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Market Report, "Nigeria Oil & Gas Report Q1 2014", published

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2014-01-23 16:55:53 - New Energy market report from Business Monitor International: "Nigeria Oil & Gas Report Q1 2014"

Nigeria's hydrocarbon sector continues to struggle amid a worsening political and business environment. Most recently, Chevron's decision to move out of the OKLNG project signals that even the large upside potential of the Nigerian gas market is not sufficient to offset the degradation in investor sentiment. The weak output flows in 2012 were the consequence of flooding, repeated oil thefts and regulatory uncertainty. We estimate that total oil production for 2013 declined to about 2.4mn, and expect production to remain feeble over the coming year. Output should ramp-up more significantly as many large fields come online after 2014, more than offsetting current depletion. Adoption of the Petroleum Industry Bill, which we do not however expect before the Nigerian 2015 election,

would be a strong signal for investors that Nigeria's hydrocarbons sector is ready to move forward.

Full Report Details at

The main trends and developments we highlight for Nigeria's oil & gas sector are as follows:

* China agreed on a US$1.1bn loan deal with Nigeria bearing a very advantageous interest rate. In exchange, the West African country will allow the lender to get a privileged access to natural resources including oil. We expect that further deals as such could be an occasion for Nigeria to revive its oil and gas sector by boosting export potential for producers.
* Chevron decided to withdraw from the OKLNG project following the path Shell adopted last year. This brings another blow to Nigeria's gas market limiting further upside potential for liquefied natural gas (LNG) exports. We note, however, that the soon-to-open Escravos GTL plant could help monetise part of the gas currently flared. Disturbances and outages due to oil thieves and pipeline attacks have continued throughout 2013, with Shell having declared force majeure on Bonny Light exports several times since the beginning of the year. Several International oil Companies have divested some of their Nigerian assets throughout 2012 and 2013 as a result of this insecurity, such as Shell, Petrobras, Chevron and ConocoPhillips. Shell's November 2013 decision to sell its Nembe Creek Trunkline following losses from crude oil theft and recurrent pipeline attacks point to the seriousness of the situation. These divestments of Nigerian assets are a sign that the country's hydrocarbon sector is becoming increasingly unattractive, and are a worrying sign of Nigeria's long-term production potential should the situation not get better.
* BMI expects oil production to increase to 2.70mn b/d by 2020, as ambitious projects such as Usan peak and Bosi, Egina and the Bonga fields come on stream in the coming years. However, there is downside risks to this forecast given potential for further disruptions, the numerous project delays and the awaiting by many companies for the passing of the PIB before taking Final Investment Decisions on projects.
* Consumption of crude is forecast to rise at a compound annual rate of about 7% year-on-year between 2012 and 2022, boosted by anticipated strong GDP growth and a strong growth of automobile use accompanying the development of a Nigerian middle class. We forecast consumption rising from an estimated 269,890b/d in 2012 to 506,350b/d by 2022.
* BMI forecasts gas production increasing from an estimated 30.4bn cubic metres (bcm) in 2012 to 52.1bcm by 2022, as the authorities and companies reduce the practice of flaring and start monetising associated gas resources.
* Booming gas demand from the government's ambitious power sector plans and large export engagements will thus bolster production growth. We see Nigerian gas consumption rising from an estimated 5.9bcm in 2012 to 15.1bcm by 2022.
* Nigeria National Petroleum Cooperation (NNPC) is aiming to more than double its annual production of LNG, from 22mn tonnes per annum (tpa), or 30.36bcm, to over 52mn tpa (71.76bcm). This was announced on September 19 2012, at a forum of LNG producers and consumers held in Japan. Group managing director of NNPC, Andrew Yakubu, gave no deadline as to when this target would be met, but he did clarify that new LNG projects in Nigeria will help the company meet this goal.
* In October 2012 Nigeria's Petroleum Minister, Diezani Allison-Madueke, announced that the government is planning to direct more than US$1.6bn towards the repair of three of its refineries. The maintenance work started in late 2012 and is due for completion in October 2014. The three refineries are located in Port Harcourt, Warri and Kaduna. The Port Harcourt refinery is currently halted indefinitely, as oil thieves damaged the feeding pipeline in early 2013.
* In another important development, Dangote Industries moved forward with plans for a US$9bn refinery in September 2013, fertilizer plant and petrochemical complex, to be located in southwest Nigeria. The project would have a 400,000 b/d refining capacity, nearly doubling the country's current capacity, and is aimed for completion by 2016. We forecast this in from 2017 onwards. In theory, the refinery would see domestic supply of refined products outstrip consumption and pave the way for refined products exports.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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