The Federal Government has announced ambitious plans to boost Nigeria’s oil production to 4 million barrels per day (bpd) and gas output to 10 billion cubic feet (bcf) per day by 2030. The government’s strategy follows the introduction of new offshore oil and gas incentives by President Bola Tinubu.
In a statement released on Tuesday, Mrs Olu Verheijen, Special Adviser to the President on Energy and head of the Energy Office, highlighted the government’s focus on attracting significant investment to the oil and gas sector, particularly in deepwater projects.
“Since Nigeria’s last deep water project the Egina project was approved in 2013, international oil companies operating in Nigeria have directed over $82 billion in deep water investments to other countries deemed more competitive,” Verheijen noted. “Over the next few years, these companies plan to spend an additional $90 billion on deep water oil and gas developments. Our reforms aim to unlock between $5 billion and $10 billion of that investment for Nigeria in the near- to medium-term.”
For years, Nigeria has struggled to meet its Organisation of Petroleum Exporting Countries (OPEC) production quota, largely due to oil theft and a lack of sectoral investment. However, Verheijen, in a statement signed by her office’s Stakeholder Manager, Morenike Adewunmi, reiterated the government’s commitment to turning things around.
Since President Tinubu assumed office in May 2023, the administration has initiated several reforms to enhance Nigeria’s competitiveness in the global oil and gas industry. These reforms, including three presidential directives issued in February 2024, are intended to reduce the cost and timeline of doing business in the sector, which remains Nigeria’s largest foreign exchange earner.
“The reforms will create tens of thousands of new jobs, increase foreign exchange earnings, stimulate tax revenues, and contribute to Nigeria’s macroeconomic stability,” Verheijen said.
As part of these efforts, President Tinubu recently approved two new sets of fiscal incentives: a Value Added Tax (VAT) waiver covering gas, diesel, electric vehicles, and clean cooking equipment, as well as tax credits for new investments in deepwater oil and gas exploration and production. The incentives, which are expected to take effect immediately, were detailed in documents issued by Wale Edun, Minister of Finance and Coordinating Minister of the Economy.
The fiscal measures align with the Presidential Gas for Growth Initiative, which aims to fast-track the development of Nigeria’s vast natural gas reserves, displace fossil fuels in transportation, and promote the affordability of gas while enhancing energy security. Despite growing global focus on the energy transition, an estimated 76 per cent of Nigeria’s gas remains undeveloped.
Commenting on the reforms, Osagie Okunbor, Chairman of the Oil Producers Trade Section (OPTS), said: “The level of coordination and policy coherence we’re seeing today is unprecedented. The accelerated pace of reforms over the past year has renewed our interest in Nigeria.”
Rosario Osobase, Chairperson of the Petroleum Contractors Trade Section (PCTS), echoed this sentiment. “For the first time in a long while, we’re seeing positive momentum in our industry in Nigeria, thanks to the presidential directives and the government’s deliberate efforts to engage the service sector,” Osobase said.
However, while Nigeria seeks to ramp up production, recent reports show that the country faces challenges in meeting its immediate targets. A survey conducted by Reuters indicated that Nigeria pumped 40,000 bpd less oil in September, leading to a decline in exports. The report, citing tanker tracking firms, stated that OPEC oil output fell to its lowest level this year, with Nigeria contributing to the decline.
The Reuters survey found that OPEC member countries collectively pumped 26.14 million bpd in September, a drop of 390,000 bpd from August’s revised total. Libya accounted for the bulk of the reduction, as political unrest led to a standoff over control of the country’s central bank, cutting its oil supply by 300,000 bpd.
Despite the decline, output from Libya is expected to recover now that a dispute over the central bank’s leadership has been resolved, and the National Oil Corporation has lifted the force majeure at key oilfields. Iraq also reduced its output by 90,000 bpd in September as it works towards full compliance with its OPEC production target.
The Reuters survey, based on shipping data from external sources, flows data from LSEG, and insights from firms like Kpler and Petro-Logistics, paints a complex picture of Nigeria’s current oil production landscape. With global oil prices fluctuating and domestic production still below OPEC quotas, Nigeria’s ambitious 2030 targets will depend heavily on the success of the Tinubu administration’s reforms and its ability to attract significant investment into the sector.
