After 64 years of independence and more than 60 years of oil exploration, crude oil accounts for less than 10 percent of Nigeria’s GDP, but accounts for about 90 percent of Nigeria’s foreign exchange earnings and more than half of government revenue.
Nigeria is endowed with one of the world’s largest proven oil reserves at 37 billion barrels, and has entered the world stage alongside most of the world’s largest oil producing countries by taking an active position in determining international energy supply and demand issues. It had the potential to.
Nigeria and the Organization of the Petroleum Exporting Countries (OPEC) have significant influence on global oil market prices and have naturally increased their ability to control crude oil production with the aim of maintaining relatively high prices to maximize profitability. The amount was jointly agreed upon.
In 1973, the cartel was able to influence an oil boom that quadrupled the price from $3 to $12 per barrel.
Also, from 2006 to 2009, oil prices rose from $74.59 to $109.25. Again, from 2010 to 2013, oil prices rose from $84.24 to $100.95.
Life after oil
During these boom years, most oil-producing countries achieved economic success and also learned not to put all their eggs in one basket by intensifying non-oil livelihood plans, but Africa’s largest oil producer The country overlooked this point.
For example, Saudi Arabia, the world’s largest oil exporter, has taken full advantage of the sustained rise in oil prices to build new cities. These projects were designed to burnish the country’s image, develop a non-oil economy, and create enough jobs to maintain social stability.
For the UAE, building an economy that is less dependent on the rise and fall of oil prices and has a skilled workforce in a variety of industries is more than just lip service. The country has a development plan called “2020: Toward the Next 50 Years,” which looks ahead to the next 50 years starting in 2021.
The plan focuses on advanced technology, strengthens investment in future generations, reduces dependence on oil by diversifying imports and exports, increases social cohesion, and improves the productivity of the national economy. It aims to build Emirati values for future benefits. generation.
The Norwegian government views oil revenues not as an immediate source of waste, but as a “transformation of wealth from natural resources into financial wealth” that considers the future by upholding the ethical obligation to share oil wealth with future generations. Ta.
Nigeria is different
For Nigeria, the narration is different. Policy failures, wasteful spending, and an inability to diversify away from gas prices and build a post-oil life have limited the country’s economy from reaching its full potential and led to the famous completely susceptible to the effects of “curses”.
“There is no doubt that the sale of IOC has created opportunities for local operators and service providers. But weak governance will ultimately suffocate everything. Nigeria’s oil and gas industry will thrive Governments have a huge responsibility to facilitate things, make things more efficient and keep things that way,” Ofserv CEO Dimej Bashir told Africa Energy Magazine.
Despite producing commercial quantities of oil for more than 50 years, Nigeria’s oil production has not recently exceeded the 2.3 million barrels per day it achieved in 1979. At the time, its oil production was insufficient to spark a Middle East-style economic miracle.
Analysts at the Asset and Resource Management Company Limited (ARM) Group said: “Since the early days of exploration in the Niger Delta region, Nigeria has faced challenges of oil theft and pipeline vandalism. “This has led to production disruptions,” analysts at Asset and Resource Management Company Limited (ARM) Group said in their 2024 report.
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It added: “These issues have had a significant impact on Nigeria’s ability to produce crude oil to its full potential, resulting in a continuous contraction in the sector’s growth rate.” Ta.
Recent modest advances, such as the passage of the Petroleum Industry Act (PIA), the rise of domestic operators, and the emergence of modular refineries, have led to inefficient national oil companies, loss-making refineries, and a decline in foreign direct investment (FDI). is hindered by.
“Nigeria’s refining capacity is substantial, but is hampered by outdated infrastructure and mismanagement,” ARM analysts said.
It added: “Recent efforts to set up modular refineries have increased refining capacity, but it is still far short of meeting domestic demand.”
NNPC rot
Analysts said thorough oversight of Nigeria’s national oil company is the starting point to ensure the country’s oil and gas resources deliver maximum value to the people.
“Nigeria is an unstable country and our oil and gas industry does not have a good reputation internationally, making it difficult to obtain financing to develop greenfield projects. As the newest of the country’s various upstream, midstream and downstream sectors, Nigeria’s refineries are pioneers and at the same time face major challenges in securing feedstock,” said Michael, AIPCC Energy Chairman. Osime said.
NNPC is at the center of the turmoil as the country’s oil company. The company, which is entrusted with a share of 445,000 barrels of the country’s oil production through various agreements with domestic and international oil partners, has for years been forced to switch from crude oil to refined products as it can no longer maintain its refineries. I’ve turned my attention to you.
When the company began opaque oil exchanges in 2010, its refineries were operating at only about 20% of capacity. The following year, banks, reluctant to further finance open account imports with losses of more than $3 billion, forced the government to begin granting exemptions to distributors, ushering in an era of fraudulent gasoline subsidies.
“Nigeria can learn valuable lessons about operational excellence by looking at successful oil companies like Shell and Exxon Mobil. and set standards that NNPC and other local companies should aim to meet,” one oil company executive told Business Day.
He added: “For example, introducing technology in exploration and production can lead to lower costs and less environmental impact, making Nigeria’s oil sector more sustainable in the long run. ” he added.
The NNPC operating model also needs cleanup. The company utilizes joint venture agreements with local and international oil companies to produce from onshore and shallow water wells. Although the company owns 60% of the benefits in these contracts, it is often unable to contribute its share of costs, leading to what the industry calls cash arrears. However, it recently paid a $2.44 billion cash call debt to its joint venture partner, a multinational oil company.
Most of these areas are plagued by sabotage and community problems, forcing multinational partners to withdraw. Nigerian law requires these oil fields to be decommissioned (basically, left in an environmentally friendly state), but the cost is enormous. So they found a creative solution: selling their shares to a local oil company.
However, NNPC opposes this arrangement. Shell, ExxonMobil, and more recently ENI have struggled to exit stakes in onshore assets.
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“When we look at production, excluding the 600,000 barrels per day from deep sea, it is approximately 1.3 million barrels per day, and only 700,000 barrels per day remains from land-based operations. This is a significant decline from the 2 million barrels per day level,” AA Holdings Executive Chairman Austin Avuru said in the Africa Energy 2024 report.
He added: “As these IOC deals resolve and independents take control, we expect to see a surge in new investment by these independents, perhaps in the near future. Production could reach 4.5 million barrels per day.
Analysts at ARM said that apart from the upstream sector, Nigeria’s downstream sector suffers from mispricing of products, security concerns and aging, despite being the world’s 13th largest crude oil producer. He said that the country is facing challenges such as poor infrastructure.
“The sector faces a variety of challenges, including inadequate supply chains, safety concerns around pipelines, unreliable supply due to vandalism, outdated pipeline infrastructure, malfunctioning refineries, and logistical challenges. “We are working on it,” said an ARM analyst.
Currently, the country is home to the Dangote Oil Refinery, which is expected to change Nigeria’s oil refining prospects.
