Crude Oil Exploration and Investment
On December 16, 2016, it was officially announced that crude oil was discovered in commercial quantities in Yobe State, making it the first Northern state to join the league of oil-producing states in Nigeria. Almost seven (7) years after the discovery, exploration hasn’t started due to the activities of the dreaded terrorist group.
Oil, natural gas, and related products account for 90% of Nigeria’s total export volume and more than 80% of government revenues. Nigeria is Africa’s largest producer of petroleum and the 6th largest in the world, with an average capacity of 2.5 million barrels of crude oil daily. As a member of OPEC, Nigeria also ranks as the world’s 8th largest exporter and has the largest natural gas reserves in Africa, ranking 7th position globally.
However, the local refining capacity is only 24% which creates a huge gap between the demand for refined petroleum products and the local supply. Towards bridging this gap, the downstream industry has been opened to private sector participation and foreign investments and with the President’s signing of the Petroleum Industrial Bill (PIB) into law as the new Petroleum Industrial Act (PIA) in August 2021, conditions have become much more favourable to foreign investors. By various government schemes and policies like better profit sharing, Nigeria’s oil and gas remains one of the most lucrative sectors to invest in.
Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC). Major international oil companies (IOC) currently operating in the country include, but are not limited to: Total, Chevron, ExxonMobil, Elf, Shell, ConocoPhillips, and Eni. Nigeria signed an accord with some of the world’s largest oil companies that could unlock billions of dollars of investment in an offshore oil field, and there is room for more.
Investment Incentives
In addition to the general investment incentives, graduated royalty rates approved for oil companies are as follows:
· Onshore production – 20%
· Production in territorial waters and continental shelf areas up to 100 meters Water depth – 18.5%
· Production in territorial waters of continental shelf areas beyond 100 meters – 16.67%