Nigeria Oil & Gas Industry

THE INDUSTRY
Nigeria has a population of over 110 million people and an abundance of natural resources, especially hydrocarbons. It is the 10th largest oil producer in the world, the third largest in Africa and the most prolific oil producer in Sub-Saharan Africa. The Nigerian economy is largely dependent on its oil sector which supplies 95% of its foreign exchange earnings.
The upstream oil industry is the single most important sector in the economy. According to the 2008 BP Statistical Energy Survey, Nigeria had proved oil reserves of 36.22 billion barrels at the end of 2007 or 2.92 % of the world's reserves. The Nigerian government plans to expand its proven reserves to 40 billion barrels by 2010. Most of this is produced from the prolific Niger River Delta. Despite problems associated with ethnic unrest, border disputes and government funding, Nigeria’s wealth of oil makes it most attractive to the major oil-multinationals, most of whom are represented in Nigeria, with the major foreign stakeholder being Shell. Nigeria produced an average of 2355.8 thousand barrels of crude oil per day in 2007, 2.92% of the world total and a change of -4.8 % compared to 2006.
According to the 2008 BP Statistical Energy Survey, Nigeria had 2007 proved natural gas reserves of 5.29 trillion cubic metres, 2.98% of the world total. Due, mainly, to the lack of a gas infrastructure, 75% of associated gas is flared and 12% re-injected. Nigeria has set a target of zero flare by 2010 and is providing incentives for the production and use of gas. The government also plans to raise earnings from natural gas exports to 50 percent of oil revenues by 2010. It has been reported in the 2008 BP Statistical Energy Survey that Nigeria had 2007 natural gas production of 34.97 billion cubic metres, 1.18% of the world total.
Nigeria's downstream oil industry is also a key sector including four refineries with a nameplate capacity of 438,750 bbl/d.

Nigeria has a robust petrochemicals industry based on its substantial refining capacity and natural gas resources. The petrochemical industry is focussed around the three centres of Kaduna, Warri and Eleme.
Until 1960, government participation in the oil industry was limited to the regulation and administration of fiscal policies. In 1971, Nigeria joined OPEC and in line with OPEC resolutions, the Nigerian National Oil Corporation (NNOC) was established, later becoming NNPC in 1977. This giant parastatal, with all its subsidiary companies, controls and dominates all sectors of the oil industry, both upstream and downstream.
In April 2000, the Nigerian government set up a new committee on oil and gas reform to deal with the deregulation and privatisation of NNPC. Seven subsidiaries of NNPC are due to be sold including the three refineries, the Eleme Petrochemicals Company Ltd, the Nigerian Petroleum Development Company and the partially owned oil marketing firm, Hyson Nigeria Ltd.
Nigeria is a member of OPEC and is its 12th largest producer. The former Secretary-General of OPEC, Dr Rilwanu Lukman, is a Nigerian national and Petroleum Advisor to the President.
The petroleum industry in Nigeria is regulated by the Ministry of Petroleum Resources. The government retains close control over the industry and the activities of the NNPC, whose senior executives are appointed by the ruling government.
Upstream
The upstream oil industry is the single most important sector in the country's economy, providing over 90% of its total exports.
Oil is produced from five of Nigeria’s seven sedimentary basins: the Niger Delta, Anambra, Benue Trough, Chad, and Benin. The Niger Delta, the Onshore and Shallow Offshore basins can be considered fairly well to well explored. Ventures here are low risk and the basins contain about 80% of producing wells drilled in Nigeria. During the later 1990s exploration focus turned to high risk ventures in the frontier basins of the deep water offshore with encouraging success. These ventures are becoming increasingly attractive with developments in deepwater exploration and production technology.
Nigeria is a member of OPEC. Its crude oils have a gravity between 21·API and 45·API. Its main export crudes are Bonny Light (37·) and Forcados (31·). About 65% of Nigeria’s oil is above 35·API with a very low sulphur content. Nigeria’s OPEC quota is 1.89 million bbl/d.
Downstream
The downstream oil industry in Nigeria is another key sector in the country's economy. The country has four oil refineries and There are eight oil companies and 750 independents all active in the marketing petroleum products. Cross-border smuggling is an ongoing problem and there are frequent reports of large scale corruption in the distribution and marketing chain. The government through its 100% state-owned national oil company, Nigerian National Petroleum Corporation (NNPC) has had an all encompassing control over the industry through its shareholding in all the companies involved and in the setting of wholesale and retail prices.