The oil and gas downstream market in Nigeria is a rapidly growing sector of the country’s economy. As the second largest producer of crude oil in Africa, Nigeria has seen a significant rise in both domestic consumption and foreign investment. With this increase comes an increased need for knowledge about the sector and its opportunities. In recent years, Nigeria has been seeking to attract more foreign investments into its oil and gas sector, this includes introducing policies that encourage private-sector participation in the industry by allowing companies to explore and exploit petroleum resources within their licensed areas.
The government has also put in place regulations aimed at streamlining operations within the country’s upstream sector, including taxation reforms that have made investment more attractive to foreign companies. In this blog post, and on our online app we’ll take an in-depth look at the Nigerian oil and gas industry and its downstream market in Nigeria and what potential investors need to know before making any decision. Let’s dive in!
Nigerian oil and gas industry
The Nigerian oil and gas industry is a lucrative sector for the nation, with its vast resources and growth potential. Nigerian oil production is currently estimated to be around 2.5 million barrels per day (bpd), making it the fourth largest producer of crude oil in Africa, behind Algeria, Angola, and Libya. The country has vast reserves of both onshore and offshore crude oil, as well as significant natural gas reserves. According to estimates from late 2017, Nigeria has produced approximately 1.9 million barrels of crude oil per day and more, making it one of Africa’s top producers according to Global Data Intelligence Centre (GDIC). It is also estimated that nearly 80% of all revenue generated from natural resources comes from petroleum products such as gasoline, diesel fuel, kerosene, jet fuel, etc., which is why it is so important for investors to understand how these products are marketed downstream within Nigeria’s borders.
The Nigerian government has taken steps towards improving transparency in the industry by introducing a range of measures such as creating a single regulatory body for all aspects of upstream activity (including exploration, development, and production) as well as implementing a data management system that captures information on activities such as drilling rigs and seismic surveys conducted throughout the country’s various basins. It is hoped these measures will help improve governance standards within Nigeria’s petroleum sector while also providing potential investors with greater assurances around project security before they commit to investments in this fast-growing market.
Overview of the Downstream Market
The downstream oil and gas sector in Nigeria has been undergoing a significant transformation over the last few years. In recent years, the country has seen significant investment in its infrastructure, enabling it to become one of the leading oil and gas markets in Africa. As a result, the downstream market continues to show promise and growth potential. There are three major sectors which the downstream market can be broken down into:
- Refining & Marketing
- Transportation & logistics
- Distribution & retailing.
Refining & Marketing involves refining raw petroleum products into usable fuels such as gasoline or diesel fuel that are then sold directly to consumers or other businesses through direct sales channels like service stations or retailers like grocery stores etc., while transportation & logistics involve transporting refined petroleum products via vehicle fleets or pipelines etc., between different locations within Nigerian territory such as refineries located near production sites etc. And Distribution & retailing involves selling refined petroleum products directly to consumers through service stations or convenience stores located throughout Nigeria’s cities and townships etc. For investors to capitalize on opportunities within this sector they must first have a thorough understanding of the regulations governing production operations along with their associated risks such as price fluctuations caused by external factors such as global supply/demand dynamics which could potentially cause losses if not managed properly by experienced professionals who are familiar with these types factors. Additionally, they should also be aware that there are various regulatory bodies overseeing operations across all levels including those related environmental protection standards set forth by local governments but also national agencies like The Department Of Petroleum Resources (DPR) which regulates activities related to exploration/production/refining throughout Nigerian territory.
Nigeria Downstream
However, Nigeria’s downstream market is highly competitive with international companies such as Shell Oil Company operating retail outlets across the country. Shell is not only involved with wholesaling petroleum products but also owns retail outlets where these fuels are sold directly to consumers at various price levels depending on location and demand. There are also numerous independent players competing within Nigeria’s downstream sector including Total E&P Nigeria Limited which accounts for more than 10 per cent of total sales at retail outlets in Nigeria while Mobil Oil Corporation/ExxonMobil contributes roughly 8 per cent towards sales followed by ChevronTexaco contributing around 6 per cent towards overall sales volume at Nigerian petrol stations nationally.
The company has already opened two Compressed Natural Gas Plants in the western part of Nigeria with an additional plant planned by the end of this year. 11Plc holds a 20k market share in the lubricant sector and intends to become number one among its competitors soon. Expanding its LPG filling plants across the country as well as enlarging storage capacity to 8,000 metric tonnes are further initiatives being taken by 11Plc to promote the use of cooking gas throughout Nigeria.
11Plc is determined more than ever before to be a major player in both the Nigerian oil industry and commerce overall. With their ambitious goals for 2020, it will be interesting to see what impact these investments have on their business performance this year and beyond!
All things considered, the Oil & Gas Downstream Market in Nigeria presents a unique opportunity for savvy investors looking to expose the nation’s energy industry. By taking time to understand each component involved, foreign entities will be better positioned to capitalize on available business opportunities without putting too much risk capital at stake. Overall, Nigerian Downstream Market remains an attractive option with potentially high returns on investment due to its vast reserves, high-quality crude oil production & sizeable refining capacity.
Nigeria Oil & Gas Market Analysis
Ranking 13th in the world for crude oil production, with a daily output of an estimated 2 million barrels, one would think that the downstream sector of the Nigerian oil and gas industry would be bustling with activities and investments. Regrettably, this is not the case. The sector is faced with numerous issues such as mispriced products, an insufficient supply of goods, insecurity around pipelines, lack of consistent gas availability due to vandalism and inadequate infrastructure for pipelines, malfunctioning refineries and COVID- 19 which came knocking recently.
Before the pandemic, national companies related to oil and gas were already facing difficulty with liquidity as well as cash shortage; which has further deteriorated due to the COVID-19 outbreak. Nonetheless, some factors are set to bolster Nigeria’s market growth during this period; such as increasing investments in the upstream sector and the development of large-scale modular refineries within the country’s jurisdiction. Additionally, attacks on infrastructure related to oil & gas production have hampered progress over the past few years which can be attributed to militant activities along with rampant occurrences of theft resulting in considerable losses for firms working within this area. These challenges will likely impede the pace at which growth can be achieved over the forecast period
Oil and Gas Sector
For the past five years, the Downstream Industry in Nigeria has seen a 12% CAGR growth (Compound Annual Growth Rate), but it still has some way to go before it reaches its potential. The main issues holding back further development are supply and logistic challenges, insecurity, an import-dependent market, and inadequate product pricing. Additionally, high operational costs reduce the profits that can be made from the industry. To combat these obstacles, the Nigerian government has encouraged private refineries to be set up to increase domestic production of petroleum products and make Nigeria a net exporter of them in time.
Other than oil refineries, there is also a need for reform in terms of policy and regulation within this industry. The Petroleum Industry Act (PIA) is aimed at improving this landscape by creating conducive regulations that will attract investments as well as reducing the financial burden caused by Premium Motor Spirits (PMS) subsidies so that deregulating markets can become a reality. With this in place we hope that these constraints on downstream industry growth will begin to weaken over time so that further progress can be made toward its full potential.
The oil and gas downstream market in Nigeria is an exciting opportunity for investors and businesses alike. With the right knowledge and resources, anyone can capitalize on the potential of this market. If you are interested in learning more about the oil and gas downstream market in Nigeria, we encourage you to take action today by researching more about this sector of the Nigerian economy using a reliable platform like TheNewspaperStand where there are a variety of ways to access information about this sector including attending seminars, reading industry reports, or speaking with experts in the field. By taking action today and educating yourself on the opportunities available, you can be well-positioned to unlock your share of profit from Nigeria’s oil and gas downstream markets!