The Society of Energy Engineers has projected that fossil fuel prices will remain high during the third quarter of 2024. This rise in prices is expected to coincide with an increase in fuel imports, exerting additional pressure on the naira.
In a recent projection, the energy engineers outlined several key factors influencing the market: “Fuel imports are set to remain high, which will put pressure on foreign exchange reserves. The petroleum subsidy continues to be a significant burden on government finances.”
The removal of the fuel subsidy has led to varied fuel prices across the country. This could result in price hikes of up to 300 percent in some states compared to the same period in 2023. The report also noted that refineries would continue to operate at limited capacity due to ongoing maintenance and upgrades.
The Society advised Nigerians to prepare for increased oil production as new fields become operational. The ongoing efforts to revamp existing fields might boost output, providing some relief amid the high prices.
The management of the 2024 licensing round by the Nigeria Upstream Petroleum Regulatory Commission is expected to impact investor confidence significantly. However, several challenges may hinder energy growth, including security issues in the Niger Delta, ongoing divestments by oil majors, lack of investments, decaying infrastructure, poor governance structure, and the poor implementation of the Petroleum Industry Act.
Gas production is also anticipated to rise as new projects come online. Nigeria is expected to maintain its position as a key global supplier of Liquefied Natural Gas (LNG), with strong export levels. However, constraints in gas infrastructure, a lack of investments, and domestic supply shortfalls may persist.
The Society of Energy Engineers noted that power generation is expected to increase as new plants come online, accompanied by continued upgrades to transmission and distribution infrastructure. Despite these improvements, funding shortfalls due to lack of investment and grid stability issues may pose ongoing challenges.
The Society also highlighted potential labor unrest in the downstream and upstream petroleum sectors due to cost-of-living crises. Workers in the electricity sector might protest over unpaid wages and benefits, showing solidarity with organized labor.
Efforts to institutionalize the Host Community Development Fund for oil and gas-producing communities are expected to continue in line with the implementation of the Petroleum Industry Act (PIA). Increased community engagement and development projects are anticipated, although issues such as insecurity, crude oil theft, artisanal refining, and oil spill incidents are likely to persist.
According to the Organisation of Petroleum Exporting Countries (OPEC), Nigeria’s average daily crude oil production fell to 1.25 million barrels per day in May. This dip highlights the ongoing challenges in the sector and underscores the need for significant reforms and investments to stabilize and grow the industry.
The Society of Energy Engineers’ projections underscore the complex interplay of factors influencing Nigeria’s energy sector and the broader economy, according to the Punch. As the country navigates these challenges, coordinated efforts from both the government and private sector will be crucial to mitigate risks and leverage opportunities for sustainable growth.
