavior, requiring players to develop new strategies to ensure efficiency and adapt to new market realities.

He explained that the African downstream oil sector is set for steady growth with a projected 4%percent cumulative average growth rate over the next five years, adding that to meet this rising demand, $2.1 trillion in energy sector investment will be required by the year 2040.

He noted that Governments are increasingly collaborating with the private sector to drive investments in refining storage, pipeline networks, and distribution systems.

“Initiatives such as the Niger-Morocco gas pipeline, the expansion of LPG terminals, and regional fuel depots underscore the importance of PPPs in closing infrastructure gaps and ensuring long-term fuel security. Increased focus on gas and renewables, the rise of LNG, LPG, CNG, and emerging biofuels initiatives highlight Africa’s growing inclusion of cleaner and more sustainable energy options.

“A more diverse energy mix is emerging, with renewables expected to contribute up to 50% of Africa’s power generation by 2030, according to the International Energy Agency. In Nigeria, the Ajaokuta-Kaduna-Kano natural gas pipeline, the Nigerian gas flare commercial energy zone program, and the presidential CNG initiative all reflect a strong commitment to diversifying Africa’s world mix towards cleaner and more affordable alternative regulatory reforms.

“Across the continent, governments are adjusting policies to attract investment and improve operational efficiency in the downstream sector. Ensuring transparency, fair competition, and a stable investment climate will be key to unlocking further growth,” he said.

He explained that while these shifts present exciting opportunities, the Nigerian government must also tackle challenges such as supply chain vulnerabilities, foreign exchange volatility, and regulatory uncertainties.

Also speaking on the development in Nigeria’s downstream sector, Farouk Ahmed, Authority Chief executive of Nigerian Midstream Downstream Petroleum Regulatory Authority noted that the growth or decline of the Nigerian downstream sector depends on various factors including liberalized market which requires that the forces of demand and supply are allowed to modulate each other, leading to an equilibrium which determines the prices of petroleum commodities.

He explained that from established principles and tested national experiences, market growth is hindered when the fundamentals of demand, supply, and price are regulated adding that investments are attracted to liberalized markets because there is a clear pathway to cost recovery.

“In this regard, Mr. President from day one set this as a number one strategic objective when on May 29, 2023, he pronounced the subsidy immediately withdrawn. Thereafter, for about 18 months, we experienced an initial turbulence in supply, demand, and pricing. I am happy, however, to confirm that we are currently experiencing stability within the industry.

“This stability offers investment certainty and enables the unlocking of opportunities with every Naira investor. To strengthen the evolving liberalized markets, NMDPRA continues to offer regulatory clarity. The Authority’s initial 18 regulations have been consolidated into six regulations and revised to align them more freely with market principles, to offer a level playing field, as well as lowering entry and exit barriers.

“Next, let me speak also about the second critical variable that we see as very important in the NMDPRA, and this is the issue of competition. The PIA mandates the Authority, with the support of the FCCPC, to ensure competition in this industry. This is a priority that the Authority takes very seriously, because the ultimate beneficiaries of a competitive petroleum industry are the Nigerian citizens. Competition fosters efficiency, provides options, and ensures fair pricing,” he said.

Ahmed, represented by Ogbugo Ukoha, the Executive Director for Distribution Systems, Storage, and Retailing Infrastructure at NMDPRA, noted that competition is now compelling operators to take deliberate steps to reduce operational costs.