Nigeria, in addition to being among the top oil and gas producers in Africa in 2022 with over 37 billion barrels of crude oil reserves, has the potential to improve its energy exports to Europe and to help meet anticipated shortages of crude oil and natural gas.
As the European Union plans to ban imports of crude oil from Russia by increasing trade with other non-Russian economies and the Russian government promises to cut gas supplies if sanctions from Western countries come continue, potential supply disruptions to Europe are to be expected.
As a result, Nigeria is expected to increase production in 2022 and maintain its position as Africa’s top crude oil producer.
Nigeria’s annual crude oil production is expected to increase to 1.46 million bpd in 2022 after low production levels in 2021 due to the Covid-19 pandemic. This will provide Nigeria with the opportunity to increase its exports to Europe, become a global energy hub and fully utilize its hydrocarbon resources for economic growth.
The country relies on its offshore projects to support crude oil production and supply, with 65% of its total production in 2022 expected to come from such projects. However, this will change with Nigeria’s crude oil production expected to decline from 2023 due to lower production in old fields. Nigeria will have to wait for the commissioning of deepwater projects to improve its production capacity.
“Nigeria needs to increase crude oil production on existing discoveries that have yet to materialize so that it can maintain a secure supply in the future to meet local, regional and international demand. The lifting of force majeure at Brass Terminal, Bonny NLNG and Okpai Power Plant comes at the right time,” said NJ Ayuk, Executive Chairman of the African Energy Chamber (AEC).
As for gas, Nigeria’s massive production capacity in 2022 will place the country among the top three producers in Africa and a potential supplier to meet demand in Europe. Nigeria has an estimated gas reserve of 209 trillion cubic feet and will produce 1,780 trillion cubic feet in 2022, up from 1,450 trillion cubic feet in 2021. With this portfolio, Europe can view Nigeria as a potential supplier.
In addition, the 2,565 billion kilometer trans-Saharan natural gas pipeline being built by the governments of Nigeria, Niger and Algeria will allow the integration of the Trans-Mediterranean, Maghreb-Europe, Medgaz and Galsi pipelines so that the Europe is tapping into the west and North Africa’s oil and gas resources to meet demand. When completed, the pipeline will transport 30 billion cubic meters of natural gas per year and Nigeria will be able to produce a significant portion of this capacity.
“Nigeria is rich in oil and gas resources but still lacks adequate infrastructure such as a functioning refinery. To use its oil and gas resources efficiently, Nigeria needs to build more local infrastructure to process its energy,” said Hendrick Malan, CEO of Frost & Sullivan.
Additionally, Nigeria’s current natural gas production fields are expected to decline sharply as we approach the mid-2020s. Majors such as ExxonMobil, Shell and TotalEnergies – Nigeria’s top producers – are expected to diversify of 2022 and exit the market. ExxonMobil has already signed a 1.2 billion dollar agreement with the local company Seplat Energy to sell four oil exploitation licenses and natural gas recovery plants.
Factors such as infrastructure vandalism, continued lack of investment in new exploration activities and political instability/civil unrest in oil and gas rich areas of Nigeria also continue to disrupt the country’s ability optimize oil and gas production and increase exports.
A positive development is the enactment of the Petroleum Industry Act which will help increase the number of majors and international investors entering Nigeria. The PIA should provide clarity on taxation, investment, and licensing that previously slowed project rollout. The law will stimulate investment in upstream oil and gas activities to improve exploration, production, infrastructure development and the country’s energy portfolio.
It should be noted that 50% of the Nigerian population still lives in fuel poverty, with the country’s energy potential remaining totally untapped.
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