Nigeria’s oil sector is in urgent need of entangling itself from the web of economic stagnancy, stalled reforms and a risk of rising militancy this year. Nigeria’s output will get a much needed boost with the startup of the 200,000 b/d Egina oil field which could take production, OPEC dependent, up to a decade high of 2.3 million b/d. But the country faces uncertainties around a volatile presidential campaign season ahead of its February 2019 elections.
President Muhammadu Buhari’s popularity appears to be on the wane especially in the south of the country where almost all of the oil in produced, and analysts remain wary of attacks by militants. In 2016, Nigeria output slumped to around 30-year lows of 1.1 million b/d due to attacks on its key oil infrastructure and the specter of fresh attacks still haunts the sector. The Nigerian National Petroleum Corp. recently acknowledged that sabotage on its oil pipelines was on the rise.
Nigeria has been starved of new investments in oil and gas projects and one of the reasons for this has been the inertia caused by the lack of progress of the Petroleum Industry Governance Bill (PIGB). This PIGB is almost a metaphor for the problems in the industry, with many desperately hoping Buhari will approve the bill quickly after he withheld its assent in August.
Analysts argue that the bill will better regulate upstream agreements, fiscal terms, and production-sharing contracts. The bill also aims to create efficient governing institutions with clear objectives, so as to diminish the powers of the stateowned NNPC. Oil majors including Shell, ExxonMobil, Total and Chevron are all losing patience with the slow progress of reform, particularly as regulatory changes in rival oil provinces such as Mexico prove more appealing.
Source: S&P Global Platts