Business Monitor (BM) released its latest findings on Nigeria’s volatile oil and gas sector from its newly-published Nigerian Oil and Gas Report. The report notes that Nigeria's hydrocarbon sector continues to struggle amid a worsening political and business environment. Most recently, Chevron’s decision to move out of the OKLNG project signals that even the large upside potential of the Nigerian gas market is not sufficient to offset the degradation in investor sentiment.
The weak output flows in 2012 were the consequence of flooding, repeated oil thefts and regulatory uncertainty. BM expects continued feeble production from 2013 and for the following two years. They note that output should ramp up as many large fields come online after 2014, more than offsetting current depletion.
Adoption of the Petroleum Industry Bill, which the company expects around 4Q13-1Q14, would be a strong signal for investors that Nigeria's hydrocarbon sector is ready to move forward.
The main trends and developments from the report include:
Chevron decided to withdraw from the OKLNG project following the path Shell adopted last year. This brings another blow to Nigeria's gas market limiting further upside potential for liquefied natural gas (LNG) exports. The report notes that the soon-to-open Escravos GTL plant could help monetize part of the gas currently flared.
China agreed on a US$1.1billion loan deal with Nigeria, bearing a very advantageous interest rate. In exchange, the West African country will allow the lender to get a privileged access to natural resources, including oil. BM expect that further deals could allow Nigeria to revive its oil and gas sector by boosting export potential for producers.
Disturbances and outages due to oil thieves are continuing throughout 2013, with Shell having declared force majeure on Bonny Light exports several times since the beginning of the year. BM forecasts that 2013 production will be slightly lower than 2012 estimates, reaching 2.5million b/d.
Oil production should increase to an estimated 2.7million b/d by 2020 from 2.5million b/d in 2012, as ambitious projects such as Usan (180,000b/d) peak and Egina (150,000-200,000b/d) come on stream.
Nigeria’s crude consumption is forecast to rise at a compound annual rate of 7% year-on-year between 2012 and 2022, boosted by anticipated strong GDP growth. BM forecasts consumption to rise to an estimated 495,000b/d by 2022 from 252,000b/d in 2012.
BM forecasts gas production to increase to an estimated 56.2Bcu m by 2022 from 36.4Bcu m in 2012, as the authorities and companies reduce flaring and start monetizing associated gas resources.
Booming demand from the government's ambitious power sector plans and large export engagements will bolster production growth. The report sees Nigerian gas consumption rising to 15.0Bcu m by 2022 from an estimated 5.8Bcu m in 2012.
Nigeria National Petroleum Corp. (NNPC) is aiming to more than double its annual LNG production to over 52MMtonnes/year (t/y) (71.76Bcu m)from 22MM t/y (30.36Bcu m). This was announced September 19, 2012, at a forum of LNG producers and consumers held in Japan. Group Nigeria managing director of NNPC, Andrew Yakubu, gave no deadline as to when this target would be met, but he did clarify that new LNG projects in Nigeria will help the company meet this goal.
In October 2012, Nigeria's petroleum minister, Diezani Allison-Madueke, announced that the government is planning to direct more than US$1.6billion toward the repair of three refineries. The maintenance work started in late 2012 and is due for completion in October 2014. The three refineries are located in Port Harcourt, Warri, and Kaduna. The Port Harcourt refinery is currently halted indefinitely, as oil thieves damaged the feeding pipeline in early 2013.
Business Monitor is a leading, independent provider of proprietary data, analysis, ratings, rankings and forecasts covering 195 countries and 24 industry sectors.
Business Monitor (BM) released its latest findings on Nigeria’s volatile oil and gas sector from its newly-published Nigerian Oil and Gas Report. The report notes that Nigeria's hydrocarbon sector continues to struggle amid a worsening political and business environment. Most recently, Chevron’s decision to move out of the OKLNG project signals that even the large upside potential of the Nigerian gas market is not sufficient to offset the degradation in investor sentiment.
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