The Petroleum Industry Act - Redefining the Nigerian Oil and Gas Landscape


Sunday, September 05, 2021 05:50 AM / by PwC/ Header Image Credit: PwC

Proshare Nigeria Pvt. Ltd.

Nigeria is home to about 206 million people (Worldometers, 2020) and is Africa's largest market, with a young, growing and vibrant population. The population is forecast to grow by an average of 2.6% per annum (World Bank, 2020). This population growth is expected to fuel greater energy demand.


Nigeria's economy entered a recession in 2020, reversing three years of recovery, due to fall in crude oil prices as an aftermath of falling global demand and containment measures to fight the spread of COVID-19. The economy lost $15.8 Billion as a result. The GDP contracted by -6.1% in Q2 and -3.62% in Q3 of 2020 before rebounding to 0.11% in Q4 of 2020. This brought Nigeria's GDP contraction to -1.98% due to the impact of COVID-19. The economy however has seen a recovery to 0.51% in Q1 of 2021 (NBS). The economy is projected to grow by 1.5% in 2021 and 2.9% in 2022, partly based on an expected recovery in crude oil prices and Nigeria's production.


Despite being a major source of revenue, the oil sector lags other sectors in terms of GDP contribution. The relative importance of the oil and gas sector in Nigeria appears to be declining, from 13% of Nigeria's GDP in 2013 to about 7% in 2020, while those of other sectors continue to increase. The federal government continues to seek means of diversifying the economy, particularly sources of government revenue and foreign exchange receipts to include Agriculture, Petrochemical, Refining, Retail, and ICT as priority sectors of the economy. It is clear however that even the oil sector needs to grow and be diversified to stimulate overall economic development

Proshare Nigeria Pvt. Ltd.

The Nigerian oil and gas industry is segmented into the upstream, midstream and downstream sectors with several players and regulators playing across the value chain.


The upstream oil and gas sector is dominated by international oil companies (IOCs). Shell, Chevron, Mobil, Agip, Addax and Total, currently dominate the oil industry accounting for over 80% of the country's crude oil production. Activities in the sector are carried out under various arrangements including Joint Ventures (JVs) and Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Corporation (NNPC). Other contractual arrangements include sole risk contracts and risk service contracts.


The IOCs also hold more than 90% of the oil reserves and operating assets. Production by IOCs has shrunk over the past ten years by an annual average of 4%, while marginal field players have increased production by up to 15% annual growth rate.

Proshare Nigeria Pvt. Ltd.

Major challenges facing the industry 

  • Policy uncertainty - The significant delay in enacting the Petroleum Industry Act into law for over a decade created an uncertain business environment which deterred investment into the sector resulting in lost opportunities. While the PIA has addressed many of these concerns, some uncertainties still remain in certain aspects such as price regulation, penalty regime and fiscal provisions.


  • Poor infrastructure - There is a huge infrastructure deficit in the sector, particularly in the midstream and downstream sectors.


  • Insecurity - Between 2019 and 2020, Nigeria experienced over 1,000 points of pipeline vandalism, kidnapping and other forms of insecurity. This has negatively impacted the performance leading to lower investment, high costs and decline in government revenues.


  • Impact COVID-19: The impact of COVID-19 on the oil and gas industry has affected demand globally as well as prices. According to Statista, this has forced a drop in production from 2.07 mbpd Q1 2020 to 1.7 mbpd Q1 2021.



Industry Regulators

Proshare Nigeria Pvt. Ltd.

The ministry of petroleum resources provides the primary oversight function for the industry, with several other agencies acting in different regulatory capacities. Prior to the PIA, the oil and gas industry had four major regulations. Exploration, production and distribution of petroleum products in Nigeria is regulated by several statutes and subsidiary legislations. The most prominent of these laws is the Petroleum Act 1969, Petroleum Profits Tax Act, Deep Offshore and Inland Basin Production Sharing Contract Act, and Associated Gas Reinjection Act. Most of the laws and regulations are outdated and inconsistent with present economic and industry realities. The Petroleum Industry Act now provides a more robust framework to drive growth within the sector.

Download Full PDF Report Here

CreditThe post The Petroleum Industry Act - Redefining the Nigerian Oil and Gas Landscape first appeared in PwC Nigeria on August 29, 2021


This report has been republished with the permission of PwC Nigeria.

 Proshare Nigeria Pvt. Ltd.

Related News

  1. PDF: Petroleum Industry Act, 2021
  2. The Petroleum Industry Act Needs Whistleblowing Mechanism to Ensure Transparency
  3. President Buhari Appoints Timipre Sylva as Chairman of Steering Committee on Petroleum Industry Act
  4. A New Course Set for the Petroleum Industry
  5. President Muhammadu Buhari Signs Petroleum Industry Bill 2021 Into Law
  6. Petroleum Industry Bill, 2021 - A Game Changer?
  7. PIB to Boost Nigeria:Committed to Driving Collaboration and Deal-Making in Nigeria's Energy Sector
  8. PIB: Securing Nigeria's Energy Future
  9. The Petroleum Industry Bill (PIB): Top 20 Changes You Should Know
  10. Petroleum Industry Bill Passed by The National Assembly
  11. PIB: Dangote Refinery, Others to Buy Crude in Naira
  12. Petroleum Industry Bill (PIB) 2020 - A Game Changer?
  13. Senate Passes Petroleum Industry Bill
  14. The Benefits of the Passing of Nigeria's PIB Will be Top of the Agenda at African Energy Week 2021
  15. PDFInside Nigeria's 2020 Petroleum Industry Bill - Budgit
  16. PDF: The Petroleum Industry Bill 2020
  17. PDFPIB Report Draft 2021 - House of Reps AD-HOC Committee
  18. TheAnalystSpeaks 1.0 - PIB will Sanitize and Standardize Processes in Nigeria's Oil and Gas Sector
  19. The PIB and the Gas Sector - Shaping a New Model
  20. NNRC Encourages NASS to Prioritize The PIB
  21. The PIB: Matters Arising
  22. PIB Will Ensure Nigerians Benefit Optimally from Oil and Gas Resources - Ahmed Lawan
  23. PIB: Will the Jinx be Broken This Time Around?
  24. PIB Will Be An Enabler For Increased Investments In The Oil and Gas Sector - Bambo Ibidapo-Obe
  25. Inside Nigeria's 2020 Petroleum Industry Bill
  26. Impact of the New Petroleum Industry Bill on Nigeria's Oil
  27. Petroleum Industry Bill - Is There Light At The End of The Tunnel?
  28. Nigeria to Draft Petroleum Industry Bill from Scratch
  29. Analysing the Petroleum Industry Bill
  30. Petroleum Industry Bill - Senate To Receive Final Report on PIGB April 25
  31. Bukola Saraki's Remarks at Petroleum Industry Bill Public Hearing
  32. The New Petroleum Industry Bill and Taxation of Petroleum Products in Nigeria
  33. FG may effect changes in Petroleum Industry Bill
  34. FG Explains Why Presidential Assent Was Withheld For Petroleum Industry Governance Bill
  35. House of Representatives Passes Petroleum Industry Governance Bill
  36. Senate Passed Petroleum Industry Governance Bill


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News