NIGERIA - Part 1 - The Prospects & Geology.

Nigeria's sustainable oil production capacity exceeds 2.75m b/d, excluding condensates. Actual oil production is averaging 2.5m b/d, with most of the difference being shut-in capacity in troubled areas. Nigeria's OPEC quota since July 1 has been 2.306m b/d. The government's new target is for the production capacity to reach 4.5m b/d by 2010 and this will include condensates, which are exempted from OPEC quotas.

Nigeria's proven oil reserves have been raised from 25 bn barrels in early 2001 to more than 34 bn barrels and should reach 40 bn barrels by 2010. Proven reserves of natural gas by late-2004 had risen to 187 TCF (5.3 TCM) from 120 TCF in 2000. To encourage exploration, the government has improved the E&P regime (see Gas Market Trends of this week).

Nigeria, rich in natural resources, has been impoverished as a result of negative politics and unrest since the 1960s. It has often been forced to import fuels to offset shortages locally, with accidents in Nigeria's oil refining sector being frequent.

Although oil price increases since March 1999 have allowed the government to raise its annual budgets, still there are serious problems in the local energy market and in the economy (see Downstream Trends of this week).

Nigeria spends heavily to maintain its production capacity and to expand it to 4m b/d by 2010. The state-owned Nigerian National Petroleum Corp. (NNPC) has always had difficulty in funding almost 60% of investments needed by its oil producing JVs. But the government is to replace all of its joint-venture agreements (JVAs) with production sharing contracts, which will reduce its funding burden (see profiles of fields and operators in Part 2 next week).

Oil is found in relatively simple geological structures along the Niger River Delta. A major part of the proven oil reserves lies in about 250 small fields. At least 200 other fields are known to exist. Nigeria's oil reserves have gravities ranging from 21[degrees] to 45[degrees] API. The main export crude oil blends are Bonny Light (37[degrees] API) and Forcados (31[degrees] API). NNPC markets its share of crude oil production. Like most other NOCs in OPEC, it prefers to sell to end-users rather than to traders. Since early July 1999, it has limited term contracts to bona fide firms (see exports & logistics in Part 3). Nigeria is becoming a major exporter of LNG and natural gas by pipeline (see Gas Market Trends No. 7).

President Olusegun Obasanjo remains the minister of petroleum. The person directly involved in the petroleum decision making process is his adviser Edmund Daukoru, sworn in recently as minister of state for energy (see who's who in Part 4).