Challenges such as chronic underinvestment and rampant crude oil theft are hindering Nigeria’s oil and gas industry in 2023. Despite gains from subsidy removal and potential refinery improvements, the industry faces setbacks, leading to oil production falling below OPEC quotas. Dilapidated exporting terminals, pipeline vandalism, and a lack of fresh exploration contribute to the challenges. The Petroleum Industry Act (PIA) hasn’t significantly improved the sector, with political interference and non-adherence to the law impacting its fortunes. The gas sector faces a price ceiling on the domestic market, discouraging investment.
Key Points:
- Chronic underinvestment and crude oil theft threaten Nigeria’s oil and gas industry gains in 2023.
- In April, Nigeria produced less than one million barrels of oil daily, significantly below its 1.8 million bpd OPEC quota.
- Challenges include dilapidated exporting terminals, pipeline vandalism, and a lack of fresh exploration and development activities.
- The Petroleum Industry Act (PIA) has not attracted substantial new investment to boost oil production.
- Data from the Nigerian Upstream Petroleum Regulatory Commission shows that about 33 out of 57 Petroleum Prospecting Licences are non-producing.
- The gas sector faces challenges, with a price ceiling on the domestic market and disruptions to gas supply impacting Nigeria’s LNG export facility at Bonny.
- Despite global energy demand, Nigeria’s LNG export facility remains under force majeure due to recurrent sabotage attacks on pipelines and low production from aging wells.
- In the downstream sector, the removal of the petrol subsidy in 2023 led to a significant increase in fuel prices, causing panic buying and transportation fare hikes.
- Speculations arise about the possible reintroduction of petrol subsidy to maintain pump prices amid the fall in the value of the naira and crude oil prices.
- The Nigerian government denies the restoration of the petrol subsidy, emphasizing cost recovery and market forces.
Source: BusinessDay