It is a bundle of growth and prosperity in the country’s oil and gas industry in 2024 although significant losses were incurred in the power sector despite various government intervention initiatives.
In the last four quarters of the year, the oil and gas witnessed an increase in oil production and significant strides such as the commencement of petrol production at the Dangote Refinery.
This move is expected to reduce Nigeria’s reliance on imported fuel and strengthen domestic supply chains. Additionally, natural gas exports continue to expand, particularly, with new partnerships in Asian markets, thus, increasing the possibility of more affordable electricity at a closer timeline.
Overall, 2024 saw strategic developments across the energy sector, from oil and gas production to renewable energy investments and power infrastructure improvements. While challenges remain, these advancements are critical for achieving energy security and supporting Nigeria’s economic growth.
The year started with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) calling on new investors to register for the 2024 oil block licensing bid round. Positive government stance and investor optimism set the stage for increased investments in the oil sector and government set the path to address challenges in oil production, including theft and vandalism, which required sustained and focused efforts for long-term solutions.
Initiatives like pipeline replacement and rig sharing was initiated with the aim to enhance efficiency and drive down production costs in the industry.
The Nigerian oil sector geared up for significant developments into the second half of 2024. The commission maintained that the 2024 oil block licensing bid round signals a renewed interest in attracting investments to the sector.
On the other hand, the Nigerian National Petroleum Company Limited (NNPC), during the period in review, declared a state of emergency on oil production, indicating a shift towards addressing longstanding challenges in the industry. The positive stance of the government towards new investments, indicating a more favorable environment for potential investors, the government’s eagerness to attract investments and the promising signals within the oil industry could drive an increase in investor participation.
This optimism sets the stage for a potentially transformative period in Nigeria’s oil sector. Government also initiated security issues of oil theft, pipeline vandalism, and illegal refineries in the Niger Delta region.
Experts however, expressed a belief that a renewed and more focused approach could yield better results this time as they emphasised the importance of consistent and persistent actions, underscoring the need for sustained efforts to ensure long-term success in combating these challenges.
Furthermore, experts at different fora discussed the NNPC’s plans to replace aging pipelines that have been in operation for over four decades and also touched upon the concept of rig sharing, a programme proposed by the NNPC to enhance production efficiencies by sharing drilling rigs among oil companies.
This initiative aims to optimize resources and streamline operations, ultimately driving down production costs and improving overall efficiency in the sector. Looking ahead to the second half of 2024, stakeholders outlined key expectations, including the anticipation of increased investments in the upstream sector.
With improved terms and capped signature bonuses in the new licensing round, Nigeria was poised to attract a fresh wave of investments. They emphasised the importance of ensuring that winning bidders promptly commence operations to kickstart growth in oil production.
With a concerted effort to address challenges, implement innovative solutions, and attract investments, Nigeria’s oil sector is primed for growth and transformation in the second half of 2024.
The status of the Nigerian oil and gas industry as the dominant contributor to Nigeria’s external reserves undoubtedly serves as a pointer to the economic importance of the sector to the nation.
Thus, fixing the Nigerian oil and gas industry has a significant positive impact on the ongoing macro-economic challenges that the nation is facing. The overarching importance of the Nigerian oil and gas sector to the overall wellbeing of the Nigerian economy may explain the continuous efforts by the government to improve the investment and operational climate in the said sector, with the aim of attracting home-grown and international investors.
Indeed, in furtherance of governments continuing drive to boost the attractiveness of the oil and gas sector, President Bola Ahmed Tinubu, on February 28, 2024, signed one executive order and two directives (Executive Orders) aimed at introducing positive reforms to the oil and gas sector.
These Executive Orders put in place, fiscal incentives for certain types of non-associated gas projects, reduce contracting costs and timelines in the sector, as well as obliterate any leakages impacting the compliance with local content requirements within the Nigerian oil and gas sector.
These Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024 (Tax Incentive Order) Holistically, qualifying non-associated gas (NAG) projects now enjoy incentives pursuant to the Tax Incentive Order, and these incentives as currently established, will ultimately engender a more investor-friendly fiscal regime in the Nigerian oil and gas sector.
Additionally, the Tax Incentive Order provides that gas companies undertaking new and ongoing projects in the midstream oil and gas industry, which is subsisting as at the date of the Tax Incentive Order, shall be granted a gas utilisation investment allowance on qualifying expenditure on plant and equipment incurred by the company, which shall be utilised to reduce the company’s assessable profits in the qualifying year.
The rate of the gas utilisation investment allowance shall be 25 per cent of the actual expenditure incurred on such plant and equipment purchased.
The gas utilisation investment allowance shall not prejudice the applicability of any other allowable deductions, allowances, and incentives applicable to the company under the Companies Income Tax Act or any other applicable legislation.
The Tax Incentive Order mandates the Minister of Finance to introduce fiscal incentives to ensure that investments for deep water oil and gas projects achieve a competitive internal rate of return.
Also, the president issued the Local Content Directive in order to prevail on the Nigerian Content Monitoring and Development Board (NCDMB), to ensure that its implementation of the Local Content Act by considering the practical challenges of insufficient in-country capacity for certain services and does not hinder investments or competitiveness in the oil and gas projects in Nigeria.
Also issued during the period are Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines, 2024 (“Contracts Directive”). Over the years, the contracting process in the Nigerian oil and industry has been overly protracted, due to the bureaucracy involved in obtaining requisite approvals for such contracts.
Consequently, the contracting cycle was typically delayed, and this impaired the ability of the operators and service providers to speedily conclude the requisite projects, which in turn, negatively impacted the economic projections of the FGN, as well as the return on investment of other investors.
The NNPC, NNPC Upstream Investment Management Services (“NUIMS”) and NCMDB are also mandatorily required to collaborate with industry stakeholders to simplify the contract approval process and adopt a single-level approval by NUIMS and NCDMB at each contract stage, including the prequalification, technical, commercial, and final approval stages
It is widely believed that the Executive Orders are a good development in the Nigerian oil and gas sector, as the directives contained therein will facilitate efficiency in the contracting processes, plug leakages in the local content regime whilst signaling to investors in the gas sector, particularly those seeking to exploit non-associated gas resources, that their investments will ultimately thrive and not be eroded.
Similarly, the sector’s market capitalization grew by 37.41 per cent by the end of Q1 2024, reaching N2.4 trillion. The 2024 licensing round had put on offer 12 new blocks across different geological terrains, including onshore basins, continental shelves, and deep offshore territories. Shell Nigeria Exploration & Production Company plans to finalize FID for the $5.5 billion Bonga North deepwater project in 2024.
As of the start of 2024, Nigeria’s gas reserves stood at 209.26 trillion cubic feet. Nigeria’s crude oil and condensate reserves totaled 37.5 billion barrels as of the start of 2024.
Here are some of the highlights of 2024 in the energy sector.
Crude Production
The Nigerian National Petroleum Company Limited (NNPC Ltd) and its partners, during the year, revved up crude oil and gas production to 1.8 million barrels per day (mbpd) and 7.4 billion standard cubic feet (bscf) per day. The company said the feat was achieved in compliance with the mandate of President Bola Ahmed Tinubu.
The group chief executive officer, Mele Kyari, said the interventions that led to the recovery of production cut across every segment of the production chain with security agencies closely monitoring the pipelines.
The nation’s Production War Room team that worked on the feat was inaugurated on the 25th June 2024, production was at 1.430mbpd, but the team swung into action, culminating into it sustaining the production recovery to 1.7mbpd in August and hitting the current 1.808mbpd in November.
The NNPC is confident that with this same momentum and with the active collaboration of all stakeholders, especially on the security front, Nigeria can see the possibility of getting to 2mbpd by the end of 2024.
Also, during the year Seplat Energy acquired a 40 per cent stake in four oil mining leases as a result of the approval after the approval of its purchase of Exxon Mobil’s onshore assets valued at $1.28 billion by the federal government.
Other developments in the oil and gas sector in 2024 include, The Petroleum Industry Act (PIA) aims to address challenges such as infrastructure issues, theft, and underinvestment. The government further expressed commitment to implementing the PIA’s regulations while stakeholders emphasised the importance of ensuring that government policies and regulations foster synergy and collaboration within the sector.
Refining
Dangote Petroleum Refinery, during the start of the year, commenced production of diesel and aviation fuel.
President of Dangote Group, Aliko Dangote, elatedly thanked President Bola Ahmed Tinubu for his support, encouragement, and thoughtful advice towards the actualisation of this project.
Dangote also thanked NNPC Limited, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and Nigerians for their support and belief in the historic project.
The refinery has, so far ,received six million barrels of crude oil at its two SPMs located 25 kilometres from the shore. The first crude delivery was done on December 12, 2023, and the 6th cargo was delivered on January 8, 2024.
The refinery can load 2,900 trucks a day at its truck-loading gantries. The products from the Refinery will conform to Euro V specifications. The refinery design complies with the World Bank, US EPA, European emission norms, and Department of Petroleum Resources (DPR) emission/effluent norms. Employing state-of-the-art technology.
Within the same period, the Port Harcourt refinery became operational after several decades.
The NNPC Ltd, in November 2024, fulfilled its pledge of re-streaming the Port Harcourt Refining Company (PHRC). The re-streaming signals the commencement of crude oil processing from the plant and delivery of petroleum products into the market.
On resumption of operations, trucks began loading petroleum products which include Premium Motor Spirit (PMS) or petrol, Automotive Gas Oil (AGO) or diesel and Household Kerosene (HHK) or Kerosene, while other product slates were scheduled to be dispatched as well.
The group CEO of NNPC, Mele Kyari described the commencement of the loadout activities as a monumental achievement for Nigeria which signifies a new era of energy independence and economic growth for the country.
Power Sector
In the power sector, despite the infrastructural deficits and financial constraints, there have been notable efforts to improve efficiency in generation, transmission and distribution.
The Electricity Act 2023 continues to set a positive trajectory by encouraging private sector involvement and enhancing regulatory frameworks.
The renewable energy sector has continued to make headway, with increased investments and government initiatives supporting solar, wind, and other clean energy projects. Key developments, including new partnerships and technological advancements, contribute to the diversification of Nigeria’s energy mix and improved access to electricity in underserved areas.
Unfortunately the familiar cycle continues as the national grid collapsed for the 10th time in 2024 on November 7. This persistent instability has become a defining feature of Nigeria’s power infrastructure, with further disruptions likely before the year ends.
The recurring incidence of grid collapse is attributed to ageing facilities, lack of maintenance, inadequate investment in the power sector and vandalisation of power facilities, leading to disruption of business activities and delays in healthcare services, as experienced in places like the University College Hospital, Ibadan.
Over the past 15 years, Nigeria has grappled with a cycle of grid failures, peaking in 2010 when citizens endured a staggering 42 instances of being plunged into the abyss of darkness. The National grid collapses rose in 2024, following a pattern of consistent fluctuations in previous years.
There was a seeming shift towards gas, for which demand is more resilient through the energy transition and to implement this strategy, government took very specific and deliberate actions, taking into account the fact that Nigerian have two major classes of investors the domestic independents, and the International Oil Companies (IOCs) both of which are collectively critical to the success of our oil and gas industry.
These actions have also very importantly sought to build on the foundation of the Petroleum Industry Act (PIA).
However, for the longstanding partners and investors, the IOCs, it was clear that the government needed to do more to attract their high-powered resilient capital and technical capacity for deepwater oil and non-associated gas to improve the reliability of our supply to export markets.
With resolution of these issues, it then turned our attention to Nigeria’s cost and fiscal competitiveness. Post-PIA analysis indicated that we needed to be more competitive in deepwater and non-associated gas (NAG) – which are critical to our long term ambition of 4 million barrels a day, securing our position as Africa’s leading LNG exporter, and fueling a gas fired industrialisation.
