While oil exports contribute more than 90% of Nigeria's foreign exchange revenues, it is not clear that the allocation of more oil to export than to domestic utilization has been optimal. The country increased its refining capacity from 160 Mbpd in 1979 to 445 Mbpd in 1989, while in the same decade, oil exports as a percentage of production increased rapidly from 76% to 89%. By 2009, 99% of Nigeria's production went to export at the expense of domestic refining capacity utilization, which plummeted to 7% with the consequence that >80% of domestic consumption of refined petroleum products was imported. This paper examines the end-use of Nigeria's oil production. It proposes a framework within which the crude oil produced in Nigeria can be optimally delivered to maximize net income. A mathematical model for optimal allocation of crude oil, based on a transshipment framework, is espoused and applied to maximize net income, subjects to certain plausible constraints. The constraints identified total domestic refining capacity, offshore refining capacity, upstream oil production, and domestic refined petroleum product demand. The results indicate that the optimal product import&swapped/demand ratio ought to have ranged from 78% (2010) to 100% (2016) instead of the actual 76% (2010) to 87% (2016). Additionally, the optimum import&swapped/demand ratio could have resulted in more product imports than the actual in 2015, 2016 and 2017. However, the model results suggest that from 2018 to 2020, actual petroleum product imports have been consistent with the optimized import&swapped/demand ratio.

Energy is fundamental to the national economic and industrial growth. Therefore, access to affordable and sustainable energy is essential to the functioning of a national economy. In most developed nations, energy policy tends to focus on energy security, environment, economy and affordability of energy. No nation can grow beyond its energy development and management pedigree. While energy development as a source of income through exportation of hydrocarbons brings monetary wealth, energy consumption in the local economy is a good indicator of the socio-economic wellbeing and industrial growth of a nation. In other words, the prosperity of all sectors of a nation economy is tied to the prosperity and effective management of the energy sector. Nigeria continues to produce bulk of its energy resources for export over the decades. Unfortunately, the domestic economy continues to suffer a significant setback because of inadequate energy to energize the productive sector of the local economy. This paper examines energy consumption per capita and the economic data in Nigeria, and compare with the data from the United State of America as a developed economy, and China as a growing and emerging economy. Based on the comparison, we then forecast how much liquids petroleum will be needed to support the socio-economic life, industrial growth and the transportation in the country. Different scenarios are run based on the rate of liquids petroleum consumption in China and Africa. Our analysis shows that Nigeria might become an importer of crude oil between 2030 and 2035 as the country economy, industrial activities and population grow.

Nigeria's crude oil reserves and production capacity growth have stagnated over the past decade leading to the apprehension of whether the country is running out of oil or running into it. Existing methods of predicting production capacity and reserves growth to address this apprehension have series of gaps which this research addressed namely inconsistent and optimistic peak oil predictions from several authors, over curve-fitting, lack of details on investment underpinning the forecast, non-relationship with international crude oil price dynamics, omission of structures of the system being modeled and non-flexibility for scenario modeling. This research offers a long term perspective to modelling and forecasting using system dynamics approach with reserves replacement ratio (RRR) as proxy for status of oil and gas industry in Nigeria. The research successfully formulated mathematical models, built Nigeria Upstream Petroleum Integrated portfolio system dynamic model (NUPIM), history matched the reference modes from 1958 to 2015 with quality of the match assessed by visualization and statistical method of multiple regressions. Then, the research forecasted Nigeria oil production capacity and reserves from 2018 to 2035 and performed economic evaluation under various growth policy scenarios to provide a long term perspective of the industry. International crude oil price dynamics was endogenously modeled, history matched and predicted in order to capture its dynamic impact on reserves and production capacity growth. Under the present state called the passive growth policy scenario where a modicum of investments are being made in exploration and development, RRR is estimated at 60% as at 2016,which is evidence of the running out of oil phenomenon. A radical investment policy of injecting some 10 billion USD annually for five years into exploration and development produces RRR > 100%, but this is short-lived. A more distributed fund injection of some 5 billion USD over 10 year period in the optimal investment policy scenario, stimulates growth and guarantees an RRR that is greater than 100% over a longer period of 8 years thereby reversing the crude oil running-out trend. The incremental economics under the present growth policy (passive state) returned negative NPV @12.5% of ca 3 billion USD suggesting the incremental investments in exploration/development to generate new reserves and capacity in the oil industry under the current passive growth policy are value destructive. Having closed identified gaps in knowledge from this research, it is recommended that government and investors should use the system dynamic approach, appropriate fund injection and exploration/development investment mix in addition to governance restructuring to reverse the apparent running-out-of-oil trend in order to drive desired growth in reserves and production capacity and to truly make the oil and gas industry the enabler of economic diversification in Nigeria in the long run.

Petroleum Fiscal Systems refer to the arrangements between a host government and an oil and gas exploration and production company to explore, develop and produce hydrocarbons. Royalty term is a key element of any petroleum fiscal policy and it could be fixed-by-terrain or sliding by volume and petroleum price. Nigeria like most countries operates a fixed-by-terrain royalty system. The defects of such a system include negligence of the size of the firm and the price of hydrocarbon in determining royalty terms. This is attended by negative shock on profitability of small firms and their operations on the one hand and the take statistics of the host government on the other. For example marginal field operators find it difficult to operate under fixed-by-terrain royalty system. All previous investigators on fiscal terms have focused quantitative evaluation on impact of fiscal terms on profitability indicators vis-à -vis impact on government and contractor take statistics without extending to proved reserves impact. This paper fills this gap. This paper focuses investigation on quantitative analysis of impact of variable and fixed-by-terrain royalty terms on proved reserves using an archetypal onshore producing oil and gas asset, existing royalty term in Nigeria as well as the archetypal sliding royalty terms in Nigerian 2012 draft Petroleum Industry Bill. A proved reserves economic spreadsheet model based on SPE Petroleum Resource Management System (PRMS), sliding and fixed royalty systems was developed and used for the study. The investigation shows that with two-tier sliding royalty system (based on volume and oil or gas price) impact on proved reserves could be positive, in effect meaning less exposure on proved reserves in existing assets than under fixed royalty term. Also under a period of global low oil price like in late 2014 to early 2016 where oil price has dropped by close to 250%, the firm may have positive effect on proved reserves due to reduced royalty payment used in economic limit test analysis. These conclusions should guide policy makers and negotiators in deciding royalty terms in fiscal policy formulation.