- Crude Oil Production & Growth Aspirations
Nigeria’s crude oil output remains below its OPEC quota (estimated at ~1.5 million barrels per day (bpd) in Q1 2025), with efforts to ramp up production hindered by insecurity, aging infrastructure, and divestments by IOCs. The government aims to boost output to ~1.8 million bpd by mid-2025, but this will depend on:
- Improved security in the Niger Delta.
- Finalizing divestment deals with indigenous firms (e.g., Seplat, Oando).
- Fast-tracking new projects (e.g., Bonga North, Nsiko).
- Insecurity in Rivers State & Impact on Oil Production
The declaration of a state of emergency in Rivers State and suspension of democratic governance could disrupt oil production due to:
- Increased pipeline vandalism and militant activity.
- Logistical challenges for oil workers and supply chains.
- Potential force majeure declarations by operators (e.g., Shell, TotalEnergies).
If unrest escalates, Nigeria risks losing 100,000–200,000 bpd in Q2 2025, further straining revenue.
- Geopolitical Tensions & Economic Growth
- Middle East conflict & Russia-Ukraine war keep oil prices elevated (~85–85–95/bbl), benefiting Nigeria’s export earnings but worsening import costs.
- US trade wars with Canada, Mexico, and Europe could indirectly affect Nigeria’s trade flows, particularly in LNG and refined products.
- Global supply chain disruptions may delay critical energy sector equipment.
- Inflation, Exchange Rate & Economic Reforms
- The 2025 budget targets reducing inflation from 34.6% to 15%, but structural bottlenecks (fuel prices, FX illiquidity) may slow progress.
- The Naira is expected to strengthen to ₦1,500/$ in Q2 due to:
- Higher oil revenues (if production improves).
- CBN’s forex interventions.
- Dangote Refinery’s FX savings (if operational).
- If inflation remains sticky (~25%), further monetary tightening may hurt economic growth.
- Naira-for-Crude Deal with Dangote Refinery: Likely Fallout
- The non-renewal of the NNPC-Dangote crude supply deal could:
- Force Dangote to source dollars for imports, worsening FX pressures.
- Increase petrol prices if refinery passes costs to consumers.
- Strain NNPC-Dangote relations, deterring future partnerships.
- IOC Divestments & Legacy Issues
- Environmental liabilities (oil spills, gas flaring) remain unresolved, risking:
- Community protests & shutdowns against new operators.
- Legal battles (e.g., Shell’s ongoing Ogoni cases).
- New investors (Waltersmith, Aradel, etc.) must engage host communities transparently to avoid disruptions.
- Domestic Refining, Fuel Imports & Subsidy
- Dangote Refinery is expected to dominate supply, reducing imports.
- NNPC may reintroduce partial subsidy if petrol prices exceed ₦1,000/litre.
- Port Harcourt Refinery’s output remains uncertain; delays could prolong imports.
- Dangote Refinery Petrol Price Hike & Economic Impact
- If Dangote increases ex-depot prices (due to crude costs), pump prices could rise to ₦900–₦1,200/litre, worsening inflation.
- Possible government intervention (price caps, subsidies) may distort the market.
- NNPC vs. Dangote: Crude Supply & Investor Confidence
- Disputes over pricing & supply terms could deter foreign investment in refining.
- Lack of long-term crude supply agreements may unsettle markets.
- Gas Production, LNG Exports & Domestic Gas Growth
Nigeria holds the largest proven gas reserves in Africa (~209 TCF), but utilization remains suboptimal due to:
- Underinvestment in upstream gas infrastructure (processing plants, pipelines).
- Persistent gas flaring (~8% of total production, despite government’s 2030 zero-flare target).
- Feedstock shortages for NLNG due to pipeline vandalism (e.g., Trans-Forcados, Escravos-Lagos Pipeline disruptions).
Q2 2025 Projections:
- Production likely to remain flat (~8.5 BCF/day) unless key projects (e.g., NNPC/SPDC’s ANOH Gas Plant) come online.
- Gas flaring penalties may tighten, forcing operators to invest in gas utilization.
LNG Exports: NLNG’s Dominance & Global Market Shifts
- Nigeria LNG (NLNG) accounts for ~7% of global LNG supply, but competition is rising (Mozambique, Tanzania, US shale gas).
- Train 7 (expected completion: late 2025) will boost capacity by 35% (from 22 MTPA to 30 MTPA), but delays are possible due to:
- FX shortages (critical equipment imports).
- Supply chain bottlenecks (global shipping disruptions).
- Geopolitical tensions (Middle East, Russia-Ukraine) could spike European demand, benefiting Nigerian LNG.
Q2 2025 Outlook:
- LNG exports to remain steady (~20 MTPA) unless major pipeline attacks occur.
- Spot LNG prices may rise (~12–12–14/MMBtu), improving revenues.
Domestic Gas Growth: CNG, LPG & Power Sector Demand
- Compressed Natural Gas (CNG) & Auto-Gas Push
- Government’s CNG initiative (post-subsidy removal) faces slow adoption due to:
- High conversion costs (₦1.5–₦3 million per vehicle).
- Limited refueling stations (only ~50 operational).
- Private sector (e.g., NIPCO, Axxela) expanding CNG infrastructure, but progress is slow.
Q2 2025 Expectations:
- Marginal growth in CNG usage (mostly commercial vehicles).
- Possible government incentives (tax breaks, subsidies) to boost adoption.
- Liquefied Petroleum Gas (LPG) for Cooking
- Nigeria’s LPG consumption (~1.3 million MT in 2024) is rising, but penetration remains low (~30% of households).
- Key constraints:
- High cost of cylinders & regulators (₦15,000–₦40,000).
- Smuggling of subsidized LPG to neighboring countries.
Q2 2025 Outlook:
- LPG demand to grow (~10% YoY), but affordability remains a challenge.
- Possible price stabilization if Dangote Refinery supplies more propane/butane.
- Gas-to-Power: Persistent Bottlenecks
- Nigeria generates ~70% of its electricity from gas, but power plants operate at <50% capacity due to:
- Pipeline vandalism (e.g., ELPS, OB3 delays).
- Debt owed to gas suppliers (~$1.3 billion arrears).
- Grid inefficiencies (transmission losses ~40%).
Q2 2025 Projections:
- No major improvement expected unless OB3 pipeline is completed.
- More reliance on expensive diesel generation, worsening electricity costs.
Policy & Regulatory Developments
- Petroleum Industry Act (PIA) Gas Fiscal Framework: Investors await clarity on tax incentives for gas projects.
- Nigeria Gas Flare Commercialization Programme (NGFCP): Slow progress; few bidders for flare sites.
- Decade of Gas (2021–2030) Roadmap: Execution remains weak due to funding gaps.
Key Risks for Q2 2025
| Risk Factor | Potential Impact |
| Pipeline vandalism | Reduced gas supply to NLNG & power plants |
| FX liquidity crisis | Delays in LNG Train 7 completion |
| Low domestic gas pricing | Deters investment in gas infrastructure |
| Subsidy removal backlash | Protests could disrupt gas projects |
Opportunities for Growth
- Modular LNG projects (e.g., UTM Offshore’s FLNG) could unlock stranded gas.
- Dangote Refinery’s LPG output may stabilize domestic supply.
- EU’s energy diversification push could secure long-term LNG contracts.
What to Watch in Q2 2025
- NLNG Train 7 progress – Will FX shortages delay completion?
- ANOH Gas Plant startup – Can it boost domestic supply?
- OB3 Pipeline completion – Will it improve gas-to-power reliability?
- Government’s CNG push – Will new incentives drive adoption?
If security improves and critical infrastructure is delivered, Nigeria could see modest gas sector growth in Q2. However, FX constraints and policy uncertainty remain major hurdles.
- Power Sector: Generation, Transmission & Distribution
- Grid capacity remains weak (~5,000 MW) due to gas constraints, transmission losses.
- Renewable energy (solar, hydro) projects delayed by funding gaps.
- Labour Relations in Energy & Power Sectors
- NUPENG, PENGASSAN may strike over wage disputes if inflation stays high.
- Electricity workers’ protests likely if tariff hikes worsen living costs.
- Solid Minerals Development
- Government cracking down on illegal mining, but artisanal activities persist.
- Revenue growth slow due to weak formalization.
- Host Community Development Fund (HCDF)
- Delays in implementation may trigger unrest in oil-producing regions.
- New investors must engage communities to avoid disruptions.
- Nigerian Content Development
- NCDMB enforcing local participation, but capacity gaps remain.
- More indigenous firms taking over IOC assets, but financing is a challenge.
- Niger Delta Development Commission (NDDC)
- Slow project execution due to corruption allegations.
- Increased agitation if development stalls.
- HYPREP & Ogoni Clean-Up
- Progress remains slow; communities growing impatient.
- More protests likely if remediation delays continue.
- Cost of Living Crisis & Inflation Trends
- Inflation eased slightly in Q1 (~30%), but food, fuel costs remain high.
- Q2 outlook: Inflation may drop to 25–28% if FX stabilizes and harvest season improves food supply.
Conclusion
Key Takeaways to Monitor in Q2 2025:
- Security in the Niger Delta – Will Rivers State’s instability trigger production shutdowns?
- Dangote-NNPC Standoff – If the naira-for-crude deal collapses, how will it affect fuel prices and FX liquidity?
- Inflation & Exchange Rate – Can the CBN sustain the naira at ₦1,500/$ amid high import dependence?
- Gas Sector Momentum – Will ANOH Gas Plant or OB3 Pipeline finally unlock domestic supply?
Q2 2025 will be challenging but pivotal for Nigeria’s energy sector. Oil production growth depends on security, while Dangote Refinery’s pricing decisions will shape inflation. Geopolitical risks and FX volatility remain threats, but gas and power sector reforms could see gradual gains. Community tensions and labour unrest are key risks if economic hardships persist.
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