Nigeria, one of Africa’s top oil producers, has the greatest gas reserve base, but it has had difficulty attracting the necessary investments to grow its oil and gas business. This presents a serious economic dilemma, given that the petroleum industry generates only 8% of Nigeria’s GDP but accounts for 90% of the country’s foreign exchange revenues and a sizeable portion of government revenue.
The Petroleum Industry Act was enacted by the federal government in 2021 with the intention of transforming Nigeria’s oil and gas industry and luring foreign direct investments. Due in large part to the perceived fiscal inadequacies and general instability of the business and economic environment, there has been a slowdown in attracting both local and international investments since the passage.
The new administration led by President Bola Ahmed Tinubu and the office of the Special Adviser on Energy Olu Verheijen, who coordinated across multiple agencies and ministries, has been proactive in its efforts to address issues in the sector with the aim of making Nigeria competitive and attractive to accelerate investments. President Tinubu announced a series of reforms including three directives to introduce fiscal incentives for oil and gas projects, reduce contracting costs, and promote cost efficiency in local content requirements.
In less than a year, Nigeria has begun to see new investment interests. The Nigerian National Petroleum Company Limited (NNPCL) and Total Energies just announced the Final Investment Decision (FID) on the Ubeta project – a 350 million standard cubic feet of gas per day (scfd) initiative. This final investment decision involves a commitment of $550 million to extract 900 billion cubic feet of non-associated natural gas from OML 58, situated approximately 85 kilometres from Port Harcourt in Nigeria’s Niger Delta Region.
The new Presidential Directives, which seek to increase Nigeria’s domestic gas supply and economic development, are in line with the TEPNG Joint Venture investment. Over the following 18 months, it is anticipated that the directions will bring in fresh investments and bring over $10 billion in projects out of dormancy.
Due to its capacity, the Ubeta project will support NLNG’s supply while also catering to Nigeria’s internal market. A key component of the Nigerian federal government’s ambitions to achieve sustainable economic development through enhanced domestic gas consumption, this project represents a significant advancement in energy security. Along with reviving the industry’s economic growth and job creation, the project is anticipated to boost local communities’ ancillary small and medium-sized businesses.
Nigeria is becoming more appealing to investors in the oil and gas sector as a result of the administration’s announcement that it intends to reinforce the PIA with new guidelines. The TEPNG JV seems to be the initial move toward enhancing Nigeria’s capacity to deliver gas, especially domestic gas, and, consequently, its economic development.