• Nigeria is the largest oil producer in Africa and was the world's fourth leading exporter of LNG in 2012. Despite the relatively large volumes it produces, Nigeria's oil production is hampered by instability and supply disruptions, while the natural gas sector is restricted by the lack of infrastructure to monetize gas that is currently flared (burned off).
• The Petroleum Industry Bill (PIB), which was initially proposed in 2008, is expected to change the organizational structure and fiscal terms governing the oil and natural gas sectors, if it becomes law. IOCs are concerned that proposed changes to fiscal terms may make some projects commercially unviable, particularly deepwater projects that involve greater capital spending.
• The major international players in Nigeria's oil and natural gas sectors are Shell, ExxonMobil, Chevron, Total, and Eni. IOCs participating in onshore and shallow water oil projects in the Niger Delta region have been affected by the instability in the region. As a result, there has been a general trend for IOCs to sell their interests in onshore oil projects.
• Nigeria has the second largest amount of proven crude oil reserves in Africa, but reserve estimates have been stagnant as exploration activity has been low. Rising security problems coupled with regulatory uncertainty have contributed to decreased exploration activity.
• Crude oil production in Nigeria reached its peak of 2.44 million bbl/d in 2005, but began to decline significantly as violence from militant groups surged, forcing many companies to withdraw staff and shut in production. Oil production recovered somewhat after 2009-2010 but still remains lower than its peak because of ongoing supply disruptions.
• The instability in the Niger Delta has resulted in significant amounts of shut-in production at onshore and shallow offshore fields, forcing companies to frequently declare force majeure on oil shipments. Supply disruptions escalated in 2013 and from January to October 2013 crude oil production averaged slightly below 2.0 million bbl/d, similar to the levels in 2008-2009 when disruptions hit record-highs.
• Pipeline sabotage from oil theft and poorly maintained, aging pipelines have caused oil spills. The oil spills have resulted in land, air, and water pollution, severely affecting surrounding villages by decreasing fish stocks and contaminating water supplies and arable land.
• Nigerian oil production estimates are often different among organizations and can range widely. The main reasons underlying the differences are the methods used to measure supply disruptions and the classification of crude and condensate.
• There are several planned oil and gas projects scheduled to come online within the next 10 years. The start-up dates for many of the deepwater oil projects have been pushed back, which has mainly been attributed to regulatory uncertainty. The regulatory uncertainty has also resulted in the decline in deepwater exploration activity since 2007.
• Europe is the largest regional importer of Nigerian oil. In 2012, Europe imported 889,000 bbl/d of crude oil and condensate from Nigeria, accounting for 44% of total Nigerian exports.
• For the past decade, the United States imported between 9% to 11% of its crude oil from Nigeria. However, this share fell to an average of 5% in 2012 and 4% from January to August 2013. As a result, Nigeria has fallen from being the fifth largest foreign oil supplier to the United States in 2011 to eighth in 2013.
• Nigeria has a crude oil distillation capacity of 445,000 bbl/d. Despite having a refinery nameplate capacity that exceeds domestic demand, the country must import petroleum because refinery utilization rates are low.
• Nigeria is the largest holder of natural gas proven reserves in Africa and the ninth largest holder in the world. Nigeria produced 1.2 Tcf of dry natural gas in 2012, ranking it as the world's 25th largest natural gas producer. Natural gas production is restricted by the lack of infrastructure to monetize natural gas that is currently being flared.
• Nigeria flares the second largest amount of natural gas in the world, following Russia. Natural gas flared in Nigeria accounts for 10% of the total amount flared globally. Gas flaring in Nigeria has decreased in recent years, from 575 Bcf in 2007 to 515 Bcf in 2011. There are a number of recently developed and upcoming natural gas projects that are focused on monetizing natural gas that is flared.
• Nigeria exported 19.8 MMtpa (950 Bcf) of LNG in 2012, accounting for more than 8% of globally traded LNG and making Nigeria the world's fourth largest LNG exporter. Japan is the largest importer of Nigerian LNG, receiving 24% of the total in 2012. The United States did not import any natural gas from Nigeria in 2012 for the first time in more than 10 years.
• Nigeria has one of the lowest net electricity generation per capita rates in the world. Electricity generation falls short of demand, resulting in load shedding, blackouts, and a reliance on private generators. Nigeria is in the process of privatizing the state-owned Power Holding Company of Nigeria (PHCN) in hopes that it will lead to greater investment and increased power generation.

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Analysis Last Updated: December 30, 2013