Oil sector endures shortfalls amid govt reforms

Nigeria’s oil and gas sector has recorded modest achievements against long-standing challenges. The Federal Government, seeking to build on this momentum, has rolled out strong policies, laying the foundations for a more resilient and investor-friendly future, DAMILOLA AINA writes.

Two years into the administration of President Bola Ahmed Tinubu, Nigeria’s oil and gas sector continues to navigate longstanding challenges. From modest gains in crude oil production to policy efforts aimed at revitalising local refining and attracting investment, the sector has seen a mix of progress and persisting hurdles. At the heart of the government’s reforms is the Renewed Hope agenda, a blueprint that seeks to boost production, deepen local participation, and enhance transparency across the petroleum value chain.

Production recovery is underway

Upon assuming office in May 2023, one of President Tinubu’s first major policy decisions was the removal of the petrol subsidy—an action aimed at deregulating the downstream sector and freeing up public finances for broader development. The move, although met with immediate economic impacts, was hailed by global financial institutions as a bold step toward fiscal sustainability.

Tinubu inherited a sector in distress. Crude oil production, Nigeria’s economic lifeblood, was struggling to meet OPEC quotas. Oil theft, pipeline vandalism, and chronic underinvestment had driven production to historic lows. The President’s campaign manifesto, the ‘Renewed Hope Action Plan’, promised a turnaround: increasing crude oil production to 2.6 million barrels per day by 2027 and four mbpd by 2030.

Since then, the administration has taken steps to stabilise oil production. According to the Nigerian Upstream Petroleum Regulatory Commission, crude oil and condensate output averaged 1.56 million barrels per day in 2024—an improvement from the 2023 average of 1.47 million bpd but below the 2024 budget benchmark of 1.78 million bpd. This trajectory suggests a slow but steady recovery. Although the highest monthly production in 2024, 1.69 mbpd, was still below pre-pandemic levels, underscoring how far Nigeria has fallen.

In total, Nigeria managed to produce 566.8 million barrels of crude oil and condensate in 2024. In the first four months of 2025, Nigeria produced approximately 200.87 million barrels of crude oil and condensates, compared to the projected 247.2 million barrels based on the budget target. This shortfall of about 46.4 million barrels has resulted in an estimated revenue loss of $3 bn, assuming an average Brent crude price of $65 per barrel.

For a country with the capacity to do much more, this marginal increase cannot be celebrated as a breakthrough. It is, at best, a tepid recovery in the face of a national emergency.

But all hope is not lost. The Group Chief Executive Officer of Nigerian National Petroleum Company Limited, Bashir Ojulari, has told President Bola Tinubu that the company is targeting 1.9 million barrels per day of crude oil production by the end of the year.

The target was contained in a statement by the Special Adviser to the President (Information & Strategy), Bayo Onanuga, on May 22, 2025, during the inauguration of the NNPC Limited Board at the State House on Thursday in Abuja.

Ojulari, who resumed his appointment on April 2, 2025, after the sacking of former GCEO Mele Kyari, a decision described as a positive one for the industry, was quoted as saying the NNPCL team had already met with industry stakeholders to review operations and business relationships and that crude oil production is on course to hit 1.9 million barrels per day.

He stressed, “Production had risen to 1.7 million barrels in two months from 1.5 million barrels, with the target of reaching 1.9 million barrels by year-end.”

A mid-term report document (MAY 2023 – MAY 2025) that details industry achievement shows that while the Ministry of Petroleum Resources has made some progress, most of the key targets set under Tinubu’s Renewed Hope campaign manifesto have not been fully achieved.

The report outlines goals such as raising crude oil production to three million barrels per day, completing major gas infrastructure projects, increasing gas supply for power, industry, and homes, and boosting the local production of petroleum products like petrol, diesel, kerosene, and aviation fuel. While there have been steps in the right direction, the ministry has yet to deliver on many of its core promises.

Although efforts have been made, including supporting domestic refining and holding quarterly stakeholder meetings to improve communication, progress has been slow. The rehabilitation of key refineries in Port Harcourt, Warri, and Kaduna is still shrouded in secrecy, and local production of petroleum products continues to fall short of demand.

On Wednesday, May 28, the national oil firm officially announced the shutdown of the Port Harcourt Refining Company. It said the facility will be shut down for a month for maintenance activities, further questioning the operational integrity of the state-owned firm, particularly regarding transparency, efficiency, and overall management of Nigeria’s refineries under the former Muhammadu Buhari’s purview.

The refinery rehabilitation ruse

Perhaps the biggest disappointment is the continued dysfunction of Nigeria’s refineries. The Port Harcourt Refinery, long promised as the cornerstone of Nigeria’s refining independence, was supposed to be fully operational by the end of 2023. By December, the Nigerian National Petroleum Company Limited announced the mechanical completion and flare start-up of the 60,000 barrels per day hydro-skimming refinery. But as of April 2025, no petrol from Port Harcourt had hit the Nigerian market.

In fact, not one of Nigeria’s three state-owned refineries is refining petrol at a commercial scale. The so-called “mechanical completion” is now industry shorthand for delays, half-truths, and spin.

The situation is even more perplexing considering the massive funds totalling $2.5bn funnelled into refinery rehabilitation. The Federal Executive Council allocated over $1.5 bn to the Port Harcourt facility alone. With nothing tangible to show for it, critics say this is yet another instance of public funds going up in smoke.

The $897m Warri refinery has also remained shut since January 25, 2025, due to safety issues in its Crude Distillation Unit Main Heater, while the “quick-fix” rehabilitation project at the Kaduna Refinery has suffered repeated delays, further stalling the government’s plan to revive local refining capacity.

The only shield Nigeria has had against soaring pump prices and the unchecked activities of profit-driven petroleum marketers and depot owners has been the Dangote Petroleum Refinery.

While many marketers prioritised profit margins, often hoarding products or manipulating supply to inflate prices, the entry of Dangote’s refinery helped to stabilise the market to some extent. By offering refined products locally and reducing reliance on costly imports, the refinery provided a measure of relief to Nigerian consumers facing relentless fuel price hikes.

Renowned energy economist Prof. Wumi Iledare attributed the persistent fuel supply and pricing challenges in Nigeria to deep-rooted structural issues within the sector.

“In the downstream petroleum sector, while there has been progress in boosting local refining capacity, it is far from being fully realised,” he explained in an interview with The PUNCH. “Although the Dangote Refinery has commenced operations, Nigeria still relies, albeit less, on imported refined petroleum products. The delays in rehabilitating state-owned refineries, regulatory inconsistencies affecting modular refinery development, and the continued dependence on fuel imports are major barriers to achieving affordable and reliable transportation fuel for Nigerians.”

Petroleum supply stability: A shaky win

The Ministry of Petroleum Resources made headway in stabilising domestic petroleum supply. Through close monitoring of the downstream sector and proactive coordination with NNPC Ltd., marketers, and regulatory bodies, Nigeria largely avoided the prolonged fuel scarcity episodes of previous years.

However, the relief proved to be shallow. Despite claims of seamless importation and pricing stability, Nigerians still endured inconsistent pricing and periodic squabbles between players. The deregulation of the petroleum sector, a hallmark of Tinubu’s economic reform drive, didn’t deliver the anticipated market efficiency. Instead, it left consumers exposed to global price shocks, with low local refining capacity to cushion the blow.

Another pillar of Tinubu’s oil and gas reform promise is increasing indigenous participation and ensuring host communities benefit directly from oil operations. The Petroleum Industry Act 2021 has already laid the legal groundwork for this through the creation of Host Community Development Trusts.

However, there has been some progress. Most communities now have their trust funds set up and are assessing them. The ministry claims this has improved relationships, reduced pipeline vandalism, and enhanced operational stability. These are not minor gains.

Yet, peace without prosperity is fragile. The oil-producing regions, from the swamps of Bayelsa to the creeks of Rivers State, remain some of the poorest in the country.

Also, the government has demonstrated a strong commitment to increasing the indigenous share of Nigeria’s oil and gas industry, in line with its broader local content development goals. This commitment is becoming more evident as more Nigerian companies step in to acquire assets divested by international oil companies.

These transitions mark a significant shift in industry dynamics, with indigenous firms such as Seplat Energy, Heirs Energies, and First E&P emerging as key players in upstream operations. The policy push toward empowering local operators aims not only to deepen national participation to 56 per cent but also to retain more value within the country, create jobs, and build local capacity across the petroleum value chain.

Through initiatives driven by the Nigerian Content Development and Monitoring Board, the administration is working to ensure that Nigerians are not just participants but leaders in exploration, production, refining, and oilfield services, ultimately fostering a more resilient and inclusive oil and gas sector.

While oil dominated the headlines during the period under review, gas remained a key pillar of Nigeria’s energy future. President Tinubu’s manifesto outlined ambitious goals for gas commercialisation, but implementation has lagged. The 2023 manifesto promised to harness domestic gas potential and increase investment in infrastructure and technology. In reality, the pace of gas commercialisation has been glacial.