The Nigeria oil and gas market is expected to grow at a Compound Annual Growth Rate (CAGR) of less than 5 per cent during the forecast period of 2020 – 2025.
Major factors driving the market are the increasing investments in the upstream and downstream sectors of the oil & gas industry. Oil and gas production had been hampered in Nigeria in the past few years, due to the attack on oil and gas infrastructure by militants. Further, oil theft has been one of the major issues faced by the oil & gas market in Nigeria, which resulted in huge losses to operating companies in the country.
Nigeria’s offshore oil and gas industry continues to expand, albeit not very fast, opening more market opportunities. The growth of Nigeria’s offshore exploration and production activities has been mainly driven by the efforts of governments in their region.
Lack of infrastructure, uncertainties in regulations, and security concerns have led Nigeria to under-utilize its refining capacities, thereby pushing the country to maintain its costly regime as a net importer of refined petroleum products. However, Nigeria is on the edge of altering refined products’ supply dynamics in the region with the help of the upcoming Dangote Refinery and is expected to become the regional refining hub in the coming years.
Given the country’s huge gas reserve and its advantage as a clean fuel, gas has already witnessed a massive surge in its domestic consumption in the recent years. Further, the country is steadily moving away from oil and exploring different ways to replace the oil consumption with gas in power as well as the transportation sector. The shift to gas is also supported by the fact that major oil reserves are likely to get dry in coming three to four decades. Hence, the oil market is considered to be one of the most vulnerable markets where natural gas has the highest potential to penetrate.
Moreover, gas production has become a major focus for the oil & gas companies, in response to strong investment in gas-to-power projects, across the region.
Further, key trends reveal the offshore sector to be fastest growing market in Nigeria’s oil industry.
Nigeria’s offshore oil and gas industry continues to expand, albeit not very fast, opening up more market opportunities. The growth of Nigeria’s offshore exploration and production activities has been mainly driven by the efforts of governments in their region, such as providing key incentives and supporting policies to unlock the investment opportunity, as well as a growing list of international oil and gas companies interested in exploring alternative fields to replace the maturing offshore producing sites.
The China National Offshore Oil Corporation has mobilized a USD 3 billion investment, in addition to the USD 14 billion already spent on its existing oil and gas operations in the West African country. A large share of this investment goes into the operations in Nigeria.
One of the most ambitious ultra-deep offshore projects is the Egina oil field in water depths of between 1,400 and 1,700 meters. Total projected that the oil field is expected to peak at 200,000 barrels/day.
Further, since 2008, the Nigerian government has been trying to pass the Petroleum Industry Bill (PIB). The country lost billion dollars of investments due to the failure to pass the bill. One section of the bill was finally passed in 2018, as the Petroleum Industry Governance Bill (PIGB).
Under this, the oil sector will be restructured, including the national oil company, the oil and gas regulator, the Department of Petroleum Resources (DPR), and the Nigerian National Petroleum Corporation (NNPC), which will become the National Petroleum Company (NPC), a fully commercial integrated entity. This reform is expected to drive the Nigerian offshore oil and gas upstream market.
Therefore, due to above mentioned factors the offshore segment is expected to be the fastest growing segment.