A Critical Look at the Nigerian Oil and Gas Industry

It was said that Nigeria's oil industry would gain pace heading into 2022 after the passage of the Petroleum Industry Act (PIA) and a moderate recovery from a COVID-19-induced recession; but, the sector saw one of its most critical years on record in 2018.

The implementation of the Petroleum Industry Act (PIA), the rebranding of the national oil company, and the creation of regulatory bodies for the petroleum upstream and midstream sectors all began in 2022 under the direction of the Nigerian government. 

This year also saw the completion of bid rounds for marginal oil fields and the beginning of the production of commercial crude oil in the Northern region of the country.

Factors That Contributed to the Rise and Fall of Oil and Gas Production in 2023

The following are reasons why there was a rise and fall in the oil and gas industry from 2022 to 2023. Read below to see the factors.

Fuel Scarcity

The first few months of the year 2022 were marked by the startling disclosure that the Nigerian National Petroleum Company (NNPC) and its business partners had imported gasoline that contained contaminants. As a result, private vehicles were damaged beyond repair, and there was a shortage of relevant goods in certain areas, particularly in Lagos and Abuja. The circumstances got worse from that point on.

The NNPC was hindered in its capacity to import due to the scarcity of foreign currency, despite the fact that it was spending millions of dollars each day on subsidies. As the year came to a close, the shortage became even more severe, and Nigerians spent the holiday season worrying about whether or not they would have enough fuel in their tanks.

Northern Oil Exploration

In November, Nigeria's President Muhammadu Buhari officially launched the Kolmani Integrated Development Project, which is located in the North-East of the country. It is planned to be an in-situ development project that is completely integrated, and it will include upstream production as well as oil refining, power generating, and fertilizer production. There are approximately one billion barrels of oil reserves and 500 billion cubic feet of gas in the Kolmani area, according to the NNPC, and there is a tremendous potential for new deposits as it accelerates exploration operations. In addition, there is a huge potential for more deposits in the area.

Pipeline Vandalism and Oil Theft

As a result of Russia's invasion of Ukraine in February, oil prices climbed to as high as $130 per barrel on the worldwide market; however, rampant petroleum theft led many oil producers in Nigeria to shut down their operations, which ensures that the country would not benefit from the increase in prices.

In October, the Nigerian National Petroleum Corporation (NNPC) unearthed an illegal pipeline that stretched for four kilometers from Forcados in Delta State to the sea and a loading port. This pipeline was part of an intricate oil theft scheme that had been going on for nine years.

The nation has been unable to fulfill its OPEC quota since November 2021, during which time it fell from its position as the world's leading oil producer for a period of six months.

Because of this, the government was compelled to hire private security organizations in order to ensure the safety of the pipelines. One of these businesses was affiliated with a fugitive militant who was once on the wanted list; his name is Tompolo. In addition, the NNPC stated that in order to monitor the pipelines, it was in the process of constructing a surveillance architecture that was comparable to that of Saudi Aramco.

Sell-offs by Major Oil Companies

Due to increased petroleum theft and pressure from their shareholders to seek greener energy sources, multinational oil firms have hastened their plans to withdraw from the Niger Delta. Even though the NNPC and the Nigerian government opposed ExxonMobil, Chevron, and Shell's privatization plans, those companies forged forward with them.

When Seplat Petroleum Development Company attempted to buy shares in ExxonMobil's Nigerian business, the Nigerian National Petroleum Corporation (NNPC) intervened. Attempts by Shell to sell off its assets were hindered by litigation in Port Harcourt.

Panoro Energy, a London- and Oslo-listed oil and gas firm, sold its two wholly-owned subsidiaries to PetroNor E&P ASA in July. These companies were Pan Petroleum Services Holding BV and Pan-Petroleum Nigeria Holding BV.

Production at the Ikike Oil Field

In July, TotalEnergies began oil production at the Ikike field in Nigeria, which it manages under Oil Mining Licence 99 in conjunction with the Nigerian National Petroleum Corporation.

The business claims that a 14-kilometer multiphase pipeline connects the Ikike platform, which it controls 40% of, to the current Amenam offshore facilities, which are located 20 kilometers off the coast at a depth of roughly 20 meters. TotalEnergies predicts that by the end of 2022, the facility will be operating at full capacity, producing the equivalent of 50,000 barrels of oil per day.

Oil bids

In December, the Nigerian government stated that it would be offering seven deep offshore oil blocks to investors in its efforts in the country's prospective deep waters. This followed the completion of oil marginal fields by the Nigerian government. According to the regulating body, the oil blocks that are up for grabs in this round of bidding will encompass an area of around 6,700 kilometers squared and will be located at ocean depths ranging from 1,150 meters to 3,100 meters.

2022 mini-bid round with the goal of promoting additional drilling and exploration.

Agreement for Nigeria's First FLNG Project

UTM Offshore contracted Kellogg Brown and Root of the United Kingdom, Japan Gas Company, and Technip Energies of France to develop the preliminary design for Nigeria's first FLNG project. The 1.52 million tonnes per hour FLNG plant was designed to supply the international energy market. It will be located 60 km off the coast of Akwa Ibom State, Nigeria, and will have a storage capacity of 200,000 cubic meters. It will have the ability to process 176 million standard cubic feet of natural gas per day of natural gas and condensate.