The Nigerian oil and gas sector requires about $7 billion capital investment yearly, to fund exploration and development to achieve the nation’s crude production targets, according to Nigerian Investment Promotion Commission (NIPC). Besides, Organisation of the Petroleum Exporting Countries (OPEC), also put the expected oil upstream investment requirements from 2016 to 2040 at $7.4 trillion).
NIPC in its analysis on the Nigerian oil and gas sector, stated that Nigeria has proven to be among the most investment–friendly nations for International Oil Companies (IOCs) because of the geological configuration of its terrain and relative security of investments.
According to NIPC, major IOCs have continued their operation in the country over the years. On the other hand, OPEC stated in its 2016 Oil Outlook, recently released, put the average upstream yearly investment requirement at estimated $300 billion, with non-OPEC accounting for more than three-quarters.
According to OPEC, while OPEC average yearly investment requirements total $65 billion, in non-OPEC countries it adds up to around $230 billion. It stated that within non-OPEC countries, the bulk of the investment needs are anticipated in the Organisation for Economic Cooperation and Development (OECD), with an average yearly requirement of more than $160 billion as a result of higher exploration costs and steeper decline rates.
OPEC added that in the downstream sector, refinery investment requirements are estimated at somewhat over $1.5 trillion for the forecast period. Of this, it noted that $265 billion is needed for investments in known projects, around $385 billion for additions beyond firm projects and just under $900 billion for capacity maintenance and replacement.
It disclosed that investment requirements in the midstream sector were estimated at $1.1 trillion.“Some capacity expansion could be forthcoming in Nigeria by 2020, either through the rehabilitation of existing refineries – in part to raise their utilisation rates – or through grassroots projects. In late March, the Nigerian National Petroleum Corporation (NNPC) was reported as being in talks with Chevron, Total and ENI regarding potential assistance to restart and revamp refineries at Port Harcourt, Warri and Kaduna.
“Of several possible refining projects, one that may materialise in the medium-term is the grassroots 650,000 barrels per day (bpd) Dangote refinery and an associated greenfield fertilizer plant in Lagos. If built, this refinery would be Nigeria’s first privately owned and operated refinery,” it added.
It said that Africa will continue to need – and provide a market for – growing product imports. “This opportunity looks set to rise from under 0.1 mbpd in 2016 to close to around 0.25 mbpd in 2018/2019, before being reduced by the advent of new refinery capacity within the region.”
OPEC noted that the recent crude oil price drop has had the effect of deferring some projects and related investments from the 2016 to 2018 period to the 2019 to 2021 time frame.
“Nevertheless, assuming that the projects will materialise as assessed, allowing for some minor capacity ‘creep’ and for realistic maximum utilisations, total incremental potential refinery output by 2021 is 7.4 mbpd.
“This compares to an expected net incremental demand for refined products of 5.2 mpd. Thus, the 2019 to 2021 period looks to be the one where an excess of refining capacity emerges, with implications for increased competition for product markets and, hence, for refinery margins and potential closure.
By 2021, China looks to be in balance on incremental projects versus refinery demand, while Africa and Other Asia are in deficit, and all other regions are in surplus,” it noted.
