An Overview of Nigerian Oil and Gas Industry

The Oil Industry is the backbone of the Nigerian economy, accounting for over 90% of total foreign exchange revenue. Nigeria is a member of OPEC, the global oil cartel. The estimated crude oil reserves of Nigeria are about 25 billion barrels with a daily production of about 2.0 million barrels per day.

Current Government policy is to raise total reserves to 30 billion barrels, by the year 2003. Most of Nigeria’s crude oil production is light sweet crude, API grades 26-40, with low sulphur content. Most of the crude oil in Nigeria comes from numerous, small, producing fields, located in Niger Delta area. The product is exported through 7 terminals, and a number of floating production vessels. There are over 606 fields with commercial quantities of extractable reserves and numerous other marginal fields throughout the Niger Delta.

Upstream Sector

Most of the oil production in Nigeria is carried out by 6 major joint venture operations managed by multinational giants; Shell, Mobil, Chevron, Agip, Elf, and Texaco. Nigerian Government, through the Nigerian National Petroleum Corporation (NNPC), holds about 60% shareholding in joint venture companies while the foreign joint venture partners manage the operations, under a joint equity financing structure regulated by a Joint Operating Agreement. All operating costs are financed jointly as per the Memorandum of Understanding (M.O.U.), which defines the commercial agreement between the partners and the government.

Downstream Sector

The refining, petrochemical, and transportation sectors of the oil industry in Nigeria, are managed by various subsidiaries of Nigerian National Petroleum Corporation (NNPC).

Refineries: The country has 4 refineries with a total capacity of 445,000 bpd

• Port Harcourt 'A'- 60,000 bbl/d
• Port Harcourt ‘B’- 150,000 bbl/d
• Warri- 125,000 bbl/d
• Kaduna- 110,000 bbl/d

Petrochemical Plants: NNPC planned the development of the Petrochemicals Industry of Nigeria in 3 phases:

• 1st phase: Already operational, it comprises of 3 plants; a linear alkyl benzene plant (LAB) in Kaduna, and the carbon black & polypropylene plants near Warri.
• 2nd phase: Eleme Petrochemicals Complex has been designed to produce 250,000 metric tons per year of polyethylene, and 80,000 metric tons per year of polypropylene.
• 3rd phase: Intended for production of xylenes, is at conceptual stage. In addition, a number of other projects are planned by NNPC in joint venture with private investors.

EXPLORATION

The developments in 3D seismology and deep drilling technology have made the deep seas very attractive prospects for the oil companies. Many of these developments are taking place in the Gulf of Guinea, from Angola to the Ivory Coast.

As part of its program to boost the country's crude oil reserves, and increase production capacity, the Federal Government of Nigeria, decided to offer for bidding, various deep offshore blocks in the Niger Delta. Some of the blocks on offer were located in water depths of up to 3,000 meters. These new concessions were given out based on production sharing contracts. The concessions attracted a number of major oil companies, including some with production operations in Nigeria.

There has been very keen interest in these offshore blocks, and most of the successful companies have concluded initial seismic surveys and exploratory drilling. Shell, Texaco and Statoil have made a number of major discoveries. It is estimated that the current findings will add about 600,000 barrels to Nigeria's daily oil production over the next 5 years.

Despite the depression in world oil prices, these developments are very encouraging for Nigerian Oil Industry.

NATURAL GAS

Estimates of Nigeria’s proven natural gas reserves are approximately 104 trillion cubic feet. Nigeria has the tenth largest reserves in the world, approximately 30% of African gas reserves. Much of this is associated gas, as many Nigerian oil fields are saturated, and have primary gas caps. About 75% of the associated gas is currently flared off.

Growing pressure from environmentalists, has now led to increasing utilisation of the associated gas, and Shell has committed to ending all flaring of associated gas from their fields by the year 2008. A number of major gas projects are under way, and more are being planned:

• Liquefied Natural Gas (LNG) Project: The largest and most significant of these projects is LNG project. With a development budget of approximately $4 billion, it is a joint venture with 4 shareholders; NNPC (49%), Shell Gas (25.6%), ELF (15%), and Agip (10.4%) with Shell as the technical managers of the project. The project will consist of a 2-train liquefaction plant, a gas treatment system, transmission pipelines, a loading terminal and storage tanks. Initial gas supply will be from non-associated gas reserves. Shell, Elf and Agip are all developing projects which will gather gas from their various fields, and the project is expected to process 750 million cubic feet of gas daily.

• Escravos gas-gathering Project: Developed by Chevron to recover associated gas from its offshore fields, the first phase of the project is completed. The plant processes over 165 million cubic feet of associated gas daily. 2nd phase of the project is underway.

• NGL (Natural gas liquids) Project: This is a joint venture project between Mobil and NNPC. The Reserve estimate for the NGL is around 350 million barrels.

• Trans West African Gas Pipeline: There are plans for the construction of a pipeline to supply natural gas to Benin Republic, Togo, and Ghana. The gas is intended to be used to generate electricity in the three countries. It would require the construction of about 600 kilometers of pipeline.

The list of the Clients for 3T Worldwide QRI (Nigeria) Limited include all the major Joint Venture Oil Producing Companies & major Pipeline Contractors in Nigeria: