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Nigeria is Africa’s biggest oil exporter, and possesses the largest natural gas reserves in the continent. Nigeria ranks among the top ten nations of the world in terms of proved oil and natural gas reserves. Nine of Nigeria’s 36 states are classified as oil and gas producers, and these are situated in the three southern geopolitical zones.
According to the CIA Factbook, oil production in 2010 was 2.458 million barrels (bbl) per day. In 2009 the figure for oil exports was 2.102 million bbl/day, which was ninth in the world rankings. Natural gas production was 23.21 billion cubic metres in 2009, which was twenty-ninth in the world rankings. Exports of natural gas totalled 15.99 billion cubic metres in that year.
In 2008 total oil export receipts for Nigeria were about $75 billion dollars, approximately 98.8% of total exports for the year. The oil and gas sectors contribution to GDP decreased from about 47.7% in 2000 to 22% in 2006, but rose to 28.4% in 2009. Revenues from petroleum were an estimated 79% of government fiscal revenues in 2007.
Nigeria’s upstream oil industry is dominated by large international companies. The number of international petroleum companies operating in Nigeria grew from one producer (Shell BP) in 1958 to more than 24 producers in 2007. Four international oil majors – Shell Petroleum Development Company (Shell), ExxonMobil, Chevron Nigeria Limited (CNL) and Total (formerly Elf Petroleum Nigeria Limited or EPNL) – accounted for nearly 83 % of Nigeria’s total petroleum production in 2008. New players in the field include the Korean National Oil Company, Addax Petroleum Development (Nigeria) Limited and China National Oil Company. One example of a small-scale oil company in Nigeria is Atlas Petroleum International Limited.
The Nigerian National Petroleum Corporation (NNPC), the commercial and business agency of the federal government in the petroleum sector, has four refineries. Two of these are in Port Harcourt (PHRC), one is in Kaduna (KRPC) and one is in Warri (WRPC). The refineries have a combined installed capacity of 445,000 barrels per day. They are linked by a network of pipelines and depots located throughout Nigeria. In 2012 Nigeria signed a preliminary deal with Vulcan Petroleum, a US-based company, to construct six new oil refineries.
Since Nigeria’s refining capacity is insufficient to meet domestic demand, Nigeria imports petroleum products. In 2009 Nigeria imported 187,700 barrels of oil per day. In 2010 oil consumption was 279,000 bbl/day, making Nigeria forty-seventh in the world rankings in this respect. On the other hand, Nigeria does not import natural gas. Consumption of natural gas was 7.216 billion cubic metres in 2009.
In contrast to the petroleum industry, natural gas development in Nigeria has been relatively slow. Before the 1980s oil companies were unwilling or unable to store or transport natural gas, so gas flaring was very common. Improved technology, government disincentives with regards to flaring and a rise in the price of natural gas has changed this situation somewhat, though a significant proportion of Nigeria’s natural gas continues to be flared.
According to Global Legal Group (2011), Nigeria’s energy requirements are met through oil (64%), natural gas (27%) and hydro-electricity (8%). Approximately 80% of natural gas utilised in Nigeria is used for power generation. The remaining 20% is utilised as industrial fuel in the cement, fertiliser, rubber, manufacturing, aluminium and steel industries. Liquefied natural gas (LNG) is not used in Nigeria, so it is produced only for export.
In 2009, the main petroleum product consumed in Nigeria was premium motor spirit (PMS) or petrol, at 76% of overall petroleum product consumption. Other petroleum products consumed in Nigeria included automotive gas oil (AGO), household kerosene for domestic use (HHK) and Aviation Turbine Kerosene (ATK).
The federal government has introduced a number of incentives in an attempt to promote investment in natural gas. Export oriented gas projects such as the Trans-Saharan Gas Pipeline and the West African Gas Pipelines (WAGP) have emerged, and the 2006 Natural Gas Master Plan aims to transform Nigeria from an oil economy into an integrated oil and natural gas economy. Natural gas companies in Nigeria include Nigeria LNG Limited, a company jointly owned by the NNPC, Shell, Total and Eni. The Nigerian Gas Company (NGC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), is responsible for gas transmission. The pipeline infrastructure comprises two non-integrated pipeline networks totalling over 1,100 kilometres.