2018 Nigeria Energy Outlook; What to Expect

As we commence 2018, we thought to examine landmark events in 2017 in the Energy space (i.e. oil, gas and power) and offer some insight on what we expect in these sectors in 2018.

Highlights:

Upstream:

  • Commencement of renegotiations of Production Sharing Contracts
  • More investments in LNG projects
  • Completion of another round of IOC divestments
  • More compliance audits by the Nigerian Content Development and Monitoring Board.
  • Implementation of Gas Flare Commercialisation Programme
  • Completion of OB3 Pipeline and possibly the Egina project

Downstream

  • Parallel pricing of Petroleum Products: Due to the continued increased cost of importation, the government in order to reduce subsidy payments to petroleum importers, would most likely adopt a parallel pricing regime for petroleum products. The parallel regime would enable the government owned stations to sell petroleum products at prices fixed by government while the petroleum importers may be allowed to sell petroleum products at prices profitable to them.
  • More investments into LPG: The Nigerian Gas Policy has identified the huge potential of LPG in the following areas: Domestic, Power Generation, Autogas, Industrial, Agriculture, Industry and commercial. We believe with this opportunity, there will be significant investment drive towards the LPG market.
  • Financing of Modular Refineries: We expect that the licensees of the modular refineries will be engaged in raising finance for their respective projects.

Power:

  • Cautious investment in the sector due to proposed review of the privatisation of the sector.
  • Potential Dispute between the Federal Government and the DISCOs as a result of the declaration of the eligible customer regime by the Minister of Power.
  • Addition of 495MW to the national grid by Azura Edo-IPP. It is expected that full commercial operations of the plant shall commence on in Q2, 2018.
  • Financial close for the construction of some solar plants.
  • Commissioning of the Lagos Embedded Power Generation Project.

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