Nigerian oil and gas

Overview

  • Nigeria is the largest oil producer in Africa and holds the largest natural gas reserves on the continent.
  • Nigeria is among the world’s top five exporters of LNG.
  • The country became a member of OPEC in 1971.
  • The oil and gas industry is primarily located in the southern Niger Delta area.
  • Oil and gas resources are the mainstay of the country’s economy.
  • The oil and gas industry accounts for typically 75% of government revenue and 95% of total export revenue.
  • The EIA estimates that in 2012 total primary energy consumption in Nigeria was approximately 4.5 quadrillion Btu.
  • The electrification rate is estimated at 41%.

Oil and oil products

  • Nigeria has an estimated 37 billion bbls of proved crude oil reserves.
  • The majority of reserves are found along the Niger River Delta and offshore.
  • Crude oil production reached its peak of 2.44 million bpd in 2005.
  • Oil production recovered somewhat after 2009 but still remains lower than its peak level because of ongoing supply disruptions.
  • Nigeria produces mostly light, sweet crude oil of which the vast majority is exported to global markets.
  • In 2014, the country produced 2.4 million bpd of petroleum and other liquids.
  • In 2014, Nigeria exported 2.05 million bpd of crude oil and condensate.
  • The US traditionally had been the largest importer of Nigerian oil until the last few years.
  • India is now the largest importer of Nigeria’s oil, purchasing approximately 370 000 bpd or 18% of total crude exports in 2014.
  • Europe continued to be the largest regional importer of Nigerian oil, importing just over 900 000 bpd of 45% of exports in 2014.
  • Nigeria consumed 305 000 bpd of petroleum in 2014.
  • Nigeria imported 164 000 bpd of petroleum products in 2013.

Oil theft and piracy

  • Since the mid 2000s, Nigeria has experienced increased pipeline vandalism, kidnappings, and militant takeovers of oil facilities in the Niger Delta.
  • Security concerns have led some oil services firms to pull out of the country and oil workers’ unions to threaten strikes over security issues.
  • The lack of progress in job creation and economic development has contributed to increased oil theft and other attacks in recent years.
  • Nigeria’s oil theft and trade business is based on a complex system of networks comprised of domestic, regional and international actors, involving various people.
  • Most oil theft operations typically involve tapping or siphoning oil from a pipeline by a hose and pumping the oil onto barges or small tankers.
  • Some stolen crude oil is taken to illegal refineries along the Niger Delta’s swampy bush areas and the refined products are then sold domestically and regionally.
  • The bulk of the crude oil makes its way to international markets.
  • Most of that oil is sold to world markets directly from Nigeria’s export terminals, which is known as white collar theft.
  • A portion of the global illegally traded oil also involves the transfer of crude oil from small tankers to larger tankers waiting further offshore, also known as ship to ship transfers.
  • Estimates of stolen crude oil vary and can reach as high as 400 000 bpd.
  • Piracy in West Africa has increased over the past few years, affecting the region’s oil industry and naval transportation.
  • Security experts say that the West African coast has become the most dangerous in the world.
  • Piracy attacks include armed robbery, kidnapping for ransom, boarding offshore oil platforms, and stealing tankers or siphoning oil from tankers.
  • Piracy in the region has focused on more crude oil and refined product theft compared with piracy in East Africa, which mostly involves kidnapping for ransom.

Refining and subsidies

  • The country has four refineries with a combined crude oil distillation capacity of 445 000 bpd.
  • The refineries chronically operate below full capacity because of operational failures, fires, and sabotage mainly on the crude pipelines feeding the refineries.
  • The combined refinery utilisation rate was 22% in 2013.
  • For several years, the Nigerian government has planned the construction of new refineries, but the lack of financing and government policies on fuel subsidies have caused delays.
  • Fuel subsidies cost US$8 billion in 2011, accounting for 30% of the government’s expenditure, approximately 4% of GDP, and 118% of the capital budget.
  • On January 1, 2012, the Nigerian government removed the federal government fuel subsidy on the grounds that it caused market distortions, encumbered investment in the downstream sector, supported economic inequalities, and created a nebulous channel for fraud.
  • The government quickly reversed course about two weeks later and reinstated a partial subsidy as public outcry and massive strikes organised by oil and non-oil unions threatened to shut down oil production.
  • Many Nigerians consider the fuel subsidy a key benefit of living in the oil rich country.

Natural gas

  • Nigeria has estimated 180 trillion ft3 of proved natural gas reserves.
  • The country is the ninth largest natural gas reserve holder in the world and the largest in Africa.
  • Natural gas production is constrained by the lack of infrastructure to monetise natural gas that is currently being flared.
  • The natural gas industry is also affected by the same security and regulatory issues that affect the oil industry.
  • Dry natural gas production in Nigeria grew for most of the past decade until Shell declared a force majeure on natural gas supplies to the Soku gas gathering and condensate plant in November 2008.
  • A significant amount of Nigeria’s gross natural gas production is flared.
  • In 2013, Nigeria flared 428 billion ft3 of its associated gas production, or 15% of its gross production.
  • The amount of gas flared in Nigeria has decreased in recent years, from 540 billion ft3 in 2010 to 428 billion ft3 in 2013.

LNG

  • Nigeria exports the vast majority of its natural gas in the form of LNG.
  • Nigeria exported approximately 800 billion ft3 of LNG in 2013, ranking it among the world’s top five LNG exporters.
  • Estimates of Nigeria’s LNG exports vary among sources.
  • Nigeria’s LNG exports accounted for approximately 7% of globally traded LNG.
  • Japan is the largest importer of Nigerian LNG and imported 23% of the total in 2013, followed by South Korea and Spain.
  • Trade patterns for Nigerian LNG have changed over the past few years.
  • Nigeria’s LNG exports to Europe have decreased significantly.
  • The country increased its LNG exports to Asia, namely Japan, following the Fukushima nuclear incident.
  • In 2012, the US did not import LNG from Nigeria for the first time since 1999.

Edited from report by Claira Lloyd

Published on 11/03/2015


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