Nigeria’s oil and gas sector failed to maximize opportunities provided by higher oil and gas prices in 2022 due to various challenges, one of which was crude oil theft.
In October 2022, Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, said crude oil theft was impacting the country’s foreign exchange inflows. At the time, he stated:
Multilevel losses: The earnings for companies in the oil and gas industry have declined 30% per year over the last three years for both downstream and upstream companies. Daily crude oil production fell below 1 million barrels per day (bpd) and significantly reduced export earnings and foreign exchange reserves to an all-time low.
Failure to cash out: Oil and gas analyst, Etulan Adu, told Nairametrics that international oil companies (IOCs) have pushed for divestments of marginal onshore assets and Nigeria has seen an increase in indigenous participation in the industry. But the gains of higher oil and gas prices eluded the country in revenues amounting to over $15 billion based on some estimates.
According to Adu, Nigeria’s oil and gas sector struggled for survival right from Q1/2022, despite surging crude oil prices and major oil-producing countries raking in profits. Nigeria lost its top oil producer position in Africa to Angola and regained it in Q4/2022. He said:
Can we be optimistic? Etulan Adu tried not to be over-optimistic for 2023 as the country is set to experience a change in government administration. Although several deals on new floating liquefied natural gas (FLNG), gas export pipelines to Europe and a lot of projects were announced in 2022, energy analysts fear that some of these projects will not come to reality amidst challenges like a lack of finance and political willpower. Adu said:
“2022 brought gas and power generation conversation 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 kicking on fine. Offshore blocks are being issued for bids; revenues have also declined 13% per year. This means overall sales from these companies are declining and profits are subsequently falling as well.
Rollercoaster year: Oil and gas analyst, Kayode Oluwadare says that it has been a rollercoaster affair in terms of production and pricing for the Nigerian oil and gas industry. He highlighted the fact that the Russia-Ukraine war has had a significant impact on oil pricing since Q1/2022. He said:
Some positive projections: The good news, however, is that the oil market projections are good and reflected in the new $75 benchmark pegged in the 2023 budget. Oluwadare says that in the year 2023, the following factors will likely push oil prices high:
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 remarkable strides in halting crude oil theft and other nefarious activities in the south-south region of Nigeria where oil and gas companies are located.
According to Akwaji, data from the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and other international agencies show that the country’s oil and gas earnings moved up between September and November 2022. This shows that the oil and gas sector in Nigeria is going to end strong in 2022, despite all the challenges it has been through.
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