Investors in Nigeria’s oil and gas sector are increasingly becoming hesitant to invest in the sector due to the high cost of operations as identified by the federal government. Producers in the country are spending more than $40 per barrel to extract crude oil, deterring potential investors from entering the market. Olu Verheijen, the President’s Energy Special Adviser, highlighted the significant obstacles facing investors as she discussed multiple presidential programs focused on enhancing productivity in the oil and gas industry. She emphasized that the President’s interventions in the energy sector are yielding positive outcomes.
In her view, the government is actively taking steps to tackle the key barriers affecting investment in the nation. Their aim is to establish a supportive and competitive environment for investments to flourish. This will position Nigeria as a top choice for investors and financiers worldwide, attracting more capital towards Nigerian projects. She mentioned that when trying to identify the primary reasons for decreased investment, they discovered that the issue mainly stemmed from high operating costs.
There has been a lack of significant investment in new projects.
The high cost of operating in Nigeria was highlighted, particularly in the oil and gas sector, which sets a high benchmark compared to other regions. For instance, she pointed out that Saudi Arabia produces oil for less than $5 per barrel. Additionally, she emphasized the lengthy contracting timelines as another significant hurdle. Establishing a contract in the oil and gas sector, whether for drilling a rig or a well, can often take up to 38 months to finalize, according to recent findings. She elaborated that numerous investors gravitate towards regions with shorter contracting timelines.
Despite efforts, investments do not always result in production growth. While the impact may not be immediate, these investments play a role in jump-starting the economy. Verheijen mentioned that there have been few projects recently, with the most recent large-scale deep water project dating back to 2013. Since then, there has been a lack of significant investment in new projects. There is a wide array of contractors, water suppliers, and staff trainers, along with numerous dormant businesses that have closed. The revival of economic operations has led to an increase in income for Nigerians, benefiting them in the short term.
NLNG’s productivity soared to 70 percent in 2024.
Speaking on the gas sector, she mentioned how the government has witnessed NLNG’s productivity soared from 53 percent in 2023 to 70 percent in the first quarter 2024. This increase in efficiency will result in higher profits for the federal government, allowing for greater investment opportunities. She stated that instead of blindly investing in activities without a clear understanding of the outcomes, the government is now focused on seeing direct correlations between our actions and the desired results.
Verheijen emphasized that there have been considerable enhancements in getting additional barrels shipped from terminals for export, increasing gas supply for power and industrial purposes domestically, and ensuring more LNG cargoes enter the market to generate the necessary dividends for foreign exchange to stabilize the macro-economic environment. However, the efforts do not stop there. She mentioned that the Power sector currently has around 15 gigawatts of installed capacity in the country, with the Nigerian National Petroleum Corporation Limited (NNPCL) planning to introduce additional supply to the grid through various initiatives.
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She explained that there is currently a capability of eight gigawatts on the transmission side, yet there have been obstacles to overcome. Even with the transmission issues resolved, the distribution side has only managed to distribute four gigawatts in the past decade. Consequently, the government prioritized enhancing distribution capacity and implemented various initiatives to ensure a more efficient energy distribution system. The minister is spearheading a presidential power initiative aimed at enhancing the stability and intelligence of the transmission grid size, she added.
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