Author: Sasforde

Nigeria, Africa’s top oil producer, is experiencing an acute shortage of fuel, which is causing huge disruption across the country.

People are waiting at petrol stations for several hours, some into the night trying to get fuel.

The longest queues have been in cities like the capital, Abuja, and the commercial hub of Lagos, at those petrol stations that actually have some fuel in stock.

In some places, prices have increased by up to four times on the black market.

It is not new for the country to run short of fuel as its oil refineries are not working to capacity.

This means Nigeria exports its crude oil and then imports refined products for local consumption.

Controversy over the government’s plan to scrap subsidies on petroleum products has reportedly also caused bottlenecks in supplies.

Nigeria’s state-owned oil company says the current shortages are because measures were taken to quarantine millions of litres of adulterated fuel already on the market.

The methanol-blended petrol was imported earlier this month, with many Nigerians reporting mechanical damage to their vehicles after using it.

The Nigerian National Petroleum Corporation now says it plans to deliver 2.3 billion litres of petrol – and that its depots and retail outlets will start round-the-clock operations in an attempt to address the frustrating long queues.

Apart from retaining its position amongst the leading oil and gas producers in Africa in 2022, Nigeria, with over 37 billion barrels of crude oil reserves, has the potential to improve its energy exports to Europe and help address anticipated crude oil and natural gas shortages.  With the European Union planning to ban crude oil imports from Russia by increasing trade with other non-Russian economies and the Russian government promising to cut gas supplies if sanctions from western countries continue, potential supply disruptions to Europe are anticipated. Accordingly, the west African country is expected to ramp up production in 2022 and retain its position as Africa’s largest crude oil producer, a development that will enable Nigeria to increase its energy capacity available for exports.

 

Nigeria’s annual crude oil production is expected to increase to 1.46 million bpd in 2022,  following low production levels in 2021 that were driven by the COVID-19 pandemic. This will provide an opportunity for Nigeria to increase its exports to Europe, become a global energy hub and to fully make use of its hydrocarbon resources for economic growth. Nigeria heavily relies on its offshore projects to sustain crude oil production and supply, with 65% of the country’s total production in 2022 anticipated to come from such projects. However, this will change with Nigeria’s crude oil production anticipated to decline in 2023 onwards due to decreases in production in legacy fields. Nigeria will have to wait for deep water projects to come online to improve its production capacity, according to the African Energy Chamber’s (AEC) Q1 2022 Outlook.

 

“Nigeria needs to ramp up crude oil production on existing discoveries that have not yet materialised to be able to sustain a secure supply in future to meet local, regional and international demand. Lifting of force majeure at the Brass terminal, Bonny NLNG and Okpai Power Plant comes at the right time. We have to continue paying attention on vandalism, sabotage and theft in oilfields. The close collaboration between the government and Industry could not be more important now” stated NJ Ayuk, Executive Chairman of AEC.

 

Meanwhile, on the gas front, Nigeria’s massive production capacity in 2022 will place the country among the top three producers in Africa and a potential supplier to meet demand in Europe. Nigeria has an estimated gas reserve of 209 trillion cubic feet and will produce 1,780 billion cubic feet in 2022, up from 1,450 billion feet in 2021. Existing producing projects and the projects currently under development in Nigeria are expected to ensure a resilient supply through 2025. With this portfolio, Nigeria has an advantage for Europe to look up to the west African country as a potential supplier.

 

In addition, the multi-billion 4,128km Trans-Saharan Natural Gas Pipeline being built by the governments of Nigeria, Niger and Algeria will enable the integration of Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi Pipelines for Europe to leverage west and north Africa’s oil and gas resources to meet demand. Once completed, the pipeline will transport 30 billion cubic metres of natural gas per year and Nigeria, as a leading producer in Africa, can produce a significant share of that capacity.

 

“Nigeria is rich in oil and gas resources but still does not have adequate infrastructure such as a functioning refinery. In order to utilize its oil and gas resources effectively, Nigeria needs to build more infrastructure locally to process its energy. To be able to build the infrastructure needed, there is a need for direct involvement from a combination of the private and public sector partners,” stated Hendrick Malan, the CEO of energy market research firm, Frost & Sullivan, in an exclusive interview with the AEC.

 

Additionally, Nigeria’s current natural gas producing fields are expected to see a steep decline as we approach mid-2020s, a worrying situation that can reduce the country’s production capacity. Majors including ExxonMobil, Shell and TotalEnergies, who have been top producers of oil and gas in Nigeria, are expected to diversify their portfolios from 2022 onwards and exit the market, a move that might negatively affect production and reduce the ability of the West African country to expand its energy exports to Europe. ExxonMobil has already signed a $1.2 billion deal with local firm Seplat Energy to handover four oil mining licenses and natural gas recovery plants. Factors such as vandalism of infrastructure, a continued lack of investment in new exploration activities and political instability/civil unrest in oil and gas rich regions of Nigeria also continue to disrupt the country’s ability to optimize oil and gas production and increase exports.

 

Regulatory reforms and market improvement

 

The recent enactment of the Petroleum Industry Act (PIA) is a game changer for Nigeria’s oil and gas market with the regulation anticipated to increase the entrance of international majors and investors. The PIA is expected to provide clarity to market players on issues around taxation, investment and licensing, that have previously slowed down projects’ deployment. The law will boost investment in oil and gas upstream activities to improve exploration, production, infrastructure development and the country’s energy portfolio.

 

Despite efforts the Nigerian government has implemented to improve its oil and gas market, the country’s hydrocarbon energy resources remain untapped. Nigeria has not been able to fully leverage its oil and gas reserves to meet local demand and to increase exports. Today, 50% of the Nigerian population is living in energy poverty. AEC’s upcoming annual conference, African Energy Week (AEW) which will take place October 18-21, 2022, in Cape Town, will discuss policy, investment and infrastructure requirements for Nigeria to boost its energy production to meet local demand whilst expanding its energy exports to Europe.

 

With Europe seeking alternative supply chains to reduce reliance on Russian gas, Nigeria could provide a significant share of the capacity the bloc needs. The European Commission, governments, energy companies and financial institutions can help Nigeria with the funding and technical expertise required to speed up the development of infrastructure for increased production and energy transportation. AEW 2022 will hosts discussions around future Nigeria-Europe partnerships on oil and gas trading.

 

The African Petroleum Producers Organisation, a consortium of hydrocarbon producing countries, will rally its member countries including Africa’s top oil and gas producers Nigeria, Equatorial Guinea and Algeria to participate at AEW 2022 and discuss continental energy market trends, opportunities and the role its member states can play to ensure global energy security.

 

AEW 2022 will host panel discussions, round tables, presentations and high-level meetings about how Nigeria and APPO member states can improve exports to Europe whilst addressing energy poverty at continental level.

Distributed by APO Group on behalf of African Energy Chamber.

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AEW 2022 is the AEC’s annual conference, exhibition and networking event. AEW 2022 unites African energy stakeholders with investors and international partners to drive industry growth and development and promote Africa as the destination for energy investments.

Society of Petroleum Engineers (SPE) has said exploration, production and other operations in the Nigerian oil and gas industry can now hold without support from expatriates.

Nigeria had granted 126,893 quota licences to expatriates, who operated with 14,690 companies. In the oil and gas sector, the figure has dropped steadily as efforts are being made towards ingenious participation in the oil and gas sector.

The Chairman of Society of Petroleum Engineers (SPE) Nigeria Council, Prof. Olalekan Olafuyi, noted that the impacts of Covid-19 pandemic showed that the country could solely handle its oil and gas sector and indeed drive the development of energy transition.

Speaking ahead of a yearly lecture of the society, Olafuyi stated that in the short term, Africa must maximize opportunities created by the availability of gas as a transition fuel at least in the next 30 years to create jobs and generate capital for the adoption of cleaner forms of energy.

In the long-term, he added that Africa’s energy should purely be renewables powered, driven by advancements in hydrogen energy technology, solar, battery storage, and wind power.

Olafuyi said COVID-19 had a positive side where the industry ran with a completely indigenous workforce; showcasing that Nigeria has developed the capacity to run the industry.

“The pandemic has shown that we have developed competence locally in terms of the workforce and vendors providing services. With proper legislative frameworks and implementation, homegrown innovations could foster effective energy transition at the lowest possible cost. This would strengthen our economy in the long run.

“Now, any investor would be confident that they could venture into business with locally available competencies without any need for expatriates who are relatively more expensive to maintain in terms of labour costs,” he stated.

Olufuyi, while speaking on the Petroleum Industry Act, noted that the PIA has re-established the confidence the industry has in the government for sustainable and competitive oil and gas industry as investment interest deepens with confidence.

Speaking further on cost-cutting options, SPE noted that cost-cutting in the form of layoffs should be avoided unless it is seen by all parties as the only solution, adding that there is need to continue to push ideas and opinions that drive best practices.

“We recently hosted a summit in Port Harcourt, attended by policymakers, power sector companies, regulators, etc. where a roadmap was drafted and presented to the government, in solving sector’s power challenges,” he said.

Advising the country to expand local capacity beyond oil and gas, Olafuyi said dependence on indigenous competence across sectors should be up to 80 per cent.

He noted that SPE, in the last 10 years, had witnessed significant increase in the number of its flagship events, stressing that while the society had two flagship events in 2012, today it has moved to five in addition to several activities.

Olafuyi said there is a need to develop the Nigerian National Petroleum Company into the likes of Saudi Aramco, especially with the models as defined by PIA, which is aimed at building a strong economy for Nigeria and Africa in a wider scope.

He said SPE’s Oloibiri lecture series and energy forum 2022 would focus on diverse conversations on investments in the oil and gas industry.

Olafuyi added, “To accelerate the energy transition, we believe in homegrown pragmatic solutions suited to our environment and our nation-building. We need to evolve considering our environment. Even though Nigeria and Africa are not the major contributors to CO2 emission we still act as though we were and hence advocate for cleaner forms of energy, to support the transition.”

“You can see this in the gains being recorded by the NLNG and the Federal Government declaring this decade as the decade of gas. SPE would always advocate best practices and not borrowed or copied practices to sound politically correct. We are apolitical but demonstrate strong commitments to our environment and sustainable development.”