As global economies gradually recovered from the COVID-19 pandemic, crude oil supply began to scale up in response to the rapidly-rising demand for the commodity. In the year 2021, global crude oil supply rose by 1.4% and averaged 95 million barrels per day (mb/d). Non-OPEC countries remained the dominant suppliers, contributing about 67% of the world’s crude oil output. On the flip side, global crude oil demand grew at a faster 6.2% relative to supply and elicited an uptick in the price of the commodity in the international market. In 2022, the crude oil market has been shaped by the ongoing war between Russia and Ukraine. The Eastern European crisis has engendered further price surges even though, according to OPEC, supply and demand dynamics have remained largely unchanged. In the first six months of the year 2022, Brent crude oil prices averaged US$104 per barrel, 46% above the 2021 average.
While the global market dynamics present opportunities, the Nigerian oil and gas industry (the Industry) has continued to contend with peculiar challenges. In 2021, the country’s average crude oil production, excluding condensates, declined year-on-year by 12.2% to 1.3 mb/d and stood below the OPEC+ quota of 1.58 mb/d for Nigeria in the same year. Notably, crude oil theft, pipeline destruction, elongated maintenance periods due to host community issues as well as operational and technical difficulties have continued to act as impediments to the country’s crude oil output. With the unprecedented levels of under-investment and the lingering cases of oil theft, average production levels in 2022 have also remained below OPEC+ quotas. To provide some respite, the Petroleum Industry Act (“the Act” or “PIA”), enacted in August 2021, seeks to address some of the underlying issues in the Industry by repealing some extant laws and introducing new provisions aimed at attracting investments and tempering tensions in the Niger-Delta region. However, with the uncertainty in the implementation of the Act and the negative sentiments, some Industry experts have maintained cautious optimism about a PIA-induced turnaround in the Nigerian oil and gas industry.
While investments in crude oil wane, Nigeria stands to benefit from its large proven gas reserve of 209.5 trillion cubic feet (tcf). The sustained clamour to reduce carbon emissions globally and the commitment of the Nigerian government toward boosting gas utilisation have been key factors propelling investments in the gas landscape. Capital-intensive projects such as the Obiafu-Obrikom pipeline also referred to as the OB3 Pipeline or the East-West Pipeline and the NLNG Train 7 are expected to contribute significantly to developing the domestic gas segment. The ANOH Gas project which has an estimated 600 MMscf production per day is expected to also bolster Nigeria’s energy transition