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Market overview

Market Overview

Nigeria’s oil and gas industry represents a compelling value proposition and is attractive, not just to Seplat but the wider industry also, on many levels.

Nigeria is the largest oil producer in Africa with proven geology, and long established infrastructure, regulatory and fiscal regimes. Nigeria also possesses one of the largest gas reserves on the continent, the development of which to supply the rapidly evolving and expanding domestic market is an attractive growth opportunity for Seplat.

Prolific hydrocarbon geology

It starts below the ground and the prolific hydrocarbon geology of the Niger Delta area, where Nigeria’s oil and gas industry is concentrated. Covering an area of approximately 75,000km2 and with up to 10km sedimentary thickness, the critical factors required for hydrocarbon generation have all combined to great effect in the Niger Delta basin, namely the existence of source rocks with high levels of organic content, high rates of sedimentation and rapid burial to allow hydrocarbon generation, and the presence of good quality reservoir rocks and effective trap/seal mechanisms where hydrocarbons have accumulated in vast quantities. Nigeria is estimated to hold remaining recoverable proved reserves of around 37 billion barrels of oil and 187 trillion cubic feet of gas, making it a globally significant source of long-term supply.

Nigerian OilSub-Saharan Africa’s largest remaining proven oil reserves37bn barrelsAfrica’s largest oil producer, capable of producing2.3mbarrels per day The worlds13th largest oil producerSource: BP Statistical Review of World Energy, 2017. Nigerian oil

Gas opportunity

For over 50 years, oil has been a critical economic driver in Nigeria. However, the country’s gas reserves exceed those of its oil (it is ranked tenth in the world for proven gas reserves) and yet historically, gas flaring has been employed to dispose of the majority of associated gas produced in association with crude oil.

Gas monetisationSource: BP Statistical Review of World Energy, 2017. Africa’s largest gas reserve 187 trillion ft3Africa’s second largest gas producer4.3 Bscfper day Nigeria is estimated to have the world’s 10th largest gas reservesGas monetisation

Although difficult to measure precisely, Nigeria’s current share of total gas flared globally is estimated to be around 300 Bscf annually, constituting 11% of global gas flared and ranking seventh out of gas flaring nations globally. It is estimated that the cost of flaring this gas amounts to around US$700 million a year, although the real cost is to the economy as that volume of gas would be capable of sustaining around 3.5 GW of power, enough to double Nigeria’s current effective on grid capacity. Nigeria lags behind many of its frontier market peers in electricity production per capita despite considerable domestic demand and its power generation deficit is widely recognised as a critical constraint on economic growth. The Nigerian government, through a combination of penalties, incentives and gas development drive, has been implementing an ambitious strategy through its Gas Master Plan (‘GMP’). The plan seeks to liberalise the domestic gas market and provide fiscal  incentives for gas producers to ultimately triple natural gas production capacity to 12 Bscf per day to fulfil electricity generation and industrial development demand.