Uche Cecil Izuora
Nigeria is on track to sustain oil production following key policy decisions by the present administration to address leakages in the sector.
President Bola Tinubu’s proposed N49.7 trillion 2025 budget is tied to the ambitious goal of increasing crude oil production to 2.06 million barrels per day, aimed at bringing down the current inflation rate of 34.6 per cent to a target of 15 per cent within the year.
Already, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) has commenced the process of reclaiming undeveloped blocks from current license holders, which are expected to constitute majority of licenses available in the upcoming round.
For this licensing effort to succeed, a strong political commitment and persistent action from the government will be essential.
The 2025 licensing round will prioritize fields that have been discovered but remain undeveloped, along with fallow assets and natural gas development, all in alignment with Nigeria’s pledge to the United Nations Sustainable Development Goals.
However, achieving this production goal is not without its challenges as the government faces significant hurdles, particularly regarding security issues in oil producing states which have historically impacted oil production. To enhance output, Nigeria plans to initiate a new oil licensing round in 2025 that will concentrate on undeveloped oil blocks.
Hopefully Nigeria is expecting that revenue growth especially from crude oil sale will continue to provide confidence in budget implementation in 2025 particularly given current growth in oil production statistics.
The Minister of State Petroleum (oil), Heineken Lokpobiri, had said that the 2.06 million barrels per day oil projection in the 2025 budget is realisable and realistic.
The Minister gave the assurance following the presentation of a N49.7tn budget by President Bola Ahmed Tinubu to the National Assembly.
The budget titled “Budget of Restoration: Securing Peace, Rebuilding Prosperity” is targeted at consolidating the administration’s reforms, which experts say have induced hardship.
Tinubu said the 2025 budget targets a revenue of N34.82tn to fund the budget, including N15.81tn for debt servicing.
The deficit will be covered with N9.22tn in debt.
Although some analysts have argued that the budget is unrealistic and ambitious.
Tinubu said the revenue projection is based on the assumption that oil production would rise to 2.06tn while the average crude oil price remains at $75 per barrel.
Lokpobiri said there are existing efforts to upscale production to 2mbpd.
Giving evidence of growth in the country’s production rise, the Organization of Petroleum Exporting Countries (OPEC) confirmed that Nigeria has recorded a shift in production.
Nigeria’s production, including condensates, rose by 11 per cent, from 1.3 million barrels in October to 1.4 million in November 2024.
Nigeria’s daily average oil production rose by 152, 000 barrels per day last November.
According to the OPEC MOMR for December 2024, the country’s production, including condensates, rose by 11 per cent, from 1.333 million barrels in October to 1.486 million in November 2024.
The analysis puts the daily increase at 152, 000 b/d and about one million barrels increase between October and November last year.
Current production stands at 1.8mbpd according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The Minister said, “What we can assure Nigerians is that this budget will be realizable; this budget will be implemented.
“Let me speak on some of the assumptions. The budget is predicated on the oil production of 2.60 million barrels of oil per day.
“We are already doing close to 2mbpd and I can assure you that by the end of the year 2024, we will surpass what is projected here, including condensates.”
In October 2024, the NUPRC launched a project to raise oil production by an additional one million barrels per day through its Project One Million Barrels Per Day Initiative.
At the time, oil production was over 1.6mbpd. An additional 1mbpd would sum oil production to 2.6mbpd, surpassing the 2.06mbpd 2025 budget projection.
The Commission’s Chief Executive, Engr. Gbenga Komolafe said at the launch that the move to raise oil production by an extra 1 million barrels per day “is in line with the president’s mandate for the country to raise its oil output to support the country’s revenue target.
Meanwhile the NUPRC has confirmed that Nigeria’s crude oil production reached 1.5 million barrels per day in December 2024, a major milestone in the country’s quest to raise output significantly.
Nigeria had finally met its OPEC quota, a feat that took a four-year struggle to achieve.
“The average crude oil production was 98.97 per cent of OPEC quota, that is 1.5 million barrels per day,” a footnote on the December production data by the Commission stated.
In all, the data showed that when crude oil and condensate, which is excluded from OPEC computation, were combined for the December output circle, Nigeria’s total average liquids volume hit 1.667 million barrels per day last month.
In December, the NUPRC figures further showed that the country’s peak production on any day within the month was 1.79 million bpd, while the lowest was 1.57 million bpd.
“Lowest and peak production in December were 1.57 million bpd and 1.79 million bpd respectively. The daily average production in December was 1,667,560 barrels per day, comprising both crude oil (1,484,585 bpd) and condensate (182,975 bpd),” the data highlighted.
Nigeria had consistently blamed its inability to meet the quota on massive oil theft in the Niger Delta, waning investment in the sector, outright sabotage as well as deteriorating infrastructure. These issues are being gradually tackled by the current administration.
Going forward the NUPRC, is set to enhance transparency and accountability in Nigeria’s oil and gas sector through the implementation of the Advance Cargo Declaration Solution (ACDS) and the Engineering Audit of Upstream Measurement Equipment and Facilities.
The NUPRC stated that these initiatives were being executed in collaboration with P-Lyne Energy and PE Energy Limited.
The advanced cargo declaration solution with P-Lyne, it said, is designed to establish a robust framework for declaring and tracking crude oil transportation and exports from Nigeria.
“Its primary objectives include monitoring and accounting for the movement of crude oil within the country, preventing disruptions, theft, and under-declaration, and ensuring that only certified products are exported.
“This solution will also enable real-time tracking, reconciliation, and reporting of crude oil exports, thereby facilitating accurate revenue billing and generation,” the commission stated.
Besides, the Engineering Audit of Upstream Measurement Equipment and Facilities, in partnership with PE Energy, NUPRC said, aims to establish reliable baseline data for all measurement points, identify gaps in production and allocation measurement, and implement targeted interventions to enhance metering infrastructure.
“It addresses critical issues such as obsolete equipment, the lack of a comprehensive database, and the absence of real-time production measurement. These challenges have been identified as significant contributors to oil losses, with inaccurate measurement accounting for a substantial portion of crude oil losses in Nigeria,” the Commission said.
These initiatives, the Commission said, align with NUPRC’s mandate to ensure optimal government revenues from upstream petroleum operations, as specified in the Petroleum Industry Act (PIA)2021.
Goldman Sachs Research At the beginning of the year has forecast that Brent oil will trade within a range of $70-$85 per barrel and will average about $76, heavily influenced by the rate of production in non-OPEC countries and potentially also by geopolitical factors.
This is coming as it said that conflicts and geopolitical uncertainty impacted oil markets in 2024, making for an unpredictable year. The price of Brent crude oil averaged roughly $80 per barrel throughout 2024, but it fell to the low $70s at times, it recalled.
“The team’s forecast sees the price of oil increasing moderately in the short term, before dropping back to a similar level due to producers’ high spare capacity. But energy prices are impacted by geopolitical events, which can be difficult to predict, and could cause prices to break out of the $70-85 range,” it added.
High spare oil capacity is likely to restrict oil prices from climbing substantially this year in spite of continued solid demand, according to Goldman Sachs Research.
The market’s expectation for a large surplus in oil production in 2025 may partially explain the decline in prices last year, it said, forecasting a modest surplus of 0.4 million barrels per day.
“This surplus will be driven in part by an increase in production from non-OPEC nations. In total, Goldman Sachs Research forecasts that non-OPEC hydrocarbon liquids supply (excluding Russia) will increase by 1.7 million barrels per day in 2025.
“Most of the growth will come from four American countries: from the US in particular, but also Canada, Brazil, and Guyana,’ it said.
While Nigeria’s energy sector presents significant potential for growth, it is confronted with a myriad of challenges, including security issues in the Niger Delta, the need to stabilize power transmission, and persistent gas flaring problems. Additionally, the solid minerals sector offers substantial opportunities for revenue generation and job creation, but it will require the government to effectively manage artisanal mining and ensure sustainable sector development.
Meanwhile the success of Nigeria’s energy sector will depend on the effective implementation of strategic policies and initiatives. While promising opportunities for growth lie ahead, overcoming these challenges will be vital to realizing the sector’s full potential and ensuring a stable energy future for the nation.