‘Why NNPCL Oil Production May Slump By 50%’

It has been forecasted that oil and gas production from the Nigerian National Petroleum Company Limited (NNPCL) may be reduced by 50% by the late 2030s due to a significant number of sub-commercial assets in its portfolio.

This insight was shared by a global leader in data and analytics for the energy and natural resources sectors, Wood McKenzie’ team of specialists, including Research Director for Upstream, Ian Thom; Director of Corporate Research, Neivan Boroujerdi; and Head of West Africa Upstream Content, Mansur Mohammed, during a review of the company following the departure of its former Group Chief Executive Officer, Mele Kyari.

In a podcast titled “A New Era for NNPC and Nigeria’s Upstream Oil & Gas Sector,” The group explained that their analysis utilised a new upstream benchmarking tool that offers customizable insights into essential operational and financial metrics.

Naija News reports that the review was conducted in light of the ambitious goals set for the NNPC board by President Bola Tinubu, which include attracting $60 billion in investments by 2030, increasing oil production to 3 million barrels per day, gas production to 10 BCF per day, and enhancing NNPC’s refining capacity to 500,000 barrels per day.

“What’s unique to NNPC is (that, unlike a lot of the other National Oil Companies (NOCs) within our corporate universe and around the world, most of its production and its assets are non-operated.

“So it’s got big ambitions to grow its business, to grow the Nigerian upstream sector, but a lot of that will be reliant on a lot of other IOCs around the world, indigenous producers, where assets will have to compete for capital within a wider portfolio.

“And if we look at production in a little bit more detail, we can see that it is growing production in the short term. That’s set to peak in 2026. But clearly, there are challenges in the longer term. As we move further out towards the late 2030s, production could be half of what it is today.

“So there is a lack of longevity in the portfolio. It needs more projects in the pipeline. And if we look at the reserve base, what you see is that NNPC has a huge amount of resources within its portfolio, but most of those resources are still sub-commercial,” the global research and consultancy firm stated.

In November of the previous year, the company declared that it had reached a production level of 1.8 million barrels of crude oil per day.

According to data obtained by Channels Television from the Organisation of the Petroleum Exporting Countries’ Monthly Oil Market Report for May, NNPCL has consistently produced 1.4 million barrels per day from the fourth quarter of the previous year until April 2025.

However, last month, NNPC Exploration and Production Limited (NEPL), a subsidiary of the Nigerian National Petroleum Company Limited (NNPC), announced its intention to increase daily production from the current level of 370,000 barrels to 550,000 barrels by 2027.

To accomplish this goal, the Managing Director of NEPL, Nicolas Foucart, indicated that the company would require an average annual investment of approximately $4 billion over the next five years.

Furthermore, upon taking office, the new group chief executive officer of the state oil company, Bashir Ojulari, committed to attracting sector investments totalling between $30 billion and $60 billion by 2027 and 2030, respectively.

Ojulari stated that the company aims to elevate crude oil production to over two million barrels per day, maintaining this level through 2027, and reaching three million barrels by 2030.

On what the NNPCL can do to recover some of its resources, Woodmac noted that whatever the company does will likely be hobbled by challenges in terms of commercialising gas, infrastructure constraints and inability to monetise its resources.

“NNPC is naturally going to be very domestically focused, at least in the short to medium term. So it has that kind of longevity challenge. Another challenge the business has is on the cost side.

“Here we’re bringing up operating costs, firstly on a sort of absolute basis, but then also on an OPEX per BOE, you see that NNPC does have a higher operating cost than a lot of its other companies that were shown in its peer group.

“And we know of some of the above-ground risks in Nigeria, loss of barrels, local content legislation, all of that adds to a higher cost base. It’s similar to Sonangol (Angola). And if we’re thinking about these companies being IPO (Initial Public Offer) ready, that is something that it has to address

“That’s particularly pertinent at the moment with a lot of uncertainty around tariffs and oil prices. That sort of short-run marginal cost of production is going to become increasingly important for investors,” the Woodmac panellists said.

However, deploying its upstream lens platform, which showed Nigeria’s overall production by water depth, the organisation said the divestment of Nigeria’s oil majors away from onshore shallow water has redefined the landscape in Nigeria.

“The majors are now focused in the deep water, and that’s where we would see their projects. Attention will now focus on indigenous companies that operate the joint ventures, mainly Oando, Renaissance, and Seplat. And financing will be the key hurdle they need to scale.

“For NNPC, it holds up to 60 per cent in these joint ventures, and they will need to find alternative financing options because the indigenous companies will unlikely continue the ‘carry arrangements’ NNPC enjoyed when the majors operated the Joint Ventures (JVs). So financing onshore will be key,” Woodmac explained.

The panel agreed that Nigeria has significant gas resources spread around the Niger Delta, but developing them has remained a challenge.

“But developing gas in Nigeria has always been a challenge. And we consider less than 20 per cent of the overall remaining volumes as commercial. This is largely due to limited infrastructure for processing and transporting gas from the fields to the markets.

“For example, the OB3 pipeline has been delayed for many years. And that is meant to connect the fields in the Eastern Delta to domestic markets in Lagos and the Western Delta. When it comes on, that’s when we’re able to see more gas developments progress in Nigeria,” the Woodmac analysts pointed out.

It, however, acknowledged the huge potential in the deep water, stressing that Final Investment Decisions (FIDs) and accelerating project development will play a major role in overall production growth.

“And this is because the deep water holds a significant scale in undeveloped resources. Bonga North took FID last year, and it is significant because it was the first deep water project to get approval since 2013,” it added.

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