Business
Business Hallmark’s 2025 Economic Outlook: Oil and gas sector: An oasis in Nigeria’s economic desert
– Sector will unlock Nigeria’s economic prosperity – Expert
In the midst of an economic crisis that overwhelmed Nigeria’s economic managers in 2024, the oil and gas sector turned out to be the shining light.
While other sectors stuttered, the much revamped oil and gas sector emerged as the major driver of growth of Nigeria’s troubled economy in 2024, providing relief and succour to a confounded government and beleaguered population.
With remarkable feats in the sector, like the resolution of disputes arising from the divestment of International Oil Companies (IOCs) oil wells in the troubled Niger-Delta region, which held up oil and gas production for years, to the spike in crude oil production that boosted the nation’s external reserves and provided more revenue to the three-tiers government to play around with, the coming on board of the 650,000 barrels per day Dangote Refinery in Lagos and the resuscitation of the moribund Port Harcourt Refinery in Rivers State, and Warri Petrochemical refinery just last week, the oil and gas sector bounced back to reckoning in 2024, becoming an outlier, where others stagnate, promises to give renewed hope in 2025.
Business Hallmark Newspaper in its Economic Outlook for 2025, projects that the nation’s Oil and Gas sector, despite expected moderation in global energy prices, will remain upbeat and further unlock Nigeria’s economic prosperity.
A PEEK INTO 2024
The nation’s oil and gas sector witnessed numerous transformative developments in 2024 that shaped the year. These included the removal of fuel subsidy in May 2023 and the signing of three executive orders by the president in March 2024 to help drive the growth of the sector.
During his inauguration on May 29, 2023, President Bola Tinubu announced the removal of fuel subsidy, insisting it was unsustainable. In a seemingly off-the-cuff remark, Tinubu declared “fuel subsidy is gone” to the chagrin of many listening Nigerians.
“We shall instead re-channel the funds into better investment in public infrastructure, education, healthcare and jobs that will materially improve the lives of millions”, the president added.
Also in March 2024, President Tinubu signed three executive orders aimed at positioning Nigeria as the leading oil and gas investment destination in Africa.
The order includes the ‘introduction of incentives to stimulate non-associated gas projects, midstream developments and deep-water ventures; reduction of the contracting cycle to expedite project timelines to just six months, as well as the application of local content requirements to enhance the involvement of indigenous operators without compromising investment attractiveness.
These two policy decisions sparked activities in the upstream, midstream and downstream oil and gas industry.
For instance, the removal of subsidy had spurred activities in the upstream and downstream oil and gas sectors, with investors scrambling to enhance their stakes.
While some operators set up blending plants both locally and offshore in order to benefit from the deregulation exercise, local refiners also stepped up their activities by stepping up production.
In January 2024, Dangote Refinery commenced operations with the production of diesel, kerosene, aviation fuel, naphtha and other petroleum products.
In September 2024, the largest single-train refinery in the world located in Lekki, Lagos, began the production of Premium Motor Spirit (PMS), generally referred to as petrol in the country.
By December 2024, the 650,000-bpd refinery announced its now operating at 85% capacity.
“We have gone up to 550,000 bpd, that is 85% capacity in crude distillation”, declared Edwin Devakumar, the Executive Vice President of Dangote Industries (DIL).
Another milestone attained in 2024 is the coming on stream of the Old Port Harcourt and Warri Refineries. While the Port Harcourt Refinery currently processes 60,000 bpd, the Warri Refinery, which recently came on board, according to the Nigerian National Petroleum Corporation Limited (NNPCL), operates at 60 percent capacity.
According to available data, while there are 25 existing licences for refineries with a combined capacity of 1.6 million bpd, only 11 of them are actually operating.
They include the Dangote Refinery, the old 60,000 bpd Port-Harcourt Refinery, Warri Refinery, Waltersmith Refining and Petrochemical Company, Azikel Refinery, Ogbele Refinery, Edo Refinery and Petro Chemical Company, Duport Refinery, OPAC Refinery, Niger Delta Petroleum Refinery, Alexis Refinery and Atlantic International Refineries and Petrochemical Limited located in Brass, Bayelsa State.
Improvements
Together, these conventional and modular refineries scattered across the country currently process a little over 700,000 barrels per day, a major feat for a country that used to be a net importer of refined petroleum products a few years back.
Also, the commencement of crude oil refining as well as the ‘Naira for Crude’ policy had largely helped to shore up the value of the naira.
Before the commencement of crude oil refining and stoppage of fuel subsidies, Nigeria struggled with foreign currency shortage and a weakened naira caused by a huge drain on crude oil proceeds.
Meanwhile, while monthly revenue accruals to the three-tiers of government have increased from an average of N700billion in early 2024 to N1.7trillion at the end of December 2024, naira has stabilized from its high of N1,760/$ in 2024 to N1,540 in 2025.
This feat, BH findings revealed, is largely attributable to an improved crude oil production of 1.8 million bpd from a low of 900,000 barrels in December 2023 and the increase in the nation’s external reserves to over $40billion dollars.
While the involvement of private security outfits with the knowledge of the treacherous Niger-Delta terrain has helped to reduce oil theft in the region, the decision of the present administration to order the prompt conclusion of oil wells divestment deals, helped in reviving dormant wells.
Faced with several lingering challenges, especially the menace of insecurity, crude oil theft, entrenched hostilities in host communities and the rise in advocacy for the reduction in carbon emission, many international oil companies operating in the country decided to move offshore.
The IOCs that divested from their onshore oil blocks include the five majors, namely Shell, Eni, ExxonMobil, Total and ConocoPhillips.
Shell, for instance, divested from four onshore oil blocks in 2010. The successful sales of these oil assets by Shell triggered a wave of sales by other IOCs.
By the end of 2015, a total of 24 oil blocks had been sold to local oil firms, with the exception of one block sold to Chinese oil giant, Sinopec.
Indigenous firms to rescue
In 2022, Shell announced that it received four offers for its entire onshore oil and gas portfolio worth $3 billion it had earlier put up for sale. At the end of negotiations, the oil giant sold its entire shareholding in the Shell Petroleum Development Company of Nigeria Limited to Renaissance, a consortium of Nigerian companies consisting of ND Western Limited, Aradel Holdings Plc, Petrolin Group, FIRST Exploration and Petroleum Development Company Limited and the Waltersmith Group.
In the same vein, Total and ConocoPhillips sold their onshore assets worth $27.5 billion to Nigerian firms, while American oil giant, ExxonMobil, agreed to sell the entire share capital of its shallow water operations in Nigeria to Seplat Energy for an initial US$1.3billion, and added fees of up to another $1billion.
Other IOCs, including Chevron, Nigeria Agip Oil Company and Equinor also put some of their oil blocks for sale. The combined worth of the oil assets put on sale by the IOCs is over N30.8 trillion.
“These blocks have an estimated total reserve of 8.211million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas. This is a significant contribution to the nation’s hydrocarbon resources.
“Additionally, these blocks contain P3 reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of non-Associated Gas.
“It is worth noting that a substantial part of the P3 reserves is located in or near producing assets.
“This means that a competent successor could easily mature them to 2P reserves”, the Chief Executive, Nigeria Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, had revealed in May 2024.
According to the NUPRC boss, the average production from the blocks is 346,290 barrels per day.
“The average oil production from NAOC is 28,018 bpd; MPNU, 159,378 bpd; Equinor, 36,155 bpd; and SPDC, 122,739 bpd.
“But the technical production potential is much higher – standing at 643,054 barrels (NAOC -147,481 bpd, MPNU – 244,268 bpd, Equinor – 39,203 bpd, and SPDC -212,102 bpd).
“These blocks have the potential to significantly boost our national production, which would benefit all stakeholders”, Komolafe added.
However, owing to the undue delay in granting regulatory approval to the acquisitions, as well as other factors, Nigeria’s oil production crashed from its highest peak of 2.469 millions barrels per day recorded on December 31, 2005, to 1.3 million barrels per day (excluding condensates) at the end of May 2024.
The development led to a huge revenue shortfall, resulting in governments at all levels unable to meet its financial obligations.
Realizing the urgency to accelerate investments in the oil and gas sector, President Tinubu directed the application of the local content requirements through the granting of approvals to indigenous firms to take up more stakes in the sector, as well as ordering that all contracting processes in the sector must be concluded in six months maximum.
The flurry of Presidential orders forced the hands of the two major regulating bodies in the industry, the Nigerian National Petroleum Corporation Limited (NNPCL) and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), who gave expedited approvals for the transfers of divested onshore oil wells to local players.
As a result, production activities, albeit slow, have resumed in virtually all the abandoned wells, helping in shoring up Nigeria’s daily oil production.
For instance, indigenous oil and gas firm, Oando Plc, achieved a production feat of 50,000 barrels per day of oil by the end of 2024 with the closure of the landmark deal to acquire upstream assets of Italian oil giant, Eni, in Nigeria.
Speaking last year in Lagos, Oando’s Chief Operating Officer, Alex Irune, said that the firm intends scaling up to 100,000 barrels per day by 2029.
With the agreement, Oando will become one of Nigeria’s biggest domestic producers.
Another major indigenous player in the nation’s oil and gas sector, Seplat Energy Plc, which is currently producing about 80,000 barrels of oil per day, plans to increase production to 200,000 bpd at the end of 2025.
BH reliably gathered that only 200 out of the about 600 onshore oil wells Seplat purchased from ExxonMobil are producing.
While the dispute lasted, output from the controversial oil assets declined from 600,000 barrels per day to 120,000bpd, leaving a shortfall of 480,000bpd, which the Federal Government recently claimed amounted to $34 billion loss at a conservative $80 per barrels in the last two and a half years.
Meanwhile, with the approval of its purchase of ExxonMobil’s onshore business, Seplat emerged as the biggest local player in the nation’s oil and gas industry, with the capacity to produce over 650,000 barrels of crude oil per day.
Speaking on the purchase, Seplat’s Chief Operating Officer, Samson Ezugworie, said the company’s major focus is to rejuvenate idle wells and bringing them back to production.
“We have acquired a company with one of the best portfolios of assets and related infrastructure in a world-class basin, providing enormous potential for the Seplat Group.
“Our immediate goals in operations include to swiftly target numerous opportunities that exist to organically grow production and further enhance the value of the assets for all stakeholders”, Ezugworie had stated.
Other local oil companies at the forefront of raising Nigeria’s present oil production include Addax Petroleum Nigeria Limited, Aiteo Oil, AMNI International Petroleum Development Company Ltd, Consolidated Oil Limited, Dubri Oil Company Ltd, Emerald Energy Resources Ltd, Lekoil Nigeria Ltd, Yinka Folawiyo Petroleum Company Ltd, and many others.
Through their collaborative efforts, Nigeria’s current crude oil output currently stands at a little over 1.8million bpd.
According to available data, domestic oil companies are the dominant players in the nation’s upstream oil and gas sector.
According to NUPRC data, they currently operate 36 2% of the nation’s existing Oil Mining Licenses (OMLs), followed by the national oil company, NNPCL, 32.7%, while OICs, who used to be the biggest player in the sector, are now left with 31.2% stake.
2025 IN FOCUS
While 2024 was a relatively good year for the oil and gas sector, the sector is positioned for a positive performance in 2025, anchored on the successful completion of Final Investment Decisions (FIDs) by major players, expansion of the ambitious CNG project, as well as the scaling up of refining capacity of existing refineries and the commencement of operations in refineries undergoing repairs and the ones under construction.
In December 2024, Shell Nigeria announced a final investment decision on Bonga North, a deep-water project off the coast of Nigeria. The project involves drilling, completing, and starting up of 16 wells (8 production and 8 water injection wells), modifications to the existing Bonga Main FPSO and the installation of new subsea hardware tied back to the FPSO.
The oil block currently has an estimated recoverable resource volume of more than 300 million barrels of oil, and will reach a peak production of 110,000 barrels of oil a day when fully operational.
Earlier in June 2024, French oil giant, TotalEnergies, announced a final investment decision to develop Ubeta gas condensate field onshore Nigeria.
Ubeta, which lies in onshore license OML 58 about 80 km northwest of Port Harcourt in Rivers State, will be developed with a new 6-well cluster connected to existing Obite infrastructure through an 11-km buried pipeline. Production is expected to start in 2027, with a plateau of 300 MMcfd (about 70,000 boe/d including condensates).
OML 58 contains two fields currently in production: Obagi oil field and Ibewa gas-condensate field. Gas production is processed in the Obite treatment center and supplied to the Nigerian domestic gas market and to the Nigeria LNG (NLNG) liquefaction plant on Bonny Island.
These two FIDs, experts argue, signals renewed confidence in Nigeria’s energy sector.
“It will no doubt drive further development in the oil and gas sector, providing immediate revenue in the form of Foreign Direct investments (FDIs) and Return on Investments (ROIs) at completion.
“Though, it is not yet obvious to many, a revolution that will lift the nation to economic prosperity is quietly going on in the petroleum sector. If this trend continues, the nation will soon start to swim in black gold like in the oil boom period”, said Samuel Atanpaku, an oil and gas expert.
With oil production expected to hit 2 million barrels per day and domestic refining capabilities improving in 2025, the value of the naira is projected to further strengthen, while the government will earn more income from exports to prosecute developmental projects.
The nation’s currency, barring a major shock, will continue on its path to recovery, creating a positive multiplier effect on the economy.
Likewise, the impact of the Presidential Compressed Natural Gas Initiative (PCNGi), BH findings revealed, has spread beyond the petroleum industry, with sectors, especially the auto and banking industries tremendously benefiting from the scheme.
Deposit Money Banks (DMBs), our correspondent learnt, are daily making tons of money from the scheme in the form of earned fees and commissions from packaging financial transactions, which sources put at over $1billion, with the Federal Government alone investing more than $450 million in the Compressed Natural Gas (CNG) value chain.
The scheme has revitalized the nation’s slumbering auto industry, with several auto firms, including Jet Motors, Hyundai Nigeria, Innoson Motors and other getting lucrative orders to either build CNG from scratch or convert existing ones to bi-fuel vehicles.
One of the major beneficiaries of the scheme is Jet Motors, which assembles CNG and electric vehicles at its assembly plant in Lagos.