Nigeria’s oil and gas sector has long been the backbone of the economy, yet the sector faces persistent challenges, including declining production, security concerns, regulatory inefficiencies, and underdeveloped infrastructure.
In this interview, Ola Alokolaro, managing partner and head, energy & infrastructure group at Advocaat Law Practice, discussed promising opportunities, particularly in gas commercialisation, local refining capacity, and upstream reforms. DIPO OLADEHINDE, head of energy, BusinessDay, brings Except:
Nigeria’s oil and gas sector has been a cornerstone of the economy, but it has also faced significant challenges. What is your assessment of the sector’s current state, and what do you see as its biggest opportunities and hurdles going forward?
Well, things are slowly taking shape as the upstream sector transitions from being IOC-dominated to a landscape driven by local players. With this, we should see more local economic empowerment.
That said, crude oil production now still falls short of both the budgetary target and OPEC quotas. The federal government needs to continue with and accelerate the reforms in the sector. With the recent changes at the helm of NNPC affairs, I am hopeful that with the calibre of the appointees, there will be improved governance, which hopefully will translate to increased transparency and commercial discipline that will foster growth and create new opportunities.
Some of the emerging gas projects, when they come on stream, should significantly grow our gas-to-power capabilities and LNG exports, allowing for industrialisation and increased foreign exchange earnings, respectively. The Dangote Refinery coming also is also a strong upside for Nigeria as this will reduce our dependency on imports of petroleum products. This will no doubt offer us some savings in terms of foreign exchange and stimulate local industry.
It is, however, important to note that true transformation of the sector hinges on effectively addressing entrenched challenges such as security, perceived corruption, environmental damage, and infrastructure gaps.
What should be the top three priorities for NNPC Limited’s new management to enhance efficiency and profitability?
I believe one of the first steps the new management should undertake if it has not already done so, is to carry out a comprehensive audit of its portfolio of assets including its upstream, midstream, and downstream assets (refineries, pipelines, depots, JV fields, etc.) to identify the non-performing or inefficiently run units.
With this, the company can then rationalise its asset portfolio by either divesting or restructuring unproductive assets and then prime itself to look for fresh funds to reinvest in high-yielding projects. This would allow it to better streamline its operations, lower its operating expenditure and improve production.
There is also a need for the company to strengthen its corporate governance structure, setting clear KPIs, ensuring board independence and encouraging transparent reporting.
This will help improve transparency on its JV cash calls and build investor confidence ahead of the statutorily required IPO offering.
What legal reforms are still needed to boost Nigeria’s gas sector and make Nigeria more competitive for oil & gas investments compared to other African markets like Angola, Ghana, or Mozambique?
Investment capital goes to where the legal and regulatory framework is certain, and that is perhaps why the countries you have mentioned, often regarded as having clearer and more consistent regulatory regimes, are attracting investments in their oil and gas sectors.
Despite the progress made thus far with the Petroleum Industry Act (PIA) 2021 in play, there is still a need for some targeted reforms to make our gas sector a lot more attractive. Firstly, we need to improve our gas pricing framework.
Presently, our domestic gas pricing remains regulated, non-cost reflective, and commercially unviable, especially for power and industrial users. Specific amendments to the PIA are required to provide for a transparent, market-linked pricing mechanism for all gas segments to ensure project viability.
If you look at the oil and gas laws of Mozambique and Angola, for instance, gas pricing is contract-based and is benchmarked to international gas prices.
Furthermore, clearer provisions around ownership, tariffs and dispute resolution pathways concerning access to midstream infrastructure such as pipelines and processing plants need to be put in place. Inconsistent fiscal terms, particularly for gas development projects, delay project investment approvals and increase investor risk. Mozambique, for instance, offers long-term fiscal stability clauses in LNG contracts, and we need to offer similar legal assurances.
Global investors want legal certainty and fast resolution of disputes. Protracted litigation and weak enforcement deter long-term gas investments. Our court system is too slow in resolving disputes in comparison to other jurisdictions. There have been recent improvements with the introduction of Alternative Dispute Resolution Centres by the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), but this will only cater for disputes in the upstream oil and gas sector as opposed to disputes across the entire value chain. Perhaps a dedicated Energy Arbitration Tribunal that can adjudicate disputes across the entire value chain may be an option for consideration.
What legal risks do international investors face in Nigeria’s energy sector, and how can they mitigate them?
Despite the ongoing reforms, I would say there are still risks that investors face in our oil and gas sector, and these risks are multifaceted.
They range from legal, regulatory, to enforcement-related risks. If they are not properly addressed and mitigated, they can delay project implementation, reduce profitability, or lead to disputes and protracted litigation.
Targeted mitigation strategies such as engaging competent local counsel early to stay ahead of regulatory updates, integrating risk-mitigation clauses into contracts, and prioritising transparency and community relations can also significantly reduce exposure.
Additionally, collaborating with government reform bodies and maintaining active compliance audits will help any investor navigate our evolving legal landscape with confidence.
A lot of people have commended the introduction of the recent executive orders. What are your thoughts on the potential impact of this sort of intervention, especially the implementation? Is that in the right direction, or is it too late?
Their introduction is indeed timely and directionally correct, but I dare say that their effectiveness will ultimately rest on implementation discipline and regulatory coherence.
If they are properly implemented, they will remove some of the bottlenecks that have stalled final investment decisions on key deepwater projects and other gas development projects.
However, without clear institutional accountability and alignment of the sector regulators, the implementation of these executive orders may not succeed.
On the issue of whether they are too late in coming, I would say no, but that time is fast running out.
Investors are becoming increasingly selective, and Nigeria needs to understand within the African continent context that it is competing with other nations where there is greater fiscal stability, and the approval process for projects is a lot quicker, such as in Angola and Namibia, for global capital.
If these reforms are not operationalised in the next 12–18 months, Nigeria risks missing a critical investment window, particularly for gas, where global demand is rising.
Nigeria’s current oil production of approximately 1.4 million barrels daily has sparked discussions about increasing output to two million. What strategies can be implemented to achieve this ambitious goal?
To increase Nigeria’s oil production from approximately 1.4 million barrels per day (bpd) to a sustainable 2 million bpd, we must implement a multi-pronged strategy that addresses operational, security, regulatory, and investment challenges.
This strategy must include strengthening security in oil-producing regions to curb pipeline vandalism and crude oil theft, which presently accounts for losses of between 7-20% of total production output.
Reduced vandalism and oil theft could help in recovering up to 300,000 bpd in shut-in capacity.
There is also a need to rehabilitate and optimise legacy infrastructure such as pipelines, flow stations, and terminals, which are outdated, causing frequent leaks and operational shutdowns. If we rehabilitate some of our major pipelines such as Nembe Creek, Trans Niger and Trans Forcados and revamp our flow stations and injection points, this will improve evacuation capacity and reduce downtime.
Many marginal fields awarded under previous licensing rounds (e.g., 2020 Marginal Field Round) remain undeveloped due to regulatory hurdles or financing delays. A possible solution is to fast-track development by creating a framework for marginal field operators with simplified approvals. Asset pooling or joint development by smaller firms to reduce costs should also be encouraged. This could help unlock an estimated 150,000–200,000 bpd in new production.
Many mature fields are also underproducing and lack enhanced recovery programs. Fiscal incentives can be introduced for EOR deployment (gas re-injection, water flooding, chemical injection) by tech-driven firms in conjunction with NNPCL to revamp mature fields.
With this, we could see the possibility of between 100,000–150,000 bpd from brownfield optimisation alone.
So, raising Nigeria’s oil production to 2 million bpd, though ambitious, is achievable with focused, sequenced action. The foundation, which includes ample reserves, capable operators, and recent policy shifts, is already in place; the key lies in the execution, i.e. securing assets, unblocking investments, modernising infrastructure, and enforcing regulatory discipline.
What are the major areas you want the government to address in terms of ease of doing business in Nigeria’s oil and gas sector?
To improve the ease of doing business in Nigeria’s oil and gas sector, the government must in my view focus on these major areas: It must look to simplify and harmonise regulations, eliminate the present overlap of regulatory functions between NUPRC and NMDPRA, to avoid bureaucratic delays and ensure timely, and fair, issuance of licenses and permits so that there is a stable operating environment.
The burden of multiple taxation must be reduced, and there needs to be better coordination between the FIRS and other tax bodies.
There must also be a greater focus on infrastructure development to improve crude and gas transportation to reduce theft and losses and boost domestic gas utilisation, and improve community engagement through better implementation of the Host Communities Development Trust (under the PIA) to safeguard any new investment in infrastructure.
Do you think gas can play a bigger role in Nigeria’s economy than it currently does?
Yes, gas can and should play a much bigger role in Nigeria’s economy than it currently does. As you may be aware, Nigeria holds one of the largest proven gas reserves in the world (over 200 trillion cubic feet), yet it remains underutilised compared to its potential.
If properly harnessed, it could help with our economic diversification and serve as a foundation for industrialisation, powering sectors like petrochemicals, fertilisers, cement, and manufacturing. We are all acutely aware that the electricity deficit is a major constraint to our growth as a nation, and gas is the most viable fuel for stable, scalable, and lower-emission electricity generation.
A shift to gas-to-power can significantly boost productivity and attract investment in energy-intensive industries. Its export potential and the possible forex earnings from LNG exports can also provide much-needed revenue for the government to invest in education, health and infrastructure.
The key to unlocking all the attendant benefits from harnessing this vast resource lies in us talking less and doing more. Doing more in terms of implementing market-based pricing. It is only when we have wholesale market pricing across the value chain that we will see the desired investment.
The demand is there with the number of power plants that have been developed over the years, but the development of connecting infrastructure in terms of pipelines needs to be accelerated. The government needs to create bankable incentives for gas Investors by offering greater tax relief, guaranteed off-takes, and de-risking investments in upstream and midstream gas projects.
Gas is our best bet for economic transformation, more than oil; it is abundant locally and capable of powering growth across sectors. With the right policies, infrastructure, and investment climate, gas can become the cornerstone of our energy security, industrialisation, and export earnings.
What untapped opportunities exist in Nigeria’s energy sector (e.g., gas commercialisation, renewables, mini-grids)?
Our energy sector is full of untapped and underexploited opportunities that, if unlocked, could drive massive economic growth, improve energy access, and accelerate the country’s transition to a more diversified and sustainable energy future. Some key untapped opportunities cut across gas, renewables, and decentralised energy. In the gas sector, we presently flare about 300–400 million scf/d of gas, a complete waste of a valuable resource which, if harnessed, offers opportunities such as Gas-to-liquids (GTL), Small-scale LNG and CNG for transportation, power generation in rural or industrial clusters, LPG for cooking and so forth.
Also with over 80 million Nigerians lacking grid energy access, the introduction of off-grid electricity solutions for communities would offer up opportunities in EPC (Engineering, Procurement, Construction) for off-grid solar equipment, battery storage and hybrid systems and community-based energy-as-a-service models, The decentralisation of the power through the recent constitutional amendment and new Electricity Act also offers opportunities within states for utility-scale renewables such as solar and hydro projects and provision of infrastructure services such as transmission and distribution services. Grid upgrades and private sector-led DisCo partnerships and Modular LNG and LPG storage facilities all offer investment opportunities for the private sector.
If you could advise the government on one policy change to improve the energy sector, what would it be?
If I could advise the Nigerian government on one transformative policy change to improve the energy sector, it would be to implement a clear, enforceable, and market-based gas pricing policy that would allow gas producers to sell gas at prices determined by supply and demand for all sectors, power, industrial, commercial, except possibly for a temporary “lifeline” category for vulnerable users.
The disparity between domestic regulated prices and export prices, which disincentivise the development of gas for the local market, needs to be eliminated, and gas supply contracts need to be backed with creditworthy off-takers and payment collection enforced, especially in the power sector.
