Africa’s largest oil producer, Nigeria is assuming a growing importance on the world energy scene while large, virtually untapped reserves of gas raise promising prospects
| Oil accounts for half of Nigeria’s GDP and the country also hopes to tap into its vast gas reserves. |
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nterest in Nigeria as an oil and gas exporter has been re-ignited in recent years by new deepwater discoveries and the sheer potential of its natural gas reserves. The only member of the Organisation of Petroleum Exporting Countries (OPEC) in sub-Saharan Africa, the country plans to double its oil output from 2.4 million barrels a day (b/d) to around 4 million b/d by 2010. At current production rates, Nigeria’s oil is expected to last another 40 years, and gas reserves 100 years. The government hopes to bump up recoverable reserves from around 30 billion barrels to more than 40 billion barrels by the end of the decade.
Oil dominates Nigeria’s economy, accounting for almost half of its GDP, more than 97 per cent of total exports and around 81 per cent of total public revenue. The major importer of Nigerian crude is the United States, which now sources more crude from Africa than it does from Saudi Arabia. Foreign multinationals like Shell dominate the industry, working in joint ventures alongside the state-owned Nigerian National Petroleum Corporation (NNPC). Shell recently unveiled two so-called Big Cat discoveries in frontier areas of Nigeria’s deepwater, giving a major boost to the reserves drive.
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Edmund Daukoru, Minister of State for Petroleum, believes the need to secure future oil supplies has never been greater, given the soaring prices and squeeze on supply afflicting the global market. “We all need energy, so shareholders must be willing to invest in longer term projects to secure supplies,” he says. As part of its long-term plans for the energy sector, the government has drafted a whole range of deregulation measures designed to draw in more investment, not only in upstream areas like exploration and production, but downstream too, particularly in refining and marketing activities. At the same time, the foreign energy companies are adjusting their approach to help Nigerians develop their skills to play a more significant role in the industry. Oil and gas exports still account for virtually all of Nigeria’s foreign exchange earnings, yet much of the work, equipment and personnel are still sourced from overseas. “We hope to see more British invstment in the oil and gas area,” stresses Mr Daukoru. “From big projects to smaller scale ones, even down to the pump level, Nigeria has a lot of opportunities.”
Gas represents a new frontier, according to Mr Daukoru: “It is an area that needs full attention. There is a lot of emphasis on liquefied natural gas (LNG), which is very similar to oil activities. We are also looking at pipe gas, because it has the potential to open up industrial activites in a way LNG doesn’t. Pipe gas presents investment opportunities.”
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With large and virtually untapped reserves – estimated to be in the region of 166 trillion cubic feet (tcf) – some commentators have even referred to Nigeria as a gas province with some oil. Most of the focus to date has been on LNG for export. The Nigerian LNG complex on Bonny Island, the largest industrial project in Africa, is now one of the most successful gas plants in the world with a proven track record. Other LNG export schemes are on the drawing board, including one – Olokola LNG – which groups Shell with Britain’s BG Group, a relative newcomer to the market. The flagship West African gas pipeline, which will carry Nigerian gas to Ghana, Benin and Togo via a 421 mile cross border pipeline, illustrates the potential for local economic development from Nigeria’s energy. Funsho Kupolokun, NNPC’s Group Managing Director and Chairman of the pipeline’s coordinating group, the West African Gas Pipeline Company, believes the project is a significant milestone in the region’s economic development. “In essence, it is a practical demonstration of the spirit of the New Partnership for African Development.”
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As well as providing an alternative source of income, gas is also being lined up to feed new power plants and industrial enterprises across the country. There are big plans to take gas to the north and other areas. Tony Chukwueke, Director of the Department for Petroleum Resources, says the West African Gas Pipeline project is a showcase scheme for the entire African region. Another ambitious cross-border scheme, taking Nigerian gas across the Sahara to Algeria, is also being put together. “I think it is very important that the resources available in Nigeria are used to feed our neighbours in West Africa,” he says. “We see that energy can be an integral commodity and a platform on which the development of our sub-region can take place.”
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