Economy of Nigeria

Commodity market

1. Overview of the Nigerian petroleum products market highlighting:

a. Market size

b. Market growth

c. Market segments

d. Key players

e. Regulatory, political and business environment

f. Industry profitability and risk profile

g. Others

a. Market Size:

Located at the extreme inner corner of the Gulf of Guinea on the west coast of Africa, Nigeria occupies an area of 923,768 sq. km (356,669 sq mi), extending 1,127 km (700 mi) E–W and 1,046 km (650 mi) N–S. Comparatively, the area occupied by Nigeria is slightly more than twice the size of the state of California. It is bordered by Chad on the NorthEast, by Cameroon on the East , by the Atlantic Ocean (Gulf of Guinea) on the South , by Benin (formerly Dahomey) on the West , and by Niger on the NorthWest and North , with a total boundary length of 4,900 km (3,045 mi), of which 853 km (530 mi) is coastline. Nigeria's capital city, Abuja, is located in the center of the country.

Nigeria has a population of over 140 million people and an abundance of natural resources, especially hydrocarbons. Oil and gas operations commenced in Nigeria effectively in 1956, with the first commercial

find in that year by the then Shell D’Arcy. Before this time, that is, from November 1938, almost the entire country was covered by a concession granted to the company to explore for petroleum resources.

Nigeria ranks as the tenth largest producer of petroleum and the 7th largest oil exporter among OPEC countries. The country’s seven hydrocarbon-bearing basins hold 35 billion barrels proven reserves of mostly sweet crude oil. However the greater share of Nigeria’s hydrocarbon deposits is gas. With over 184 trillion cubic feet (tcf) of sweet gas, Nigeria has about the 8th largest gas reserves in the world.

Nigerian crude comes in 21 classes, including condensates, as at the second quarter of 2006 but is marked internationally for its sweet crude- the Bonny Light and the Forcados. In the first quarter of 2006, Nigeria exported 198million barrels of crude oil and received about 11.9billion dollars from an average price of $60 a barrel.

Presently, oil exports contribute about 95% of Nigeria’s export revenues, about 80% of all government revenue and about one-third of the country’s GDP.

b. Market Growth:

Nigeria's refining capacity is currently insufficient to meet domestic demand, forcing the country to import Petroleum products. Nigeria's state-held refineries (Port Harcourt I and II, Warri, and Kaduna) have a combined nameplate capacity of 438,750 bbl/d, but problems including sabotage, fire, poor management and a lack of regular maintenance contribute to the current operating capacity of less than 50%.

c. MARKET SEGMENTS:

Nigerian oil and gas industry may be broadly segmented into the upstream and downstream sectors.

The Upstream Segment:

The upstream oil sector is a term commonly used to refer to the searching for and the recovery and production of crude oil and natural gas. The upstream oil sector is also known as the exploration and production (E&P) sector.

The upstream sector includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, and subsequently operating the wells that recover and bring the crude oil and/or raw natural gas to the surface.

The upstream oil industry is the single most important sector in the country's economy, providing over 90% of its total exports.

Oil is produced from five of Nigeria’s seven sedimentary basins: the Niger Delta, Anambra, Benue Trough, Chad, and Benin. The Niger Delta, the Onshore and Shallow Offshore basins can be considered fairly well to well explored. Ventures here are low risk and the basins contain about 80% of producing wells drilled in Nigeria. During the later 1990s exploration focus turned to high risk ventures in the frontier basins of the deep water offshore with encouraging success. These ventures are becoming increasingly attractive with developments in deepwater exploration and production technology.

Nigeria is a member of OPEC and has an OPEC quota of 1.89 million bbl/d.

i.) Major Players in the Upstream Segment

The industry is dominated by 6 major joint venture operations managed by a number of well known multinationals:

1. Shell,

2. EXXONMobil,

3. Agip (ENI),

4. TOTAL,

Date: 2015-01-29; view: 949