Oil and gas market in Nigeria

Nigeria, despite being a lower-middle-income country, boasts one of the largest economies in Africa. It is projected to become the world's third most populous country by 2050. It has one of the world's largest proven reserves of crude oil and gas but struggles to meet domestic energy demand, with one of the lowest average annual electricity consumption rates per capita in the world at 14 watts per capita per annum. By comparison, Canada's average annual electricity consumption per capita is 1,659 watts per capita per annum. Although the country's refinery nameplate capacity can meet its domestic demand, it heavily relies on fuel imports. However, this is projected to end in 2024.

Key opportunities for Canadian energy companies Nigeria

Despite recent underinvestment, Nigeria's upstream oil sector remains highly consolidated and is dominated by large international oil companies (IOC) and the state-owned NNPC Limited. The IOCs have been divesting from their carbon-intensive onshore assets, which are often problematic but highly lucrative, to focus on their offshore assets. Local independents have been acquiring these assets and other marginal fields. Though the country has recovered some of its oil production, which had been declining over the past five years, they have not yet reached the peak levels of 2 million barrels per day from 2019.

These circumstances present opportunities for Canadian companies:

• The upstream oil sector's growing domestication is creating a need for digital oilfield solutions, particularly those powered by artificial intelligence and innovative hydrocarbon extraction technologies from independents who are seeking to boost productivity and reduce costs.
• Rising fuel costs downstream have prompted the government to introduce policies that promote the greater use of natural gas in transportation and industry.
• Increasing cost of fuel will drive demand for renewable energy and storage solutions to replace diesel usage in commercial and industrial sectors.
• Planned increase in the exploitation of gas resources and detailed engineering services will be required for the construction of gas processing plants and new pipelines.
• The Nigeria Gas Flare Commercialization Program (NGFCP) will create a demand for gas monetization and commercialization solutions, such as gas-to-liquids, compressed natural gas (CNG), and liquefied natural gas (LNG) technologies.

Notable challenges for Canadian oil and gas companies in Nigeria

• Canadian original equipment manufacturers (OEMs) have a limited market share in Nigeria's oil sector. Many industry stakeholders are former employees of IOCs and prefer to work with familiar OEMs from the US and the UK. However, there has been an increased exploration of Japanese, Singaporean, and Chinese suppliers recently, potentially opening opportunities for Canadian OEMs.
• A weak local financial ecosystem has resulted in an inability to finance large projects in local currency. The devaluation of the local currency is also hindering independent companies from raising local financing.
• Extended visa processing times and short visa validity periods, compared to the US and UK, discourage stakeholders from travelling to Canada to establish relationships. As a result, there is a low level of awareness in Canada of the emerging opportunities in Nigeria's oil sector.
• Finding qualified partners in Nigeria can be difficult and requires extensive due diligence.

Nigerian business landscape

• Nigeria is often described as having high political and economic risk and a challenging business environment. To combat this, the government has implemented reforms to enhance the ease of doing business in various sectors like the Petroleum Industry Act (PIA) which has gradually transformed the oil sector since its introduction in 2021.
• The Local Content Act (LCA) limits foreign participation and requires them to partner with local companies to execute certain activities in the oil sector. Under the LCA, local companies are prioritized for upstream projects and services for which contracts are to be awarded.

Upcoming projects and events

• Nigeria LNG's $10 billion Train 7 project will increase capacity from 22 MTPA to 30 MTPA by 2030.
• Between 2023 and 2032, Shell plans to invest $6 billion in CAPEX for its offshore assets.
• The final investment decision on the 7,000 km Nigeria-Morocco gas pipeline, which will export Nigerian gas to Europe, is expected by December 2024.
• Nigeria International Energy Summit; February 26 - March 01, 2024. Abuja.
• NOG Energy Week Conference and Exhibition; June 30 - July 04, 2024. Abuja.
• Nigeria Annual International Conference and Exhibition (NAICE); August 05 - 07, 2024. Lagos.

Summary

Nigeria is an attractive market for Canadian OEMs and suppliers with solutions for enhancing oil production, reducing operational costs, and processing gas. As the government is committed to meeting its obligations under the Paris Agreement, the industry will also require emissions reductions and other solutions that facilitate environmentally sustainable practices to support the clean energy transition. The market is suitable for innovative carbon finance mechanisms, as the country is about to finalize the creation of its voluntary carbon market. Given its geographical and economic conditions, Nigeria is an ideal destination for business development in the oil and gas sector.

For more information on Oil and Gas sector in the Nigerian market please contact

Godwin Aigbokhan
Trade Commissioner (Oil, Gas & Mining)
godwin.aigbokhan@international.gc.ca