Nigerian Crude Oil And Gas

Nigeria a place for great Foreign Direct Investments (FDI) in the Crude Oil and Gas Industry

Nigeria is a place for great Foreign Direct Investments (FDI) in the Crude Oil and Gas Industry. Let no man deceive you, millions and billions of dollars are being made in the Nigerian Crude oil and gas industry. You need to get involved today. Opportunities abound in both the upstream and down stream sectors.

Here are the opportunities for your perusal and necessary action.

Nigerian Crude Oil and Gas Investment Opportunities And Potential

UPSTREAM

The Nigerian Oil and Gas reserves have grown tremendously since the discovery of hydrocarbon in 1956 in Oloibiri. The growth was from a modest figure of 0.184 billion barrel of oil and 2.260 billion cubic feet of gas in 1958 to 25.93 billion barrels of oil, 3.80 billion barrels of condensate and 158 trillion cubic feet of gas, as at December 2000.

The reserves increase was achievable because of two main factors namely:

The introduction of various incentives by the Government for increasing oil reserves and gas utilization. In order to increase oil reserves, a Memorandum of Understanding (MOU) was negotiated and agreed to guarantee a notional profit margin of US $2/bbl. This was revised to include the Reserves Addition Bonus clause, which qualify the operator for a tax credit for additions to reserves that exceeds its production for a year.

Opening up of other basins, which are blocked into concessions and awarded to competent entrepreneurs for exploration and development (Fig. I). The basins are Benin, Anambra, Benue Trough, Chad and the Deep and Ultra-deep offshore area of Nigeria.

The first four of these basins are relatively un-explored while the Deep and Ultra-deep offshore are now partially explored. The opening-up increased the number of companies exploring for hydrocarbon in Nigeria from just a few to 59 with 46 of them discovering oil, gas and/or condensate in significant quantities and qualities. This brought about the conversion of 91 of 177 Oil Prospecting Licenses (OPLs) to Oil Mining Leases (OMLs). Seventeen of these companies have gone into actual production. In the deep and ultra-deep offshore terrain, 12 companies have discovered oil and gas in commercial quantities. This encouraging result made the Government to open up 22 new blocks to interested entrepreneurs for competitive bidding process in year 2000.

Government also awarded 24 of the 200 fields classified as marginal by operators due to low ranking in their investment portfolio and/or remoteness to existing facilities to 32 local companies. These 24 Marginal fields have an estimated reserve of about 300 million barrels of crude.

Similar drilling that target deeper pools are bound to yield more reserves as depth of investigation was limited to about 3000 meters.

Government encourages drilling that will target deeper horizon by giving exploration, first and second appraisal incentive to wells that investigate depths in excess of 500 meters beyond that of the deepest well in the field.

Some of the major activities in which investment opportunities abound include:

Surveying; Civil Works
Seismic Data Acquisition and Interpretation.
Geological Activities; Drilling Operations
Crude Oil Transportation and Storage
Exploration and Production

Upstream Opportunities:

•Surveying - tropical and plan metric; and sea bottom survey.
•Civil Works - mud pit construction, concrete works at rig sites.
•Seismic data acquisition and interpretation.
•Drilling operations.
•Pipelining
•Crude oil transportation and storage.
•Exploration and production of oil and gas products.
•Manufacturing of consumable materials in exploration such as explosives,
•Detonators, steel casting, magnetic tapes etc.
•Search for development of local substitutes for items such as medium pressure valves, pumps, shallow drilling equipment, drilling mud, bits fittings, drilling cement etc.

DOWNSTREAM

In view of the enormous potentials in this sector, some fiscal incentives have been put in place by the government for investors which are as follows:

Gas Production Phase

•Applicable tax rate under the Petroleum Profit Tax (PPT) Act to be as the same rate as company tax currently at 30%.
•Capital Allowance at the rate of 20% per annum in the first four years, 19% in the fifth year and the remaining 1% in the books.
•Investment Tax Credit of the current rate of 5%.
•Royalty at the rate of 7% on shore and 5% offshore.

Gas Transmission and Distribution

•Capital allowance as in production phase above.
•Tax rate as in production phase.
•Tax holiday under pioneering status.

LNG Projects

•Applicable tax rate under Petroleum Profit TaxPPT is 45%.
•Capital allowance is 33% per year on straight-line basis in the first three years with 1% remaining in the books.
•Investment tax credit of 10%.
•Royalty of 7% on-shore, 5% off-shore tax deductible

Gas Exploitation (Upstream Operations)

Fiscal Arrangements are reviewed as follows:

All investment necessary to separate oil from gas from the reserves into suitable products is considered part of the oil field development.

Capital investment facilities to deliver Associated Gas in usable form at utilization or transfer points will be treated for fiscal purposes as part of the capital investment for oil development.

Capital allowances, operating expenses and basis for assessment will be subjected to the provisions of the Petroleum Profit Tax PPT Act and the revised Memorandum of Understanding (MOU).

Gas Utilization (Downstream Operations)

Incentives given to investors for encouragement of exploitation and utilization of Associated Gas for commercial purposes include:

Companies engaged in gas utilization are to be subjected to the provisions of the Companies Income Tax Act (CITA).

An initial tax free period of three years renewable for an additional two years.

Accelerated Capital Allowance after the tax-free period in the form of 90% with 10% retention in the books for plant and machinery.

15% investment capital allowance which shall not reduce the value of the asset.

In 1998, the government approved additional incentives to support the gas industry in the following areas:

All gas developmental projects, including those engaged in power generation, liquid plants, fertilizer plants, gas distribution and transmission pipelines are to be taxed under the provisions of the Companies Income Tax Act (CITA) and not the Petroleum Profit Tax.

All fiscal incentives under the gas utilization downstream operations in 1997 are to be extended to industrial projects that use gas i.e. power plants, gas to liquids plants, fertilizer plants and gas distribution/transmission plants.

The initial tax holiday is to be extended from three to five years.

Gas is transferred at 0% Petroleum Profit Tax PPT and 0% Royalty.

Investment capital Allowance is increased from 5% to 15%.

Interest on loans for gas projects is to be tax deductible provided that prior approval was obtained from the Federal Ministry of Finance before taking the loan.

All dividends distributed during the tax holiday shall not be taxed.

INVESTMENT OPPORUNTIES IN DOWNSTREAM

Investment Opportunities in the Downstream sector are:

Gas treatment
Crude Oil and Gas conversion into refined and petrochemical Products and finer chemicals
Transportation and Marketing of the products
Related ancillary services

The investment opportunities in the downstream are many. Some of them are:

Refining, Petrochemicals and Gas Utilization

In order to reduce the investors' risk, speculative seismic data acquisition is carried out in the deep offshore using the services of reputable data acquisition companies. In the inland area, there is direct involvement in exploration activities.

Nigeria's production cost per barrels is one of the lowest world wide. Huge reservoirs of hydrocarbon are found in Nigeria.

Government has provided generous fiscal terms both for oil production and gas utilization.

The economic environ ensure easy repatriation of profit by investors.

Productions from new ventures are guaranteed by Governments deliberate policies.

An even field is provided for all operations in the Petroleum Regulations and the monitoring agency -the Department of Petroleum Resources.

Downstream- Gas

1. Domestic Production and Marketing of Liquefied Natural Gas (LPG).

2. Domestic Manufacturing of LPG cylinders, valves and regulators, installation of filling plants, retail distribution and development of simple, flexible and less expensive gas burners to encourage the use of gas instead of wood.

3. Establishment of processing plants and industries for the production of:

Refined mineral oil, petroleum jelly and grease
Bituminous based water / damp proof building materials e.g. roofing sheets, floor tiles, tarpaulin,
Building of asphalt storage, packaging and blending that may export these products.

4. Establishment of chemical industries e.g. distillation units for the production of Naphtha and other special boiling point solvents used in food processing.

5. Linear Alkyl Benzene, Carbon Black and Polypropylene producing industries.

6. Development of Phase II (Phase III to commence later) in Nigeria’s Petrochemical Program

7. The NLNG Projects.

8. Small-scale production of chemicals and solvents e.g. chlorinated ethane, Formaldehyde, Acetylene etc. from natural gas.

9. Crude oil refining with efficient export facilities. Companies with the technology can undertake turn around maintenance of refineries. There is a tremendous scope for small-scale joint venture manufacturing concerns with foreign technical partners. Such ventures can start warehousing arrangements that will ensure continuity of supply at competitive prices.

10. Products Transportation and Marketing. Associated with products distribution and marketing is a chain of manufacturing and maintenance businesses e.g. Lubricating Oil processing, LPG bottles and accessories, oil cans reconditioning etc. Opportunities in ancillary activities, other investment opportunities contingent upon refining and ancillary activities are the manufacture of special products that include the following:

Industrial and Food grade solvents
Insecticides
Cosmetics
Mineral Oil, Petroleum Jelly and Grease
Bituminous-based water/damp proof building materials
Asphalt storage, packaging and blending plants.

WHY THE MULTINATIONAL OIL COMPANIES ARE INVESTING IN NIGERIA

Shell plans to invest $11 billion in the country's oil sector.

ExxonMobil produces around 750,000 bbl/d of Oil in Nigeria. The company plans to invest $11 billion in the country's oil sector through 2011, with the hope of increasing production to 1.2 million bbl/d.

The majority of the increase will occur at the 150,000-bbl/d Erha development, which is located on Block OPL 209. First production is expected in March 2006, with output increasing to 200,000 bbl/d by the end of the year. Oil from Erha will be stored in a FPSO, with a capacity of 2.2 million barrels oil. Very Large Crude Carriers (VLCC), capable of holding up to 300,000 deadweight tons will be used for exporting the oil from the terminal. ExxonMobil also operates the Yoho field, with current full-field output of around 150,000 bbl/d.

Yoho contains around 400 million barrels of oil reserves. Yoho will be re-injected with associated Natural Gas to maintain field pressures and to eliminate natural gas flaring. The $1.2 billion field is located in the shallow waters of Block OML 104. ExxonMobil's Bosi, and Eti/Asasa fields with capacities of 120,000 bbl/d, and 25,000 bbl/d, respectively, are scheduled to come online between 2006 and 2007.

Total, Chevron, Agip, and ConocoPhillips are also involved in the Nigerian oil sector. Output at Total's Amenam field reached 120,000 bbl/d in January 2005. The Amenam field contains reserves of around one billion barrels of oil equivalent. Total's Akpo field is expected to come online in 2008, with estimated output capacity of 225,000 bbl/d. In 2004, Chevron produced an average of 366,000 bbl/d of oil, while Agip produced 255,000 bbl/d of oil.

In past years, the amount of oil that Nigeria produced has led to disputes with the Organization of Petroleum Exporting Countries (OPEC), as Nigeria frequently exceeded its production quotas. The multinationals see Nigeria's OPEC production quota as a major hindrance to increased production at several deepwater fields. Currently, Nigeria�s OPEC quota for crude production is 2.3 million bbl/d. In January 2006, Nigerian Minister of State for Petroleum, Edmund Daukoru, became the new OPEC president. Industry analysts have indicated that he will be faced with the double challenge of guaranteeing cohesion among OPEC members, while allowing Nigeria to increase its oil production.

Other Business Opportunities

Nigeria has one of the largest markets in Africa. It also has the potentials to be the fastest growing market on the continent. Some of these investment opportunities are below.

Agriculture/ Forestry

Extensive opportunities exist for foreign investors in the areas of forestry and agriculture, particularly in cultivation of exportable crops like cassava, timber, pulp wood, rubber, groundnuts and soya beans.

Solid Minerals Industry

Government has already embarked on open competitive bidding rounds for bitumen, coal, barytes e.t.c. since the third quarter of the year 2000. Generous terms and incentives for attracting foreign investments in this sector are also available.

Gas Market Potentials Internal

An internal demand for 360 mmscf of gas daily exists. This was expected to exceed 1.2 billion cubic feet per day by 2003. Most of these internal gas demands are now being utilized in independent power generation as well as gas utilization plants. A quantum leap in liquefied petroleum gas (LPG) consumption as well as doing business in Nigeria occurred in the same period. The National Gas Trunk-line system is to be extended northwards to Abuja and Kaduna.

Gas Market Potentials External

Gas demands for LNG exports stands at 700 million standard cubic feet per day which are utilized in the two train LNG plants at Bonny. Daily gas consumption rose to 1.05 billion cubic feet since the third train came on stream in November, 2002. A planned Trans-West African Gas Pipeline for 2003 is expected to deliver 120 million standard cubic feet per day to the Republics of Benin, Togo and Ghana. These gas utilization projects will require the construction system in industrial and estates.

Oil Industry Petroleum Products

West Africa is an obvious target for Nigerian manufactured petroleum products. Current installed refining capacity in Nigeria is 445,00 barrels per day, although effective performance is only 50% of the installed capacity. Tremendous opportunities for investment (in the privatization of Nigeria's refineries and petrochemical plants) therefore exist to meet the demand for petroleum products in both Nigeria and West Africa. There are also opportunities for the establishment of exports oriented refineries, petrochemical and LPG plants.

Support Facilities

Investment opportunities exist in the establishment of manufacturing facilities to produce most of the inputs for oilfield operations e.g. oil well drilling clays, chemical and materials, pipesbolts and nuts, screw gaskets, valves and other accessories, pans and plastics including other components.

Opportunities also exist for engineering construction and contracting companies willing to establish locally to boost the Nigerian content in the operation, activities and growth of the oil and gas industry.
Financial Sector

Government has totally divested her interests in both the commercial and merchant bank. The sector is totally open for overseas investment.

Hospitality Industry

This industry is not well developed despite the rich culture and a long history of traditional hospitality. This could be commercialized as the tourist attractions are many and varied and are spread all over the country.

For investment consulting please contact: ceo@nigeriancrudeoilandgas.com

Stay Ahead of the Nigerian Crude Oil and Gas Industry Curve! Get your own FREE subscription to the "Nigerian Crude Oil and Gas Industry Opportunity Tips" newsletter for ambitious companies. Packed with hundreds of Nigerian and Global crude oil, gas and petrochemicals inspiration, contracts, deals, anti-fraud leads, licenses, forms, processes and tips You'll receive your own copy delivered directly to your e-mail inbox each month/week. That's a $1,000,000 value, yours FREE! You will receive immediately you sign up two million dollar information packages courtesy of the President of the Trillionaire Mentorship Network that will enable you to build your own oil and gas empire sent to your email immediately. That's worth a million dollars and more, yours FREE! Over Five Million Subscribers worldwide and still growing tremendously. Sign up now for our free newsletter!.. Privacy Policy
Full Names:
Telephone Number with country code Separated by dash ( - ):
E-Mail: