Oil & Gas Field
|Total Market Size||389||408||428|
|Total Local Production||13||13||13|
|Imports from the U.S.||301||316||332|
Note: Figures in millions of dollars
Estimates from industry contacts and NNPC
Exchange rate: 150 Naira to 1 USD
Nigeria serves as a hub for oil and gas exploration, production and services in the West African Gulf of Guinea region. The establishment of the Joint Development Authority (JDA) to manage oil and gas resources in the joint development zone between Nigeria and Sao Tome and Principe offers tremendous investment opportunities. Since the first deep-water oil bid rounds in 2000, Nigeria has regularly and successfully offered for sale oil acreages in both Nigeria and in the Joint Development Zone (JDZ), which offer investors abundant investment opportunities. Within the upstream and downstream segments, opportunities abound in different sub-sectors related to core exploration and production, such as: exploration and production, drilling and manufacturing equipment, support services, marketing, construction, engineering and consulting services, transportation and storage of crude oil, insurance, legal services, facilities maintenance,and environmental management. Nigeria has recoverable gas reserves estimated at between 124 -187 trillion standard cubic feet (Tcf) and additional undiscovered natural gas potential conservatively estimated at about 45-100 Tcf. Nigeria is a “gas surplus” country with gas life expectancy projected to last 109 years. At present, about 75% of associated gas produced as a consequence of oil production activities is flared.
The Nigerian market offers significant opportunities for U.S. firms with a keen interest in expanding their operations internationally, and the oil and gas industry remains one of Nigeria’s most lucrative and viable investment opportunities. Business observers believe that the oil and gas sector offers consistent opportunities for marketing essential capital equipment and technology, for both extraction and production. Drilling equipment appears to hold the most promise for U.S. exporters.
The supply and services sector of Nigeria’s oil and gas industry is continually expanding as the country’s oil and gas industry expands into new terrain, including the deep offshore. The government of Nigeria annually budgets an average of about $12 billion for the oil and gas industry, which offers tremendous potential for investment to local and international operators. The oil and gas industry remains one of Nigeria’s most lucrative and viable investment opportunities, with oil and gas machinery and services a key market because of its unrivaled potential as a source of investment opportunities
Oil and gas machinery is number one due to its unrivaled potential as a source of investment opportunities for businesses in Nigeria. Business observers believe that the oil and gas sector offers consistent opportunities for marketing essential capital equipment and technology, for both extraction and production. Drilling equipment appears to hold the most promise for exporters, with total sales in this sub-sector projected to exceed $500 million in 2008 and to increase over the next four years. This is mainly due to production activity in the offshore deep-sea region, which accounts for about 27% of total daily production and is estimated to peak by 2018. The lubricant segment of the oil sector remains most lucrative, as there is yet no price control. Training services is another area where service companies have comparative advantage especially in exploration and production, engineering and seismic techniques.
Within the upstream and downstream segments, opportunities abound in different sub-sectors related to core exploration and production, such as: exploration and production, drilling and manufacturing equipment, support services, marketing, construction, engineering and consulting services, transportation and storage of crude oil, insurance, legal services, facilities maintenance, and environmental management. The
Government planned to hold a bid round in the 1st quarter of 2010, which will offer additional investment opportunities in Nigeria’s lucrative oil and gas industry, however, this was shelved. It is unlikely that the government will hold new bid rounds until after general elections in April 2011. In the interim, Shell auctioned off four of its onshore and shallow/swamp acreages to indigenous firms. Currently, the Government is focusing on the reorganization of NNPC, the national oil company, deregulation of the downstream oil and gas industry, enacting a Petroleum Industry Bill and renegotiation of expired oil leases.
One point to note is the establishment of a new electronic one-stop transaction center - the Nigerian Petroleum Exchange (NipeX) - aimed at improving procurement processes in the oil and gas industry and institutionalizing world-class contracting procedure. NipeX is the amalgamation of the joint qualification system and the e-marketplace. The e-market place is an electronic petroleum market place project initiated in 2005 to improve cycle time for procurements of goods and services in Nigeria’s oil and gas industry. This system has now been linked to an industry-developed joint qualification system (JQS), and aims to ensure open and competitive bidding, capture information on all transactions, maintain performance monitoring and cost benchmarking while reducing administrative costs on contract tendering.
Due to the government’s commitment to phase out gas flares in Nigeria’s oil and gas industry, and following its inability to enforce the 2008 flare out deadline, the Nigerian Senate passed the Gas Flaring (Prohibition and Punishment) Bill, which sought to ensure the end of gas flaring in Nigeria by December 31, 2010. Under the Bill, companies which flare gas from January 2011 will pay the prevailing international market price of gas for the amount flared (according to sources this is still in the implementation stage). This legislation is a key element of the government’s Gas Master Plan, aimed at encouraging massive investment in gas infrastructure and improved domestic utilization.
The Minister is also authorized to shut down any wells producing flared gas (but this is unlikely). In addition, the bill further stipulates that oil companies must provide reports showing quantity of gas flared, reserve, location and composition within 90 days. Also, all operators are required to submit their plans on how they intend to utilize the flared gas to the Minister of Petroleum for approval on or before the flare-out date of December 2010.
The oil companies had signaled their intention to abide by these provisions provided they took effect in 2012. Of the various gas gathering and commercialization projects initiated, some are currently in the developmental stages. These projects including:
Liquefied Natural Gas projects (LNG), Gas to Liquids (GTL) and Natural Gas Liquids (NGL), domestics gas market expansion, Independent Power Projects (IPP), the West African Gas Pipeline and Trans Saharan Gas Pipeline projects, offer tremendous opportunities for gas investors ranging from manufacturing, construction and services within the full spectrum of gas development