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Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the
Nigerian National Petroleum Corporation (NNPC), admits that the target is aggressive but appeared certain when he said last week that Nigeria is committed to
meeting it. The GMD has a penchant for making overly optimistic if not widly unreasonable predictions which only serve to undermine confidence in the National oil company.

Nigeria currently pumps around 2.2 million bpd in both crude oil and condensate. In March Nigeria’s crude oil production stood at 1.733 million bpd, up by 11,000 bpd
on the previous month. Over 10 years ago Nigeria commited to increase oil reserves to 40 billion barrels, that commitment never really looked plausible and has been kicked down the road until 2025 too. Nigeria has not had a bid round for over 10 years during which the passage of the Petroleum Industry Bill, the legislation created to provide certainty to investors has not been passed. It is hard to see how any investment can be made when the legislation that is meant to provide the fiscal and regulatory regime has not be passed.

It is against this backdrop that Nigeria and Saudi Arabia plan to draft a memorandum of understanding on an oil and gas partnership that could see the construction
of a new refinery and investments in liquefied natural gas, according to the Nigerian oil Ministry. The Ministry feels a possible agreement will open the doors for Nigeria
to “potentially benefit from Saudi Arabia’s Aramco’s recent aggressive oil sector investments across the globe while serving as the nerve centre for its presence in
Sub-Saharan Africa,” Kachikwu the Oil Minister said.

The Buhari Administration has a intuitive affinity for Saudi Arabia with the Nigerian government indicating back in February that Nigeria was, "as a responsible member of he Organisation of Petroleum Exporting Countries, willing to go along with the Saudi initiative of limiting oil output to push up prices". Buhari said then " “I know that it is in our interest to listen. We will cooperate.”

There may well be synergy and a mutually beneficial opportunity as Saudi energy minister Khalid Al-Falih reiterated the possibility of establishing an independent
refinery in Nigeria, considering it the best hub from which to reach other African countries. Nigeria imports the bulk of its petrol, under an offshore processing program
called Direct Sales Direct Purchase (DSDP) but referred to as a swap. Despite being Africa’s biggest crude oil producer, and due to its comatose refineries Nigeria
import over a million metric tons of refined petroleum product every month . NNPC and the Ministry have been desperately looking for investors into the existing refineries with no success.

Saudi Aramco is seeking to expand its downstream operations such as refining and petrochemicals production as part of its drive to become the world’s largest
integrated energy firm. Nigeria hopes that areas of interest will include the existing and new refineries, LNG investments and product supply trading in crude and
refined products,” the Nigerian oil ministry said in a statement.

Yet it was only 3 years ago the Nigerian Government, with much fanfare claimed it had signed a Memoranda of Understandings (MoU) with a number of Chinese firms
to invest $50 billion in the Nigerian oil and gas industry, to bridge the infrastructure funding gaps in the industry. Nothing has materialised. Largely because the
investment climate in Nigeria has not been right. The Nigerian government are going to have to commit to deregulation to get any investments in Refineries. They will
most likely need to sell off the existing Refineries in a well managed and transparent process

There is also the question of insecurity. Although the number of militant attacks on oil infrastructure has abated over the past couple of years, oil theft from pipelines is
still plaguing facilities and leading to leaks that often force operators to shut down export pipelines .Nigeria is also looking to Saudi Arabia to secure potential investments in its downstream sector. This past weekend, Nigeria’s Oil Minister Emmanuel Ibe Kachikwu met with Saudi Energy Minister Khalid al-Falih and said that the top Saudi oil official had expressed “the strong readiness of the Kingdom of Saudi Arabia to sign a definite and high value MoU with Nigeria for oil sector development.”



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