Riding on policy execution, investment drive 

The oil and gas sector grew in leaps and bounds in the outgoing year. Notably, crude oil production significantly improved, with Nigeria meeting her OPEC+ quota after years of failing in this regard. This feat, among other successes recorded, is hinged on detailed and targeted reforms, particularly, the implementation of the Petroleum Industry Act (PIA) 2021, MUYIWA LUCAS writes.

Nigeria’s 2025 oil and gas sector began on a cautious optimism, driven by regulatory reforms Petroleum Industry Act (PIA) 2021, increased indigenous participation and ambitious oil production targets of 2.1 million barrels per day (mbpd).

With this were associated rising gas focus and new investments which were expected despite persistent security challenges and past refinery operational issues. But with deeper upstream investment, new tax incentives, growing gas utilisation and enhanced security efforts, some measure of significant foreign direct investments (FDI) were attained. Key policies put in place with a focus on unlocking dormant assets via “drill or drop” initiative, were also instrumental in shaping the industry.

Therefore, for observers and players in the country’s oil and gas sector, this year may after all be one to applaud owing to the quantum of achievements recorded.

The sector, in the outgoing year, showed strong resilience with oil production hitting 1.8 million barrels per day. This feat was attained following a combination of several factors- sharp reduction in oil theft, pipeline vandalism and regulatory efficiency. In 2021, the average daily crude oil losses stood at 102,900 barrels per day or 37.6 million barrels per year. However, due to the combined efforts of security forces as well as the collaborative effort of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the nefarious activities were curtailed, reducing it by 90 per cent to specifically 9,600bpd as at September 2025.

Similarly, rig count significantly increased this year, reaching 69 compared to eight as at 2021,    representing a 762.5 per cent increase. A breakdown of this includes 40 active, eight standby, five warm stack, four cold stack, 12 in transit.  The increase is believed to be a reflection of renewed activity and investor confidence in the nation’s oil and gas sector.

The “Project One Million Barrels” initiative has equally raised daily crude oil production to between 1.7 and 1.83 million barrels per day, with a notable increase of 300,000 barrels per day in July 2025.

Besides, the launched of an initiative- Cost Efficiency Incentive, in June 2025, which offered tax credits of up to 20 per cent for operators who achieve lifting costs below benchmark levels ($25–$40/barrel), also served as great incentive to the improved production output.

Although the year witnessed more divestments by the International Oil Companies (IOCs), it nonetheless unlocked huge new investments amounting to over $5.5 billion in Final Investment Decisions (FIDs). It equally increased local ownership of oil assets, even as their operations boosted production by 200,000 bpd. Still, enforcement of stricter rules for asset transfers secured billions in decommissioning funds and positioned indigenous players like Seplat and Oando for growth, signaling a shift towards a localised, resilient energy sector.

Still, the 650,000 bpd Dangote Refinery, though faced early operational setbacks and regulatory disputes early in the year, but rebounded strongly. The refinery, which presently operates at about 85 per cent installed capacity, has been very instrumental in reducing fuel imports by 60 per cent and saving the country up to $15 billion in foreign exchange annually.

It has also been cheery news for the country in the aspect of gas production. As of this mid-year, Nigeria had achieved its natural gas reserve target of 210 trillion cubic feet. Gas flaring fell to 7.16 per cent in July 2025, while daily gas production rose to 7.59 billion standard cubic feet per day (BSCFD). The simultaneous growth in output and decline in flaring underscores the Commission’s drive to boost production while advancing its 2030 zero-flare commitment.

In terms of Domestic Gas Delivery Obligation (DGDO) performance, the sector delivered 72.5 per cent in July 2025, up from 71.8 per cent in June. DGDO performance stood at 72.2% in January, rose to 73.5 per cent in February, dipped slightly to 70.8 per cent in March, before climbing again to 73.7 per cent and 73.0 per cent in April and May, respectively.

The AKK (Ajaokuta-Kaduna-Kano) Gas Pipeline project is in its final stages, reaching around 86 per cent completion as of mid-2025, with major works nearly done and mechanical delivery targeted for last month. Key milestones, like crossing the River Niger, were achieved in mid-2025, with the focus now on system testing and final infrastructure installation for the 614km pipeline.

Advertisement

The Nigeria-Morocco gas pipeline project valued at $25 billion, made significant strides, establishing a dedicated project company, completing crucial technical/feasibility studies and confirming the pipeline route, securing interest from international financiers and preparing for the Final Investment Decision (FID).

However, despite these production gains, oil revenue slumped by 23.9 per cent in June 2025 due to global price volatility and Asian demand shifts. This perhaps account for the N16.20 trillion shortfall or 63.49 per cent shortfall in government earning in its projected oil revenue target in the first half of the outgoing year.

According to the second quarter Budget Performance Report released by the Budget Office last week, gross oil revenue of N9.32 trillion was recorded between January and June 2025, a figure way below the N25.52tr pro-rated budget projection for the period. Data from the report also indicated that average crude oil production stood at 1.68 million barrels per day, below the budget benchmark of 2.12mbpd, with significant revenue implications for the Federation Account.

Interestingly, despite the revenue shortfall, the oil sector still rallied the country’s real gross domestic product (GDP) to grow by 4.23 per cent in the second quarter of 2025- its highest quarterly growth rate since Q2 2021. This surge is attributed to a boost in crude oil production, with Nigeria pumping an average of 1.68 million barrels per day during the quarter. That figure is significantly higher than the 1.41 million barrels per day produced in Q2 2024 and above the 1.62 million barrels per day recorded in Q1 2025.

The sector is moving towards greater sustainability, efficiency and indigenous participation, balancing energy security needs with global transition goals, with 2025 marking a period of significant policy execution and investment drive.