Decentralization has become the key to the Nigerian oil industry.
This is leading to changes in the Nigerian oil market. One result is the construction of oil refineries by Nigerian companies.
1. Nigeria is an energy giant with huge hydrocarbon reserves.
Nigeria has gigantic energy reserves that make an important contribution to the national budget, especially petroleum plays an important role in Nigeria. There are large natural gas production wells in the south of the country, some of which are located off the coast of Nigeria and the Lagos region. At present, Nigeria is concerned with whether the oil production, but above all the oil refinery business, should remain in state hands or whether the oil refinery business is handed over to private hands.
The advantage of privatization is that Nigerian oil production would become more efficient in the use of natural resources. At the moment, large quantities of natural gas are lost due to technical problems, that urgently need to be corrected. This requires a lot of capital and manpower to solve. There are also many parties involved, which means stakeholder management is important.
There are now investors willing to invest in Nigeria’s oil refining business, including some of Nigeria’s largest capital investors who want to expand their business activities in the energy sector, in their home market. These entrepreneurs are from Nigeria, they do not come from another country, which means they have a strong interest to invest long-term.
The time is well chosen, because the Nigerian economy is currently on the up, the demand for energy in Nigeria is growing steadily, even if the prices are still somewhat low. In addition, there are already many logistics companies that would be willing to take over energy transport and the midstream. However, it must be considered that there is a lot of resistance against decentralization of the energy system. But the trend is for certain economic activities to be taken over by market participants. So all in all, it appears there is some resistance to the privatisation of state infrastructure.
2. Nigeria will concentrate more on petrochemical processing and the operation of oil refineries. The second focus will be on the construction of small liquefied natural gas terminals in Nigerian ports.
One has to bear in mind that Nigeria has to import most of its energy supplies from abroad. The oil is therefore transported from the oil production sites to the ports, shipped to be processed in oil refineries abroad. There are technological reasons for this. There are also cost factors involved. Nigeria’s prices for crude oil on the domestic market do not yet make the processing of crude oil lucrative enough.
This could explain why much of the oil produced is simply burned without being used, as these quantities cannot be refined. The idea is to establish LNG terminals in the domestic market. These plants will be added to Nigeria’s own oil refineries to provide liquefied natural gas to customers in the domestic market.
3. Future potential of biomass to produce biofuels in Nigeria.
Nigeria has great potential for biofuels. Most of the potential has so far remained unused. There are more readily available alternatives. This is mainly due to the fact that Nigeria is a major producer of hydrocarbons and has considerable oil and gas reserves. Agricultural production of staple foods is naturally preferred to land use for the production of biofuels. This is particularly relevant for agricultural use in connection with sugar cane production.
Sugarcane can be used as a food additive or for the production of ethanol. As in Cameroon, great efforts have been made to use Jatropha for the production of biofuels. Initial estimates look very promising, and Nigeria’s potential for using biomass for energy production is roughly on a par with Indonesia. Sugar cane is unlikely to play the role it plays for Brazil. This is because Nigeria is a major oil producer and does not rely on biofuels for transportation.
Nigeria has the ideal sweet spot, as it has both hydrocarbon reserves and enormous potential for renewable energy. This is a very good combination because Nigeria has the time to switch to renewable energies more slowly. In this way, Nigeria can choose the right renewable energy sources to benefit industry and the economy.
Another important advantage is Nigeria’s central location, which enables the country to cooperate with its neighbors in the construction of a transnational power grid, which can reduce the problems of power disruption caused by the increasing use of renewable energy.