The latest Nigeria Oil & Gas Report forecasts that the country will account for 11.59% of African regional oil demand by 2013, while providing 21.29% of supply. African regional oil use of 2.98mn barrels per day (b/d) in 2001 rose to 3.60mn b/d in 2008. It should average 3.58mn b/d in 2009 and then rise to around 3.96mn b/d by 2013. Regional oil production was 7.84mn b/d in 2001, and in 2008 averaged 10.20mn b/d. It is set to rise to 11.98mn b/d by 2013. Oil exports are growing steadily, because demand growth is lagging the pace of supply expansion. In 2001, the region was exporting an average 4.86mn b/d. This total had risen to 6.60mn b/d in 2008 and is forecast to reach 8.02mn b/d by 2013. Angola has the greatest production growth potential, with Nigerian exports set to soar if it can resolve recent quasi-political issues.

In terms of natural gas, the region in 2008 consumed 115bn cubic metres (bcm), with demand of 181bcm targeted for 2013. Production of 211bcm in 2008 should reach 354bcm in 2013, which implies net exports rising from 96bcm in 2008 to 173bcm by the end of the period. Nigeria in 2008 consumed 11.29% of the region’s gas, with its market share forecast at 27.61% by 2013. It contributed 16.58% to 2008 regional gas production and, by 2013, will account for 21.18% of supply.

For 2009 as a whole, we are now assuming an average OPEC basket price of US$55.00 per barrel (bbl), a 41.5% decline year-on-year (y-o-y). This represents an upgrade from the US$52 forecast we have stuck with during the past three quarters. Our OPEC basket assumption delivers likely Brent, WTI, Urals and Dubai prices of US$56.30, US$57.50, US$55.60 and US$55.60/bbl respectively. For 2010, we expect to see a recovery to US$60.00/bbl for the OPEC price (up from our previous forecast of US$58), gaining further ground to US$65.00 in 2011 and to US$70.00/bbl in 2012. Our post-2010 forecasts are unchanged and we are continuing to use a long-term price assumption of US$70.00 for 2013-2018.

In 2009, the report is now assuming a global average gasoline price of US$62.12/bbl, with the fuel having peaked in June. The overall y-o-y fall in 2009 gasoline prices is put at 40.0%. The gasoil forecast is for an average price of US$68.62/bbl, assuming a monthly high of US$92.49/bbl in December. The fullyear outturn represents a 43.4% fall from the 2008 level. The annual jet price level for 2009 is forecast to be US$65.17/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put at US$49.06/bbl, down 43.9% from the previous year’s level.

Nigerian real GDP is now estimated to grow by 1.9% in 2009, following 6.4% in 2008. We are assuming 2.7% growth in 2010, 6.8% in 2011/12, followed by 6.6% in 2013. We expect oil demand to rise from 368,000b/d in 2008 to 458,000b/d in 2013, representing up to 3%-5% annual growth. State owned Nigerian National Petroleum Corporation (NNPC) accounts for more than 50% of oil production and over 40% of gas supply, but has a large number of international oil company (IOC) partners contributing to a forecast rise in oil and liquids production from 2.17mn b/d in 2008 to 2.55mn b/d by 2013 – subject to rebel attacks on infrastructure and OPEC quota policy. Gas production should reach 75bcm by 2013, up from 35bcm in 2008. Consumption is expected to rise dramatically from around 13bcm to 50bcm by the end of the forecast period, allowing exports of no more than 25bcm. This threatens the country’s liquefied natural gas (LNG) export business unless fresh supplies can be located and developed.

Between 2008 and 2018, we are forecasting an increase in Nigerian oil and gas liquids production of 56.7%, with volumes rising steadily to 3.40mn b/d by the end of the 10-year forecast period. Oil consumption between 2008 and 2018 is set to increase by 78.8%, with growth slowing to an assumed 7.5% per annum towards the end of the period and the country using 658,000b/d by 2018. Gas production is expected to rise to 110bcm by the end of the period. With demand rising by 423.1% between 2008 and 2018, there should be export potential increasing to 42bcm, largely in the form of LNG. Details of the 10-year forecasts can be found in the appendix to this report.

Nigeria now shares second place with Gabon and Republic of Congo (RoC) in BMI’s updated Upstream Business Environment rating, behind only Libya. It may struggle to keep Angola at bay over the short term, as the West African neighbour is just one point behind. Nigeria’s score benefits from its substantial oil and gas reserves, its oil and gas production growth outlook, and high reserves-to-production ratios (RPR). The competitive landscape features numerous non-state companies, while licensing terms are generally acceptable, although potentially under review. However, negative country risk factors undermine the hydrocarbons-specific strength. The country is in the upper half of the league table in the Downstream Business Environment rating, with a few high scores but near-term progress further up the rankings deemed unlikely. It is ranked fourth behind Algeria, thanks largely to poor country risk factors that undermine further a regulated and largely state-controlled industry. Algeria is four points above it in the regional rankings, and looks set to stay out of reach. Angola below poses little mediumterm threat.