By the late 2030s, the Nigerian National Petroleum Company Limited (NNPCL) may lose up to 50% of its oil and gas production, according to a recent report by the international energy research firm Wood Mackenzie.

The consulting firm claimed in its most recent podcast, "A New Era for NNPC and Nigeria's Upstream Oil & Gas Sector," that NNPCL's portfolio is overburdened by numerous sub-commercial assets, raising questions about its long-term viability.

The evaluation follows Mele Kyari's resignation as Group CEO and coincides with new goals set by the administration of President Bola Tinubu to strengthen Nigeria's upstream industry.

Oil output to decline

Wood Mackenzie's team of experts, which included Ian Thom, Research Director for Upstream; Neivan Boroujerdi, Director of Corporate Research; and Mansur Mohammed, Head of West Africa Upstream Content, used its new upstream benchmarking tool to highlight that although production may improve slightly in the short term, output is predicted to peak by 2026 before sharply declining.

“What is unique to NNPC is that, unlike many other National Oil Companies within our corporate universe and around the world, most of its production and assets are non-operated.

“So it has big ambitions to grow its business and the Nigerian upstream sector, but much of that will rely on other IOCs around the world and indigenous producers, where assets will have to compete for capital within a wider portfolio.

“And if we look at production in more detail, we can see that it is growing in the short term. That’s set to peak in 2026. But clearly, there are challenges in the longer term. By the late 2030s, production could be half of what it is today,” the team stated, citing a lack of project pipelines and an over-reliance on non-operated assets.

Wood Mackenzie pointed out that NNPCL's production is mostly reliant on assets run by foreign and domestic oil corporations, in contrast to other national oil companies that have greater operational control. This increases its sensitivity to capital allocation choices made outside Nigeria and restricts its capacity to directly influence output growth.

“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. NNPCL has big ambitions, but its future hinges on how much capital other players are willing to invest in Nigeria,” the analysts said. “Right now, there’s a lack of longevity in its portfolio. It needs new commercial projects urgently.”

President Tinubu has tasked the NNPCL management, led by Group Executive Chief Officer Bayo Ojulari, with achieving an ambitious set of goals by 2030, including raising oil production to 3 million barrels per day, gas output to 10 billion cubic feet per day, attracting $60 billion in investment, and refining 500,000 bpd domestically.

However, Wood Mackenzie says that financial obstacles and structural inefficiencies could undermine these goals.

Wood Mackenzie identified long-standing infrastructural limitations as a significant roadblock to gas production. According to the report, Nigeria has substantial undeveloped gas reserves, particularly in the Niger Delta. However, because of inadequate processing and transportation facilities, less than 20% of the remaining volumes are deemed commercially viable.

“For instance, the OB3 pipeline, which should connect gas fields in the Eastern Delta to Lagos and other markets, has faced years of delay. Its completion could be a game changer,” the report said.

Another issue is operational expenses; according to Wood Mackenzie's benchmarking tool, NNPCL has a higher cost base than its competitors due to a number of variables, including insecurity, barrel losses, and legislative difficulties such as local content laws.

“The company must urgently address its cost competitiveness, especially if it wants to attract investors or consider an Initial Public Offering in the future,” the team warned.