Nigeria’s oil, gas sector: Beyond the numbers

Orisemeke Benjamin

Nigeria met its OPEC crude quota for the fourth straight month in August, but the headline figures obscure a sector that is producing more than a year ago, earning more per barrel than budgeted, and still falling short of what the economy needs from it.

Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) show crude oil and condensate output rose 0.4 per cent to 1,677,777 barrels per day (bpd) in August, from 1,670,890 in July. Crude alone, excluding condensate, stood at 1,500,190 bpd, effectively at the 1.5 million bpd quota. 

The regulator credited the uptick largely to the resolution of Single Buoy Mooring problems at the Erha field.

A plateau, not a climb

Output rose from 1,564,100 bpd in March to 1,663,430 in April and 1,700,800 in May, peaking at 1,735,398 in June before slipping in July. August’s recovery leaves production below that peak.

Against the 2026 budget, the gap is wider. The budget assumes about 1.8 million bpd, an oil benchmark of $64.85 per barrel and an exchange rate of N1,400 to the dollar. Combined output is roughly 120,000 to 160,000 bpd short, depending on whether the appropriated figure is 1.8 or 1.84 million. The crude-only figure is not comparable, since OPEC’s quota excludes condensate, a distinction petroleum governance expert Henry Adigun has stressed.

Government officials describe a sector on the mend. Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, told a ministry management retreat in Abuja in June that crude production had risen from about one million bpd to roughly 1.8 million bpd since the administration took office. 

He said active rigs had grown from fewer than 10 to over 60, credited policy stability for restoring investor confidence, and cited foreign reserves above $50 billion.

At the February Nigeria International Energy Summit, he put output at between 1.7 and 1.83 million bpd.

He urged stakeholders to aim above 2.5 million bpd and directed retreat participants to produce a framework for raising output and reserves, adding that he did not want the exercise to be “just a talk show.”

The minister’s 1.8 million bpd figure exceeds any monthly output NUPRC has reported between March and August. The ministry’s statement did not say which measure or period it referred to.

Price is doing the heavy lifting

Brent settled at $104.32 on Friday, according to market reports, far above the $64.85 benchmark. The rally is tied to disruption of shipping through the Strait of Hormuz during the US-Iran conflict.

The windfall is real but partial. In March, as prices surged, Lokpobiri urged operators at a London industry forum to ramp up output, calling the moment “a window of opportunity” for short-term gains. Output has since risen, but not decisively.

Adigun explained why. Producers respond slowly to price signals, he told Financial Vanguard in June, because “you cannot simply switch gears overnight and start producing more oil.”

The Sun, citing analysis by Money Africa, reported a government oil revenue shortfall of $2.49 billion in the first half of 2026, adding that higher prices had largely offset lower export volumes rather than creating fiscal headroom.

The Centre for the Promotion of Private Enterprise’s chief executive, Dr Muda Yusuf, told Vanguard in June that the drive for massive investment in the sector may have failed to materialise, attributing the shortfalls to crude theft and vandalism even as security interventions had helped.

Prof. Wumi Iledare, Professor Emeritus of Petroleum Economics and Policy Research at Louisiana State University, has cautioned against reading the recovery as a turnaround. Reviewing 2025 in January, he said “the gains are real but fragile.”

NUPRC at five: What was said

The regulator marked its fifth anniversary in Abuja on Tuesday under the theme “From Uncertainty to Stability: Unlocking the Next Phase of Investment,” with the government, operators and industry groups taking turns to assess the Petroleum Industry Act (PIA) at five years.

The presidency. President Bola Tinubu, represented by Vice President Kashim Shettima, said the PIA ended two decades of waiting and gave host communities a legal stake in the resources beneath their land. 

He said theft and vandalism had eased through joint effort by security agencies, operators, host communities and the commission, and that Nigeria had been ranked Africa’s leading destination for upstream investment two years running. 

“The PIA is a strong foundation, but the foundation is only the beginning,” he said.

Tinubu cited the Deep Offshore Oil and Gas Projects Incentive Tax Remission Order 2026, which he said is designed to unlock up to $50 billion in investment, starting with the Bonga Southwest project. 

He also put the onus on operators: those enjoying incentives must deliver on work programmes, local content, environmental and host-community commitments, while the commission must account publicly for its own performance. 

He urged NUPRC to carry “the same commitment, integrity, and sense of purpose” into the next five years.

The regulator. NUPRC’s chief executive, Mrs Oritsemeyiwa Eyesan, said the commission had gazetted 19 regulations to operationalise the PIA and approved 120 field development plans since 2024, carrying about $47.6 billion in capital and, if fully developed, the potential to add about 1.74 million bpd of oil and 13.9 billion standard cubic feet per day (bscf/d) of gas.

She said Nigeria accounted for 38 per cent of all upstream investment sanctioned in Africa in 2025, against an average of four per cent between 2015 and 2023. 

She also said delays in reform had cost Nigeria investment to Guyana, Namibia, Brazil and the US Gulf of Mexico, while discoveries including Bonga Southwest, Zabazaba-Etan, Owowo, Preowei and Nsiko remained undeveloped.

On output, Eyesan said production rose from 1.44 million bpd in 2022 to an average of 1.75 million bpd in the first seven months of 2026, reaching 1.84 million bpd in April, while gas output rose from 6.83 bscf/d to about 7.97 bscf/d. The figure for April differs from the monthly series cited above, which put output that month at 1,663,430 bpd. 

Her stated priorities are restoring more than 788,000 bpd of shut-in production across 63 operators, taking offshore projects valued at $30 billion to $50 billion to final investment decision, and raising domestic gas delivery from about two-thirds of the obligation to full delivery.

She said the commission would enter an “age of compliance,” scoring and publishing the performance of every licensee and lessee on work programmes, royalty payments, domestic supply obligations, flaring and host-community contributions, among others. 

“The next five years must establish our impact,” she said.

She also announced the 2026 Licensing Round, offering 40 blocks across land, shallow water and deepwater terrains, with mandatory disclosure of bidders’ beneficial owners, fuller publication of evaluation results and a published timetable. 

“May the best bids win,” she said. Assets from earlier rounds, if developed, could add about 500 million barrels of reserves and at least 300,000 bpd within five years, she said, supporting the government’s 3 million bpd ambition by 2030.

The minister. Lokpobiri said the commission should be judged by the business and production it enables, not by the number of regulations it issues. 

He said active rigs had risen from fewer than 10 to over 70, up from “over 60” at the June retreat. Drilling, he said, is the real test of the output target: “the drilling campaign of today is what will produce the barrels of tomorrow.” 

He said the ambition of 3 million bpd would remain unattainable without a sustained, growing campaign. In June he had urged stakeholders to aim above 2.5 million bpd.

NNPC Limited. Group Chief Executive Officer Bayo Ojulari said the national oil company was increasingly being approached with investment opportunities, and that relations between regulator and operators had never been better aligned. 

He pointed to Aramco, Petronas and Brazil’s industry as examples of regulator-operator co-creation that Nigeria should consolidate.

The board, regulators and industry. NUPRC board chairman Senator Magnus Abe said the commission’s progress had been backed by executive orders, policy direction and non-interference in its regulatory processes, and urged it to evolve into a technology-driven regulator.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority’s chief executive, Rabiu Umar, said upstream production cannot thrive without functioning midstream and downstream markets, and that investors operating on 20- to 30-year horizons need policy continuity.

Representing the Nigeria Extractive Industries Transparency Initiative’s executive secretary, Sarkin Adar, Jane Onwumere said NUPRC had replaced regulatory ambiguity with predictability. 

The Petroleum and Natural Gas Senior Staff Association of Nigeria’s president, Bosun Olabiyi-Agoro, welcomed the regulatory clarity but urged more attention to contract workers, citing pay disparities with permanent staff.

The Independent Petroleum Producers Group’s president, Adegbite Falade, said indigenous producers’ share of national output had risen from about three per cent when the group was formed to 52 per cent last year. 

For the Oil Producers Trade Section, ExxonMobil’s managing director, Jagir Baxi, said consultation with the regulator had produced more practical regulations, but that production constraints, gas development, costs and security still need to be addressed.

What the regulator says about the pipeline

The NUPRC says reserves stood at 37.01 billion barrels of oil and condensate and 215.19 trillion cubic feet of gas as of January 1. The oil figure was 0.74 per cent lower than a year earlier, which the commission attributed to 2025 production and updated technical evaluations.

The commission’s chief executive, Mrs Oritsemeyiwa Eyesan, has said upstream approvals since 2024 exceed $57 billion, and that the priority is shortening the time between approval and first production. 

At the Association of Energy Correspondents, Abuja, conference last Thursday, represented by Joseph Ogunsola, she said the issue is not a shortage of resource opportunities but converting them into committed capital, producing assets and economic value, and that an approved project only counts once capital is committed and production follows.

The 2025 licensing round is the test of appetite. Thirty-one companies emerged as winning bidders for 37 blocks, but 13 of the 50 offered drew no bids. Eyesan said some assets sat in frontier basins that had not been de-risked. She said the awarded assets could add about 500 million barrels to reserves and at least 300,000 bpd within three years, and warned winners to meet post-award conditions within 90 days or forfeit. Her message to holders of acreage: “drill or drop.”

The government acknowledges the execution problem. Speaking at the same conference through his technical adviser, Abel Nsa, Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, said the PIA and reforms were meant to give investors clarity but “legislation alone is not sufficient.” 

He listed infrastructure constraints, security, operational inefficiencies, contracting timelines and regulatory bottlenecks as issues hurting project economics.

Lokpobiri, at the signing of the final investment decision on the Ima gas project last week, urged investors to take such decisions within at most six months.

Iledare’s yardstick for the PIA is outcomes. In April, he argued that reserves growth without matching production growth delivers little, and that “capital does not respond to reserves; it responds to risk-adjusted returns.” Of the upstream regulator, he said in August that “regulation should ultimately focus on creating value rather than simply producing more rules.”

The refinery story has changed

The most visible shift is downstream. Data reported this month show the Dangote refinery ran at 105.21 per cent of capacity in August, producing 41.94 million litres of petrol daily, of which 35.87 million litres went to the domestic market and 9.73 million litres to export. Petrol imports fell 26 per cent in August, and none of the NNPC Limited refineries in Port Harcourt, Warri and Kaduna were producing. Petrol exports were reported at about $750 million in the second quarter, up more than sixfold from a year earlier.

The picture is less tidy than the headline. Iledare, citing the Nigerian Midstream and Downstream Petroleum Regulatory Authority’s (NMDPRA) factsheet, noted in late August that petrol imports rose nine per cent to 19.7 million litres per day in July even as domestic consumption fell. He said exporting locally refined petrol while continuing to import it points to a coordination problem in the market.

His prescription is neither protection nor import bans. Domestic refining, he said, “should become the foundation of Nigeria’s fuel supply,” but it should compete on price, quality and reliability, with imports remaining available to discipline prices and cover shortfalls. Regulation should focus on safety and quality standards, transparent pricing and import procedures, and infrastructure bottlenecks.

The industry has tested those principles in court. In May, Dangote Refinery went to court seeking to nullify petrol import licences granted by the NMDPRA, while NNPC Limited argued in filings, according to Reuters, that the refinery had not provided credible, independent evidence it could meet national demand. The Independent Petroleum Marketers Association of Nigeria’s vice president, Hammed Fashola, said at the time that Dangote should concentrate on reasonable pricing rather than seeking an import ban.

NNPC Limited has sought a way back into refining, signing a memorandum of understanding on April 30 with two Chinese firms to explore a technical equity partnership to revive the Port Harcourt and Warri plants.

Ojulari has described the tension between Dangote and marketers as a natural feature of the shift from imports to local refining, adding that NNPC Limited remained the “supplier of last resort.”

The gain carries concentration risk. When one privately owned plant supplies most of the country’s petrol, its outages, feedstock arrangements and pricing decisions become national issues.

Gas: The larger unrealised prize

Gas is where the gap between resource and result is widest. Gas production has risen above seven billion standard cubic feet per day, according to Ojulari, yet electricity generation remains modest: NMDPRA leadership said in February it was still around 5,000 megawatts. At the NUPRC anniversary, Eyesan acknowledged that domestic gas delivery stands at only about two-thirds of the domestic supply obligation.

Ekpo argued at the energy correspondents’ conference that Nigeria’s transition must reflect its development realities, with millions still lacking reliable electricity and clean cooking fuel. The Decade of Gas Initiative, he said, is meant to shift gas from mainly an export commodity to a domestic input for power, manufacturing, fertiliser, petrochemicals and transport.

At Gastech in Bangkok this month, according to a statement by his spokesperson, Louis Ibah, Ekpo held talks aimed at turning the 215.19 trillion cubic feet of proven reserves into growth and jobs. “Nigeria is open for business,” he said.

Pricing and market structure are moving in parallel. The NMDPRA fixed the 2026 Domestic Base Price at $2.18 per million British thermal units from April 1, with commercial users paying $0.50 more. The regulator’s chief executive, Rabiu Umar, has since set September 24, 2028 as the target to end regulated pricing in the domestic gas market, with distribution licences due in the fourth quarter of 2026. Gas, Umar said, “must be affordable for Nigerians” while supporting investment reforms.

Cooking gas shows the tension between export and domestic supply. NMDPRA data indicate domestic LPG coverage eased to 86 per cent in 2026 year-to-date from 88.4 per cent in 2025, even as producers exported volumes between January and May.

Iledare has said gas must be repositioned as a domestic economic catalyst and warned against letting export ambitions overshadow domestic utilisation. Whether the pricing roadmap and pipeline diplomacy translate into domestic supply will decide if the 215 trillion cubic feet becomes an economic asset.

What to watch

Four things will show whether the numbers translate into outcomes: whether output moves decisively above the June peak, whether the Federation Account reflects the price advantage, whether the 2026 licensing round and gas reforms draw the investment that domestic supply requires, and whether the compliance scorecards NUPRC has promised are published on schedule and with teeth.

Production data alone will not settle any of them.