Featured, Oil & Gas
Despite the persistent challenges in the Nigerian Oil and Gas sector, the government and the stakeholders in the sector should be commended for the numerous achievements recorded in 2024, especially the coming onstream of the Port-Harcourt and Warri Refineries after decades of turnaround maintenance.
By Anthony Isibor
THE Nigerian energy sector in 2024 recorded significant growth, driven mainly by government’s policies aimed at enhancing production, attracting investments and promoting sustainability through increased oil production and combating oil theft. However, the stakeholders in the sector will definitely remember the resuscitation of the Kaduna and Warri Refineries.
In his one year and eight months, the Tinubu administration recorded at least 10 milestones in the oil and gas sector of the economy, including achieving OPEC Quota Compliance and reaching 99% compliance with its OPEC production quota of 1.5 million barrels per day (bpd), producing 1.485 million bpd in November 2024, revival of the Port Harcourt and Warri Refineries, which resumed operations in November and December 2024 after many years of dormancy, crackdown on oil theft through Operation Delta Sanity, leading to increase in crude oil production levels from 1.2 million bpd in February to 1.7 million bpd by August 2024, implementation of Decarbonization Policies: Effective January 2025, oil license applicants must demonstrate low carbon emissions and integration of the renewable energy frameworks.
Others are Increased Foreign Investment in the Oil Sector by successfully attracting $4 billion in foreign direct investment (FDI) into exploration and production, launch of the Energy Transition Plan to achieve net-zero carbon emissions by 2060 and Expansion of gas-to-power projects and the promotion of renewable energy sources, Introduction of the Value Added Tax, VAT, Modification Order 2024 to attract investments, Growth in Gas Production and Exports recording its highest Liquefied Natural Gas (LNG) export levels in five years, driven by increased global demand, Commissioning of two additional modular refineries each with a capacity of 10,000 bpd and collaboration with International Partners and strengthened partnerships with countries like Saudi Arabia and China for technology transfer and infrastructural development.
With stakeholders in the sector attributing the shortage in oil production to theft and pipeline vandalization, the federal government had launched the Operation Delta Sanity (OPDS) in the Niger Delta region. This initiative, involving the petroleum ministry and the Nigerian Navy, deployed armed drones, attack helicopters, and enhanced intelligence.
These efforts have been yielding significant results for example, Emmanuel Ogalla, Chief of Naval Staff, had highlighted the impact of enhanced security measures on oil production: “Our efforts have increased crude oil output to between 1.6 million and 1.7 million barrels per day, up from 1.2 million barrels per day in February.” These measures aim to curb crude oil theft and improve production levels.
Heineken Lokpobiri, Minister of State Petroleum had also expressed optimism about future production targets. “With the intensified crackdown on oil theft, we are confident in reaching our goal of producing 3 million barrels per day by 2025,” he said.
Celebrating these achievements, President Tinubu expressed delight in seeing Nigeria regain its leadership position in the global oil market. “This is the beginning of a new era where accountability, infrastructural development and economic growth take center stage.”
Similarly, Haitham Al-Ghais, the OPEC Secretary-General, described the achievements recorded by the country as a show of determination of the government and stakeholders to stabilize and grow the oil industry. “We commend their strides and encourage further progress,” he added.
Meanwhile, oil production increased from 1.4 million barrels per day (bpd) to 1.8 million bpd, with a target of reaching 3 million bpd in 2025.
These milestone achievements are a direct consequence of the government’s efforts under President Bola Ahmed Tinubu, who since assuming office in May 2023, has implemented significant reforms in the Nigerian oil and gas sector, aiming to enhance investment, increase production, and promote economic growth.
In February 2024, President Tinubu signed three Executive Orders, introducing fiscal incentives to attract investments in the oil and gas industry. These measures include tax exemptions and credits for key energy products and infrastructure, such as diesel, liquefied petroleum gas (LPG), compressed natural gas (CNG), and clean cooking equipment. The incentives are designed to lower living costs, bolster energy security, and accelerate Nigeria’s transition to cleaner energy sources.
President Tinubu’s strategic policies in 2024 was also acknowledged to have played a critical role in enabling the successful commencement of operations at the Dangote Refinery.
These policy actions which addressed regulatory bottlenecks, enhanced private sector confidence, and aligned the refinery’s operations with national priorities.
For example, the Removal of Fuel Subsidies created a market-driven downstream sector, boosted profitability for local refiners like Dangote Refinery and increased domestic demand for refined products.
As noted by Aliko Dangote, Chairman, Dangote Group: “The removal of subsidies created a business environment where projects like ours could thrive and meet Nigeria’s fuel demands effectively.”
Similarly, Wale Edun, Minister of Finance had explained that the Full implementation of the Petroleum Industry Act, PIA provided a transparent and favorable regulatory framework and encouraged investment in the Dangote Refinery by offering clarity and stability in the sector.
“The PIA is a cornerstone of our reforms, and its implementation under President Tinubu has attracted key projects like the Dangote Refinery,” he said.
In October 2024, Nigeria ended the state oil firm’s exclusive rights to purchase petrol from the Dangote Oil Refinery, allowing local fuel traders to buy directly from the plant. This move was aimed at fostering a competitive market, streamline the petroleum supply chain and reduce dependence on imported oil products.
To boost oil production, President Tinubu had also launched the ‘1MMBOPD’ Initiative, which is aimed at increasing Nigeria’s output by 1 million barrels per day. This strategy focused on harnessing dormant oil assets and enhancing collaboration among industry stakeholders to achieve production targets and stimulate economic growth.
These enabling environment created by government’s determination had also allowed the Nigerian National Petroleum Company Limited, NNPCL, under the its Group Chief Executive, Mele Kyari, to achieve significant strides in reviving Nigeria’s refining capacity, particularly through the rehabilitation of the Port Harcourt and Warri refineries.
Port Harcourt Refinery Rehabilitation
The Port Harcourt Refining Company (PHRC) resumed operations in November 2024 after a comprehensive rehabilitation process. This development marked a pivotal moment in Nigeria’s pursuit of energy independence, enabling the production of refined petroleum products domestically and reducing reliance on imports. Kyari described the event as a monumental achievement for Nigeria, signifying a new era of energy independence and economic growth for the country.
Warri Refinery Resumption
Similarly, the Warri Refining & Petrochemical Company, WRPC, came onstream in December 2024 after nearly a decade of inactivity. The 125,000 barrels-per-day (bpd) refinery is currently operating at 60% capacity, contributing to an increase in domestic fuel supply. This coming onstream of the refinery is expected to bolster local fuel availability and ease pressure on foreign exchange reserves by reducing the need for imported fuel.
Reacting to the coming onstream of the Warri Refinery, President Tinubu said: “Reviving our refineries is not just about increasing fuel supply; it is about restoring Nigeria’s pride and achieving economic self-reliance. These refineries will reduce our dependence on imports and stabilize our economy.”
On his own part, Gbenga Komolafe, CEO, Nigerian Upstream Petroleum Regulatory Commission, told journalists during the news conference on the refineries’ impact on Nigeria’s oil supply, noted that the successful resuscitation of the Port Harcourt and Warri refineries is a game-changer for Nigeria’s petroleum value chain. “It proves the effectiveness of the government’s investment and reform strategies.”
Impact on Nigeria’s Oil Supply
The revival of these refineries is expected to enhanced domestic production: With the Port Harcourt and Warri refineries operational, Nigeria can process more of its crude oil domestically, decreasing dependence on imported refined products.
Economic Benefits: Local refining reduces the outflow of foreign exchange used for fuel imports, potentially stabilizing the national currency and improving the trade balance.
Energy Security: Increased refining capacity ensures a more reliable supply of petroleum products within the country, mitigating the risks associated with global supply chain disruptions.
Market Dynamics: The resumption of refinery operations is anticipated to lead to a drop in fuel prices, benefiting consumers and stimulating economic activity.
These developments reflect a strategic move towards self-sufficiency in the oil and gas sector, aiming to transform Nigeria from a net importer to a net exporter of refined petroleum products.
Attracting Investments
The administration’s reforms have unlocked substantial investments in the sector. Notably, a $550 million upstream gas project between the Nigerian National Petroleum Company Limited, NNPCL, and TotalEnergies commenced, facilitated by the government’s policy changes.
The administration has also facilitated international partnerships to strengthen the sector. For instance, the anticipated approval of the $1.28 billion deal between Exxon Mobil Corp and Seplat Energy to acquire Exxon’s Nigerian onshore assets signals a commitment to fostering a conducive environment for foreign investments.
Although the sector continues to record tremendous achievements, underinvestment in infrastructure, high cost of petrol, dependence in imported refined products, environmental degradation, high production cost and fuel subsidy removal backlash remains a major challenge.
To curtail the impact of rising cost of petrol caused by the sudden removal of fuel subsidy in May 2023, the government had introduced the compressed natural gas (CNG) initiative, investing $200 million to convert over 1 million vehicles to CNG within three years. This programme seeks to provide a cheaper and cleaner alternative to petrol, leveraging Nigeria’s abundant natural gas reserves.
In summary, 2024 was marked by proactive reforms in the Nigerian oil and gas sector, focusing on fiscal incentives, production enhancement, subsidy removal, and investment attraction. While these measures aim to position Nigeria as a prime destination for energy investments, they have also introduced challenges that require careful management to ensure sustainable economic growth and public welfare.
A.I
Jan. 4, 2025
Tags: Aliko Dangote Haitham Al-Ghais Mele Kyari NNPCL OPEC Wale Edun
