This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 6/20/2016

Overview

Unit: USD thousands

 

2011

2012

2013 Estimates

2014 Estimates

Total Market Size

559,000

501,000

527,000

553,350

Total Local Production

13,000

17,000

19,000

19,950

Total Exports

0

0

0

 

Total Imports

546,000

483,000

508,000

533,400

Imports from the U.S.

437,000

387,000

406,000

426,300

Exchange Rate: 1 SD

158

158

158

190

 
Total Market Size = (Total Local Production + Total Imports) – (Total Exports)
Data Sources:
Total Local Production: Industry Operators & trade publications*
Total Exports: Industry Operators & Trade Associations
Total Imports: U.S. Census Bureau, Trade Associations (PETAN) **
Imports from U.S.: U.S. Census Bureau
 
*Trade Publications: Nigerian Oil & Gas Intelligence, African Oil & Gas Journal, the Oxford Business Group
**PETAN: Petroleum Technology Association of Nigeria
 
Nigeria still ranks as Africa’s largest oil producer and the twelfth largest in the world, producing high-value, low-sulfur content crude oil. A now six-year long effort to reform Nigeria’s oil and gas legal framework has created uncertainty that has delayed billions of dollars in potential investment in this sector.  Following recent fluctuations of crude oil prices, decline in economic activities associated with the buildup to national elections of a new government, devaluation of the Naira have impacted Nigeria’s economic outlook and as a result, many projects are expected to be delayed and a number of the OICs will scale down capital expenditure to balance their books. I t is envisaged that the National Assembly will once again begin the process of review and passage of the most recent version of a Petroleum Industry Bill (PIB), which seeks to incorporate and update 16 different laws that regulate the sector.  The international oil companies operating in Nigeria, however, have expressed concern that the latest version of the PIB would boost Government of Nigeria (GON) royalty and tax revenues to a level that makes new investment unprofitable.  In contrast, the GON has argued that the PIB reflects current internationally-accepted industry contract standards. The 2010 Nigerian Content Act, which imposes limits on foreign management and the content of the petroleum sector, and the recent Central Bank of Nigeria foreign exchange controls presents significant barriers to foreign participation and imports in the sector, in particular to service companies.
 
In 2014, Nigeria produced about 2.39 million barrels per day (bbl/d) of total liquids, according to the U.S. Energy Information Administration. Onshore, recent and announced divestments by, International oil companies (IOCs) have opened a space for smaller E&P companies to enhance production of under-utilized fields, and the opportunity to return to production fields’ shut-in due to past periods of militancy and ethnic violence. Information from industry contacts indicates that the GoN proposes to hold a “Marginal Fields” (fields that produce less than 10,000 barrels per day) bid round in 2014, however, this has been suspended.  Offshore, IOCs are investing in incremental expansion of existing deep-water production, although only two out of planned nine deep-water oil projects, which have potential to add about 1.1 million bb/d over the next five years and going forward, have received final investment decisions for development. 
 
In 2012, - Exxon Mobil (Erha North), Shell (Bonga South-West/Aparo, North-West and North) and Total (Egina) all announced contract awards, and with the 40,000-bbl/d Bonga North West field, which came online in 2014, these will likely lead to increased imports of oilfield equipment/machinery in 2014 and going forward.
 
Over the next decade, Nigeria hopes to increase its reserves through field optimization, as well as encouraging investments in the development of marginal fields, deep water offshore and exploitation of bitumen reserves. The GON continues to prioritize investment in natural gas and gas-based industries, as outlined in the Gas Master Plan, a comprehensive gas infrastructure development program which targets new investments in gas processing and pipelines, gas-to-power projects and petrochemical facilities. The government’s ongoing power sector reform and privatization will also require concurrent investment in new gas supply for planned Independent Power Producers (IPPs) and refurbishment of former state-owned generation assets.
 
Several gas commercialization projects, include the existing Notore Fertilizer plant, Indorama’s petrochemicals plant, the proposed $9bn Dangote refinery for the provision of urea and ammonia fertilizer plants as well as the 2800 hectare gas based free trade zone in Delta State proposed to generate demand of 2.5 bn scf per day of gas as feedstock for new fertilizer and methanol plants.  The GON recently broke ground for the construction of a 1.8 million tons per annum capacity methanol plant in the Niger Delta.  The plant, which is proposed to have a 3-year construction phase each of 5,000 metric tons, will gulp an estimated total required investment of U.S. $1.1 billion.  The project sponsored by the Gulf of Guinea Oil Exploration Limited (GGOEX), is to be sited at the $20 billion Industrial Park in Ogidigbie in Delta State.  GON also plans to rehabilitate all fuel depots in the country and has already started on the following depots: Aba-Abia State, Benin-Edo State, Warri-Delta State, Jos-Plateau State and Gombe in Gombe State.
 
In its 2014, the government announced that Nigeria raised 700 million dollars to support the completion of Nigeria-Algeria gas pipeline project, which has an estimated cost of 20 billion dollars.  Under its strategic Gas Master Plan focus, GON through the Nigerian National Petroleum Corporation (NNPC) outlined a comprehensive gas infrastructure development program projected to attract an industry wide investment outlay of over U.S. $16 billion within the next four years. Investment opportunities range from financial services, gas transmission pipelines, pipe milling and fabrication yards to upstream gas development, Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) plants as well as gas processing facility and gas-based manufacturing industries.  All these projects offer tremendous opportunities for foreign firms for sale of equipment and services.  Many local companies are gradually getting involved in gas projects with the U.S. as a favored source for expertise, equipment and services.
 
Other ongoing reforms include the full deregulation of the downstream petroleum industry to enable appropriate investment in domestic refining of petroleum products and gas commercialization to drastically reduce gas flares.  Increasingly, the focus has been on other gas projects such as Gas to Liquids (GTL) and Natural Gas Liquids (NGL), domestics gas market expansion, Independent Power Projects (IPP), the West African Gas Pipeline and Trans Saharan Gas Pipeline projects, which offer tremendous opportunity for gas investment ranging from manufacturing, construction and services within the full spectrum of gas development.  The Nigerian Liquefied Natural Gas Limited plans to purchase six LNG carrier ships valued at $1billion for its operations.  Observers estimate over $500 million in imports of gas equipment, small LNG, gas treatment plants and other gas accessories in the coming years.
 
Nigeria’s oil and gas industry remains it’s most lucrative and viable investment opportunities as observers believe that the oil and gas sector offers consistent opportunities for marketing essential capital equipment and technology, for both extraction and production.  Drilling equipment continues to offer the most promise for U.S. exporters as does the supply and services sector, which is increasingly expanding despite challenging environment.  Nigerian government has shown preference to foreign investors willing to invest in Nigeria’s oil and gas industry.  Although American companies maintain clear dominance of the market share of imports of high end oilfield machinery at about 75 percent, with Europe at 17 percent and Asia 8 percent, companies like Daewoo, Hyundai Heavy Industries (HHI) and other Chinese companies provide fabrication of FPSO’s mainly due to the financing model they offer.  These companies continue to encroach in various areas of the upstream industry due to their business model (offer of short-term capital equipment and project funds with favorable repayment terms), which is attractive to Nigerian stakeholders.
 
The Nigerian local content legislation represents a “significant” barrier to entry, but one that international companies can successfully manage with the right strategy; however, companies are expected to register with the Department of Petroleum Resources (DPR - http://www.dprnigeria.com), the regulatory agency for all activities in the oil and gas industry. Key issue worth reiterating, which is relevant for foreign companies interested in operating in Nigeria’s oil and gas industry, is government’s commitment to enforcing Nigerian Content Act and the Nigerian Petroleum Exchange (NipeX) portal for improved procurement processes in the oil and gas industry.  https://www.nipexng.com

Best Prospects/Services

Oil and gas machinery is number one due to its unrivaled potential as a source of investment opportunities for US businesses in Nigeria.  Business observers believe that the oil and gas sector offers consistent opportunities for marketing essential capital equipment and technology, for both extraction and production.  Training services is another area where U.S. service companies have comparative advantage especially in exploration and production, engineering and seismic techniques.

Opportunities

Within the upstream and downstream segments, opportunities abound in exploration and production, drilling and manufacturing equipment, support services, marketing, construction, engineering and consulting services, transportation and storage of crude oil, insurance, legal services, facilities maintenance, and environmental management.  State-owned Nigerian National Petroleum Corporation (NNPC’s) commercialization activities offer opportunities for investment in pipelines and storage depots (tank farms), which are critical for the downstream sector.  Additional opportunities exist in the fabrication of pipes for the oil and gas industry and the water services sector. Nigeria’s estimated average demand for steel pipes range between 1 million to 1.2 million tons annually and offer opportunity for partnership for the pipe milling and fabrication services.  The Nigerian Government’s prioritization of growing domestic gas sector to support power generation and gas-based industrialization presents a major opportunity for U.S. manufacturers and suppliers of modular gas stripping and treatment plant equipment, LNG, Compressed Natural Gas (CNG), LPG, and methanol and fertilizer plant equipment. 
 
The various gas gathering and commercialization projects initiated, some of which are in the developmental stages, offer tremendous opportunity for gas investors ranging from manufacturing, construction and services within the full spectrum of gas development. American firms with advanced technology and associated service experience in the oil and gas industry will be well positioned to meet this requirement.

Other opportunities in the Extractive Industries:
 
Nigeria offers other excellent investment opportunities for U.S. companies involved in the extractive industries including, mining of solid minerals, especially sales of mining equipment, machinery and associated technology and services.  Over the last decade, Nigeria has undertaken substantial institutional and legal reforms to address the underutilized potential of its solid mineral wealth and make the sector more attractive for investment.  The Ministry of Mines and Steel Development identified 34 potential minerals open for investment across the country with a focus on eight sub-sectors: iron ore, gold, copper, coal, tar-sands/bitumen, barite, lead-zinc and dimension stone. Nigeria has proven reserves of over 1.5 billion tonnes of coal, after only partial exploration of potential producing areas.  The Nigerian Coal Corporation (NCC) also has a mandate to identify U.S. technical partners for clean coal development and conversion, coal gasification, manufacture of coal briquettes and cement and coal to power generation to help meet government’s proposed national power target of 14,000MW (from the current 4,000MW).  Several states in Nigeria, especially Ondo State, which has the second largest deposits of Bitumen in the nation, is keen to attract requisite foreign investors and technical partners for its exploitation and development.

Web Resources

http://www.nnpcgroup.com/
http://www.dprnigeria.com/home.htm
 
Email Benedicta Nkwoh, Commercial Specialist: Benedicta.Nkwoh@trade.gov

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.


More Information

Nigeria Oil and Gas Trade Development and Promotion