NNPCL Faces Potential 50% Production Cut by Late 2030s, Warns Wood Mackenzie
Nigeria’s oil and gas output could plummet by up to 50% by the late 2030s, according to a sobering forecast from energy research firm Wood Mackenzie. The analysis warns that the Nigerian National Petroleum Company Limited (NNPCL) faces steep production declines unless urgent reforms are implemented.
Wood Mackenzie’s recent podcast, *“A New Era for NNPC and Nigeria’s Upstream Oil & Gas Sector,”* points to NNPCL’s heavy reliance on "sub-commercial assets" as a major risk to long-term sustainability. The report comes at a critical juncture—following the exit of Group CEO Mele Kyari and amid President Bola Tinubu’s push to revitalize the country’s struggling upstream industry. Without decisive action, the state-owned firm risks a dramatic erosion of its production capacity.
Short-Term Gains, Long-Term Declines
Using its new upstream benchmarking tool, Wood Mackenzie’s team of experts, including Ian Thom (Research Director for Upstream), Neivan Boroujerdi (Director of Corporate Research), and Mansur Mohammed (Head of West Africa Upstream Content), projected that while short-term production might see a slight improvement, overall output is expected to peak by 2026 before entering a steep decline.
"What is unique to NNPC is that, unlike a lot of the other National Oil Companies within our corporate universe and around the world, most of its production and its assets are non-operated," the team stated. This crucial distinction means that NNPCL’s ambitious growth targets for both its business and the wider Nigerian upstream sector heavily rely on the capital allocation decisions of International Oil Companies (IOCs) and indigenous producers, whose assets must compete for investment within their broader global portfolios.
The analysts elaborated on the projected decline: “If we look at production in a little bit 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,” they warned, attributing this to a significant lack of viable project pipelines and an over-reliance on non-operated assets.
Structural Challenges and Fiscal Hurdles
Unlike many other national oil companies that exercise greater control over their operations, Wood Mackenzie pointed out that NNPCL’s production is largely dependent on assets managed by IOCs and local producers. This operational dynamic significantly limits NNPCL’s direct influence on output growth and heightens its exposure to capital allocation decisions made outside of Nigeria.
"So there is a lack of longevity in the portfolio. It needs more projects in the pipeline," the analysts stressed. They added that while NNPCL possesses a vast amount of resources, most remain "sub-commercial." "The NNPCL has big ambitions, but its future hinges on how much capital other players are willing to invest in Nigeria," the report concluded. "Right now, there’s a lack of longevity in its portfolio. It needs new commercial projects urgently.”
President Tinubu has set an ambitious agenda for the NNPCL management, now led by Group Executive Chief Officer Bayo Ojulari, targeting 3 million barrels per day (bpd) of oil production, 10 billion cubic feet per day (bcf/d) of gas output, $60 billion in investment attraction, and 500,000 bpd of domestic refining capacity by 2030. However, Wood Mackenzie's analysis suggests that structural inefficiencies and fiscal hurdles could undermine these ambitious goals.
Infrastructure, Costs, and Shifting Landscape
Regarding gas development, Wood Mackenzie highlighted long-standing infrastructure constraints as a major bottleneck. Despite Nigeria holding significant untapped gas reserves, particularly in the Niger Delta, less than 20 percent of the remaining volumes are considered commercially viable due to a severe lack of processing and transportation infrastructure. "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 stated.
Operational costs also present a significant concern. Wood Mackenzie’s benchmarking tool indicates that NNPCL operates with a higher cost base compared to its peers. This is driven by factors such as barrel losses, pervasive insecurity, and policy challenges, including local content regulations. "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.
The upstream landscape in Nigeria has also been reshaped by the ongoing retreat of major international oil companies from onshore and shallow water assets. Deepwater fields now account for the bulk of investments, with projects like Bonga North, which secured Final Investment Decision (FID) in 2023, expected to play a pivotal role in any future production rebound.
The analysts noted that while NNPCL holds a 60 percent stake in many joint ventures, future financing arrangements will grow increasingly complex. Unlike the oil majors, local partners like Oando, Renaissance, and Seplat are not expected to sustain previous "carry arrangements." Wood Mackenzie emphasized, "Independent financing of onshore operations will be essential—without it, growth faces severe limitations."
Nigeria’s deepwater reserves hold substantial untapped potential, the firm acknowledged, but realizing this will demand aggressive project execution, strict cost discipline, and clearer regulations. "The upstream sector’s success depends on timely final investment decisions, greater capital investment, and resolving infrastructure constraints," the experts warned. "Without these, production declines will persist."