National Oil Company Profile: NNPC

Reserves and production  

NNPC’s oil production has followed a long-term decline since 2005. Rystad Energy expects this decline to continue, even in the scenarios assuming the highest oil price (e.g., in a slow transition scenario). Only in the slow scenario does gas output remain stable at the current level. In other scenarios with a faster transition, gas production declines. The driver of this projected decline is the high production cost of Nigerian oil and gas, in addition to low investment due to the withdrawal of IOCs from parts of the country.  

Sources: (1, 3, NRGI visualization) 

Transition and other economic risks 

Although NNPC has posted the highest profits of its history on the back of record gas prices in 2023 (23), the overall financial position of NNPC is unclear due to a lack of public reports, and even its debt is debated (21).  

Rystad Energy projects that NNPC’s traditional oil and gas business will decline substantially in the coming decades, as will the entire Nigerian hydrocarbon sector. Accordingly, the Nigerian government projects 30,000 jobs to be lost in the oil sector by 2030, with only 7,000 jobs gained in gas production over the same period.   

This decline poses a potentially existential challenge to the Nigerian state, which has historically relied on hydrocarbon revenues for around 40 percent of its government revenue. According to Carbon Tracker, 80 percent of this government revenue would be lost in the moderate scenario (8). Moreover, crude oil and gas exports together account for 90 percent of Nigeria’s exports. Since Nigeria has struggled to develop alternative export industries, the projected decline in oil and gas export revenue is a challenge for the country. Adapting to this risk could require investment in diversification alongside fiscal austerity, a difficult balancing act. As one first step in that direction, Nigeria eliminated its controversial fuel subsidies in 2023, which according to the International Monetary Fund had previously consumed about half of the country’s revenue from oil and gas sales (23).    

According to the World Benchmarking Alliance: “NNPC has not set any emissions reduction targets, does not calculate its emissions and has not published a transition plan. The company discusses the potential use of renewable energy and ‘clean fuels’ however there is no evidence that the company is transitioning away from its core business model” (11).  

Economic dependence on fossil fuel revenues and exports 

Government revenues at risk in the transition 

Credit ratings 

NNPC financial performance 

 Investment at risk in different energy transition scenarios 

Source: (24) 

Few of the world’s largest NOCs are exposed to as much transition risk as NNPC. Only about half of the NOC’s investment pipeline breaks even in the moderate transition scenario. Despite this high exposure to transition risk, the company has not divested from high-cost upstream assets and continues to expand upstream developments that are unlikely to break even in the moderate scenario. To the contrary, in recent years, NNPC has overseen a large-scale transfer of assets from IOCs such as Shell and ExxonMobil to smaller private companies, including Nigerian ones (19). This means that the transition risk associated with Nigerian oil production tends to be transferred to the Nigerian private sector; thus Nigerians are still exposed to transition risk. 

Nigeria’s key oil-producing regions include the Niger Delta and the deepwater fields in the Gulf of Guinea. Only a small proportion of NNPC’s investment pipeline breaks even in the slow transition scenario. The single largest project by development capital expenditure is the planned Nigeria Liquefied Natural Gas (NLNG) project, a joint venture with international partners, which does not break even in that scenario. Among the planned additions to NNPC’s portfolio, only the Iseni gas condensate field (in cooperation with Shell) breaks even in the moderate scenario. Only one project in Nigeria’s investment pipeline, the Amenam-Kpono field in the Niger Delta, is projected to break even in the fast scenario, which models a fast-paced energy transition in line with the Paris Agreement.  

Energy security  

Nigeria has particularly low refining capacity. Due to refining inefficiencies, NNPC processes only 1 percent of the petroleum products used in the country. Consequently, Nigeria exports crude and imports refined petroleum. NNPC owns a small stake in the Dangote refinery, which opened in Lagos in 2023 and could be the world’s largest refinery if fully operational. However, collaboration between NNPC and the refinery’s majority owner, Aliko Dangote, has been difficult, so that the refinery currently does not receive sufficient supplies from NNPC to be fully operational.  
 
According to the International Energy Agency, Nigeria also imports all the gas it uses, although NNPC aims to increase its share in the domestic gas market. As only 25 percent of Nigeria’s population have access to “clean fuels” for cooking, the Nigerian government is trying to expand households’ gas access, a suboptimal strategy from an energy transition perspective.  
NNPC has emphasized the role of natural gas as a "transition fuel" in Nigeria’s energy mix. In line with Nigeria’s National Gas Expansion Program, it collaborates with power generation companies like Egbin Power to use gas for power generation. 

Nigeria has an Energy Transition Plan that requires USD1.9 trillion investment to reach net zero by 2060, mainly by using the country's potential for solar photovoltaic and other renewable energy sources. It is unclear how Nigeria can raise enough money. Nigeria’s sovereign wealth fund, managed by the Nigeria Sovereign Investment Authority, which is funded from hydrocarbon revenues, started with seed funding of just $1.25 billion.