Nigeria’s oil and gas sector failed to maximize the opportunities brought by higher oil and gas prices in 2022 due to several challenges, one of which was crude oil theft.

In October 2022, Nigerian Minister of State for Petroleum Resources Timipre Sylva said oil theft was affecting the entry of foreign currency into the country. At the time, he stated:

  • “Oil theft has denied the country an estimated 700,000 barrels of crude per day. The adverse effect of this is the drop in crude oil production and the decrease in national income.”

Multilevel losses: The profits of companies in the oil and gas industry have decreased by 30% per year for the last three years, for both upstream and downstream companies. Daily crude production fell below 1 million barrels per day (bpd) and sharply reduced export earnings and foreign exchange reserves to a record low.

Lack of collection: Oil and gas analyst Etulan Adu told Nairametrics that international oil companies (IOCs) have pushed to divest marginal assets on land and Nigeria has seen an increase in indigenous participation in the industry. But the gains from higher oil and gas prices eluded the country in revenues amounting to more than $15 billion by some estimates.

According to Adu, Nigeria’s oil and gas sector has struggled to survive since the first quarter of 2022, despite rising crude prices and major oil-producing countries making profits. Nigeria lost its position as the top oil producer in Africa to Angola and regained it in the fourth quarter of 2022. He said:

  • “The challenge of oil theft, pipeline vandalism and lack of investment in upstream activities pushed Nigeria’s oil production to its lowest point in 30 years. We saw the government and the Nigerian National Petroleum Company (NNPC) engage stakeholders to end the theft of crude oil by hiring private security firms that have significantly assisted in the return of oil production to more than 1.2 million barrels per day (bpd)”.

Can we be optimistic? Etulan Adu tried not to be too optimistic for 2023 as the country will experience a change in government administration. Although several deals on new floating liquefied natural gas (FLNG), gas export pipelines to Europe, and many projects were announced in 2022, energy analysts fear that some of these projects may not come to fruition amid challenges such as lack of financing and politics. willpower. adu said:

“2022 brought the conversation around gas and power generation as a solution for economic development, diversification and job creation to the forefront and the Nigeria Liquefied Natural Gas (NLNG) Limited Train 7 project is doing well. Offshore blocks are being issued for bidding; revenues are also down 13% per year. This means that the overall sales of these companies are declining and subsequently the profits are also falling.

  • “Despite the challenges of 2022, investors are bullish on the Nigerian oil and gas industry and seem confident of long-term growth rates. However, in 2023, we expect Liquefied Petroleum Gas (LPG) aka cooking gas prices to remain high for the common Nigerian, gasoline prices to remain high, increased oil production to as the government continues to fight the problem of theft of crude oil. There will also be more investments in natural gas.”

Roller Coaster Year: Oil and gas analyst Kayode Oluwadare says it has been a roller coaster in terms of production and prices for the Nigerian oil and gas industry. He highlighted the fact that the Russia-Ukraine war has had a significant impact on the price of oil since the first quarter of 2022. He said:

  • “It is quite unfortunate that Nigeria has not been able to maximize or take advantage of the price increase that went up to $100 a barrel at some point. We lost some ground, unlike Saudi Arabia, Qatar, and even the United States posted big gains from crude oil sales.
  • “Looking at the performance of the 2022 oil industry, we saw Nigeria’s crude production hit an all-time low, at a point where we were just over 900,000 barrels per day. Although some concerted efforts have been made through the joint task force headed by former Niger Delta militant Tompolo, which is combing the Niger Deta region for illegal pipelines and other facilities that have helped prevent oil theft oil that has been going on for decades. ”

Some positive projections: However, the good news is that the oil market projections are good and are reflected in the new $75 benchmark set in the 2023 budget. Oluwadare says that in 2023, the following factors are likely to push oil prices higher: Petroleum:

  • Russia has decided to stop exporting its oil to price cap countries, so the implication is that Russian production will fall, although some of that product is expected to be diverted to countries like China, India and Pakistan. But in general, production will fall.
  • There will be some type of price increase in Europe, which is a net importer of oil and gas. If prices rise in Europe, as a result of the price cap, there are opportunities for Nigeria to participate more in the European market. When production falls in the global scheme of things, prices will go up, that’s Basic Economics.
  • Starting in January 2023, China will ease some strict Covid-19 rules for travelers, so China will open up more in the coming months. This is a big deal for the oil and gas industry as demand increases, which will also lead to an upward trend in oil prices, which Nigeria can take advantage of in 2023.
  • Natural gas has always followed the trend of crude oil, although there has been some separation between the two markets due to increasing volumes of pipeline gas and liquefied natural gas in the markets. However, some gas markets are still indexed to crude oil, especially in Asia, which is the world’s largest LNG market.
  • Nigeria Liquefied Natural Gas (NLNG) Limited has had a good 2022 taking advantage of the global increase in the price of LNG, although at some point, production fell when the company was operating at 60% capacity due to problems with gas from food and crude. oil theft The outlook for 2023 is good for the Nigerian gas market because NLNG is managed efficiently. The Russian oil price peak also affects Russian gas, so the drop in Russian gas production also provides an opportunity for Nigeria to take advantage and increase its gas production and increase its profit margin.

A good ending: Production engineer James Akwaji told Nairametrics that Nigeria’s oil and gas sector has faced challenges for many years, but the NNPC and security agencies have made notable progress in stopping crude oil theft and other activities. dire in the south-south region of Nigeria, where the oil and gas companies are located.

According to Akwaji, data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and other international agencies show that the country’s oil and gas profits increased between September and November 2022. This shows that the oil and gas sector in Nigeria he’s going to finish strong in 2022, despite all the challenges he’s been through.