Oil and gas
Between 2014 and 2020, BMI expect oil production to increase only slightly from 2.38 million bpd to 2.48 million bpd. The reasons behind this are that onshore production, continued instability, and investment problems are occurring due to regulatory uncertainty and these are not being helped by falling crude oil prices. There are also both downside and upside risks in Nigeria that are largely dependent on an improvement in the business environment and the content and adoption of the PIB. Should the market continue without having adopted the PIB, BMI believes that project investments and cancellations could see Nigerian production head downwards in the medium to long term, as new production fails to offset decline rates at mature onshore and shallow water fields. A more substantial increase in production is not at all likely until the PIB is passed.
When it comes to consumption, BMI expects oil consumption to increase from 311 000 bpd last year to 400 000 bpd by the end of 2023. This will be led by the transport sector and the continued use of diesel power generators as backup methods to the country’s intermittent power supplies. BMI has also said that the recent collapse in oil prices will reinforce the likelihood of fuel subsidy reductions in the country. However, the low fuel prices should in theory enable subsidy reductions without an increase in regulated fuel price. Looking at the downstream sector, the country does indeed have a large refining capacity, however the adverse consequences of fuel subsidies, poor maintenance and general operational failure has resulted in the sector’s utilisation rates remaining below 30% over the last 10 years. BMI has said that refined fuels production could increase from 2015 onwards however with the Escravos GTL plant starting operations, and the important 500 00 bpd Dangote refinery which is expected to come online by 2020.
Looking at gas, BMI has said that with the prospect for higher domestic gas prices and the promising domestic demand from the power sector, there should be some stimulation in private investment in infrastructure to increase gas production levels. This at the moment is turning into a slow ramp up in gas monetisation and production. The expansion of LNG capacity in the country is unlikely given the unreliable supply side and an uncertain demand side. In addition, BMU has said that more gas production in the country is most likely going to be consumed domestically. New LNG projects are coming online all over the world however and therefore Nigerian LNG export capacity is expected to remain capped by 30 billion m3 and will see Nigeria lose market share in the global LNG sector.
BMI has said that growth in gas production is going to spur downstream petrochemicals industries, however the company has warned that the business environment remains uncertain and will no doubt be affected by the turbulence that inevitably comes with presidential elections. Last year, the country had an olefins production capacity of 550 000 bpy, ethylene at 125 000 tpy and thermoplastic resins at 240 000 tpy along with others. The sector is characterised by low capacity utilisation, frequently disrupted plan operations and a lack of proper resources to operate and maintain facilities.
The government is continuing to make efforts to attract foreign direct investment (FID) into the country’s petrochemical sector, however, a lack of skilled labour as well as political and social unrest and sabotage of infrastructure is expected to delay projects. If current planned projects do run as planned, by 2019 Nigeria could have an additional 5.6 million tpy of urea and 1.74 million tpy of ammonia. Methanol is set to see additional capacity of 3.6 million tpy over the next few years and basic polymers are likely to increase by 600 000 tpy by 2018.
Adapted from reports by Claira Lloyd
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/14042015/bmi-nigeria-oil-gas-petchem/