Nigeria Oil and Gas Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

The Nigeria Oil and Gas Market is segmented by Sector (Upstream, Midstream, and Downstream).

Market Snapshot

Nigeria Oil and Gas Market Bar Graph
Study Period: 2018- 2026
Base Year: 2020
CAGR: >2 %
Nigeria Oil and Gas Market Major Players

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Market Overview

The Nigerian oil and gas market is expected to register a CAGR of more than 2% during the forecast period of 2021 – 2026. In addition to the country-wide economic impact of COVID-19, crude producers are faced with a decline in both price and demand for crude, thus, resulting in an oil glut. In its industry circular as of 30 March 2020, the Department of Petroleum Resources (DPR) stated that it considers the situation occasioned by the COVID-19 pandemic a force majeure and has directed all operators to limit the number of personnel at project sites. This has the potential of leading to a breach of specific contract terms. However, some of the major factors driving the market include increasing investments in the upstream sector and the development of large-scale and modular refineries in the country. Oil and gas production had been hampered in Nigeria in the past few years due to the attack on oil and gas infrastructure by militants. Furthermore, oil theft has been one of the major issues faced by the oil and gas market in Nigeria, which resulted in huge losses to operating companies in the country. Such factors are expected to have a negative impact on the market growth during the forecast period.

  • Nigeria's offshore oil and gas industry continues to expand, albeit not very fast, opening more market opportunities. The growth of Nigeria's offshore exploration and production activities was mainly driven by the efforts of the government to improve the country's hydrocarbon industry.
  • Lack of infrastructure, uncertainties in regulations, and security concerns have led Nigeria to underutilize its refining capacities, thereby pushing the country to become a net importer of refined petroleum products. However, Nigeria is on the edge of altering refined products’ supply dynamics in the region with the help of the upcoming Dangote Refinery, and it is expected to become the regional refining hub in the coming years. Once completed, the country is planning to become the refinery hub in Africa. This, in turn, is expected to attract foreign players to tap into the country's downstream market in the near future.
  • Given the country’s huge gas reserves and its advantage as a clean fuel, gas has already witnessed a massive surge in its domestic consumption in recent years. Further, the country is steadily moving away from oil and exploring different ways to replace the oil consumption with gas in power as well as the transportation sector. The shift to gas is also supported by the fact that major oil reserves are likely to get dry in the coming three to four decades. Hence, the oil market is considered to be one of the most vulnerable markets where natural gas has the highest potential to penetrate. Moreover, gas production has become a major focus for the oil and gas companies, in response to strong investment in gas-to-power projects, across the region.

Scope of the Report

The Nigerian oil and gas market report includes:

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Key Market Trends

Offshore Oil and Gas Segment to Witness Significant Growth

  • Nigeria's offshore oil and gas industry continues to expand, albeit not very fast, opening up more market opportunities. The growth of Nigeria's offshore exploration and production activities has been mainly driven by the efforts of governments in the region, such as providing key incentives and supporting policies to unlock the investment opportunity, as well as a growing list of international oil and gas companies interested in exploring alternative fields to replace the maturing offshore producing sites.
  • The China National Offshore Oil Corporation mobilized a USD 3 billion investment, in addition to the USD 14 billion already spent on its existing oil and gas operations in the West African country. A large share of this investment goes into the operations in Nigeria. One of the most ambitious ultra-deep offshore projects is the Egina oil field in water depths between 1,400 and 1,700 meters.
  • Furthermore, since 2008, the Nigerian government has been trying to pass the Petroleum Industry Bill (PIB). The country lost billions of dollars of investments due to the failure to pass the bill. One section of the bill was finally passed in 2018, as the Petroleum Industry Governance Bill (PIGB). Under this, the oil sector will be restructured, including the national oil company, the oil and gas regulator, the Department of Petroleum Resources (DPR), and the Nigerian National Petroleum Corporation (NNPC), which will become the National Petroleum Company (NPC), a fully commercial integrated entity. This reform is expected to drive the Nigerian offshore oil and gas upstream market.
  • Therefore, due to the above-mentioned factors, the offshore segment is expected to be the fastest-growing segment.
Nigeria Oil and Gas Market Latest Trends

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Increasing Investments to Maintain the Country’s Production

  • Nigeria is one of the largest and oldest oil producers in Africa. The oil and gas sector is one of the most important sectors in the country’s economy, accounting for more than 90% of the country’s exports and 80% of the federal government’s revenue.
  • The country is the ninth-largest in terms of global gas reserves with over 200 Tcf, but it has not started up any new gas projects recently.
  • As of 2019, Nigeria had the largest oil and gas reserves in the African region, with around 37 billion barrels of oil and 5.4 trillion cubic meters (bcm) of gas. With a production of 2.11 million barrels per day in 2019, which is approximately 25% of the total production in Africa, Nigeria continues to dominate African oil production.
  • The country's economy was hit hard by the global commodity price downswing in 2014. Investment in the Nigerian upstream oil and gas sector declined by 13% annually, during 2015-2017, due to the downturn in the crude oil price. The decline in spending was largest in 2016, driven by severe disruptions on major oilfields. Oil and condensate production recovered in 2017, and it returned to remain at the level of more than 2 million bbl/d in 2018.
  • The drilling activity in the country is ramping up, and it is expected to continue on account of current and upcoming projects. However, production is not expected to ramp up in the coming years, as the new projects that are expected to come online may be able to offset the declining volume from brownfields, keeping the oil supply stable, provided the political situation does not exacerbate, leading to renewed supply disruption.
  • The development of ultra-deepwater Egina oilfield by Total is one of the key projects, which started production in the first week of 2019. The Egina field may significantly boost the production and cash flow in 2019 and continue onward. Further, NNPC (Nigeria National Petroleum Corporation) signed an agreement for seven critical gas development projects to deliver around 3.4 bcf of gas per day in order to bridge the medium-term supply gap, by 2020, on an accelerated basis.
Nigeria Oil and Gas Market Growth Rate By Region

Competitive Landscape

The Nigerian oil and gas market is moderately consolidated. Some of the major players operating in the market include Nigerian National Petroleum Corporation (NNPC), Royal Dutch Shell PLC, Total SA, Chevron Corporation, and Exxon Mobil Corporation.

Recent Developments

  • The Nigerian government passed the Finance Act 2020 in January 2020. This act amends a number of tax laws and is aimed at improving tax participation and collection and modernizing the tax system. Provisions in the bill, such as the Petroleum Profits Tax (which repeals a tax exemption for dividends paid from after-tax (profits), a value-added tax (which increases from 5% to 7.5%), and the Companies Income Tax (which requires Nigerian companies to deduct and withhold tax on payments to any foreign company that provides them with technical or professional services), are likely to affect oil and natural gas companies and increase their overall cost of doing business in the country.
  • The Finance 2020 Act follows a November 2019 amendment to the 1999 Deep Offshore and Inland Basin Production Sharing Contracts Act, which changed royalty rates for deepwater (specifically greater than 200 meters in water depth) and inland basin contracts (which comprise onshore basins aside from the Niger Delta) to 10% and 7.5%, respectively. The amendment also introduces an additional royalty tax rate that ranges from 0% to 10% based on the price of crude oil. Given that international oil companies (IOCs) primarily operate in the deepwater fields in Nigeria, this amendment is likely to increase the government’s share of revenue generated from these fields and to lead investors to re-evaluate their investment plans for currently producing fields as well as new–source development.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Scope of the Study

    2. 1.2 Market Definition

    3. 1.3 Study Assumptions

  2. 2. EXECUTIVE SUMMARY

  3. 3. RESEARCH METHODOLOGY

  4. 4. MARKET OVERVIEW

    1. 4.1 Introduction

    2. 4.2 Oil and Gas Reserves, 2010-2019

    3. 4.3 Oil and Gas Upstream Spending in USD billion, till 2026

    4. 4.4 Crude Oil Production Forecast in billion barrels per day, till 2026

    5. 4.5 Natural Gas Production Forecast in billion cubic feet per day, till 2026

    6. 4.6 Oil Breakeven Prices in USD/bbl for Key Unsanctioned Projects

    7. 4.7 Active Rig Count in Nigeria, till January 2021

    8. 4.8 Recent Trends and Developments

    9. 4.9 Government Policies and Regulations

    10. 4.10 Market Dynamics

      1. 4.10.1 Drivers

      2. 4.10.2 Restraints

    11. 4.11 Supply Chain Analysis

    12. 4.12 PESTLE Analysis

  5. 5. MARKET SEGMENTATION - BY SECTOR

    1. 5.1 Upstream

    2. 5.2 Midstream

    3. 5.3 Downstream

  6. 6. COMPETITIVE LANDSCAPE

    1. 6.1 Mergers and Acquisitions, Joint Ventures, Collaborations, and Agreements

    2. 6.2 Strategies Adopted by Leading Players

    3. 6.3 Company Profiles

      1. 6.3.1 Nigerian National Petroleum Corporation (NNPC)

      2. 6.3.2 Royal Dutch Shell PLC

      3. 6.3.3 Total SA

      4. 6.3.4 Chevron Corporation

      5. 6.3.5 Exxon Mobil Corporation

    4. *List Not Exhaustive
  7. 7. MARKET OPPORTUNITIES AND FUTURE TRENDS

**Subject to Availability

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Frequently Asked Questions

The Nigeria Oil and Gas Market market is studied from 2018 - 2026.

The Nigeria Oil and Gas Market is growing at a CAGR of >2% over the next 5 years.

Nigerian National Petroleum Corporation (NNPC), Royal Dutch Shell PLC, Total SA, Chevron Corporation, Exxon Mobil Corporation are the major companies operating in Nigeria Oil and Gas Market.

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