From Left to Right: Mr. Chikezie Nwosu, CEO Waltersmith Petroman, Mr. Abdulrazaq Isa, IPPG Chairman and Mr. Roger Brown, CEO of Seplat Energy Plc at the NAPE Divestment Workshop held recently in Lagos.
…Current production not sustainable to support country’s economic development
-By Felix Douglas
The Divestment Workshop that was organized by the Nigerian Association of Petroleum Explorationists (NAPE), recently provided virile platform for industry professionals and experts to gather and rub minds on industry matters to proffer solutions to some key challenges of the industry.
The Indigenous Petroleum Producers Group (IPPG) a unified member of petroleum and production companies established in 2015 for the primary objective of promoting and advancing the development of Nigeria energy industry towards social economic development of the country.
Speaking at the Workshop, Chairman of IPPG, Abdulrazaq Isa, disclosed that there is a natural synergy between IPPG and NAPE. It is a professional association of Geology in Africa, “I therefore look for future collaborations with the association and fostering growth and development of Nigeria oil and gas industry.”
Overview of Nigeria Oil and Gas Industry
Presenting his overview of Nigeria’s oil and gas industry, Isa said the country has world class hydrocarbon resource potential with over 37 billion barrels of oil and 11th in the world with 2.1% of global reserves, 209 billion cubic feet (bcf) of gas and 9th in the world which represents 2.6% of global reserves besides hydrocarbon potentials.
The IPPG Chairman made it known that contributions to national economy and Gross Domestic Product (GDP) alone is at 31% in 2021 to government revenue. It constitutes 1% of global revenue with 17% of oil exchange earnings and 600,000 Nigerians have been employed by the independent companies. It has also contributed immensely into Nigerian domestic electricity market.
The oil and gas industry constitutes majorly to the Nigerian economy. There are five local key domestic trends ongoing. One is energy transition which is a shift to cleaner energy sources and global adoption with far reaching implications. Nigeria commitment to net zero target by 2060 will result to greater focus on gas development. Second is insecurity challenges, massive unprecedented debt and vandalisation with existential threats to the nation and industry.
Isa said the ongoing divestment activities are bound to usher a new era in shallow waters. Geopolitics and global conflicts with regards to Russia/Ukraine conflict has brought a major shift in global supply and demand balance in oil and gas resulting in higher oil prices. This is threatening global economic recovery and post Covid-19. Widespread industry reforms following the passage of Petroleum Industry Act (PIA) which is expected to unlock investment opportunities.
As global and domestic events are shifting, Nigeria energy industry is creating a new era.
He gave spotlights on key industry trends and less than 1% of renewable contribute by energy supply system and the country had 37 billion barrels of oil with 209 proven gas reserves yet only 51% of Nigerian population have access to electricity and 145 kilowatts hours of electricity consumption per capita which is one of the lowest in the world. Powers shortages have affected the economy of the country.
Therefore, Nigeria has energy crisis. Almost one hundred million Nigerians have no access to electricity. Under investments in the energy sector over the years whereas the industry needs massive investments with huge opportunities to address the situation in a suitable manner.
There is need to focus on how to transform the economy and address energy crisis in the country. The catastrophic decline in oil production since 2012 minus 50% in the last 10 years. From 2012 till date the country is currently producing about 1.2 million barrels of oil production per day.
This is clearly not sustainable to support economic development. Nigeria oil production has continued to nosedive limiting benefits even when prices are high.
The Waltersmith Chairman stated further that the IOCs divestments offers opportunities for greater participation for indigenous companies and between 2010 and 2022 global reserve, they have probably covered almost 90%. By the next two to three years will forecast onshore and much of the shallow waters will be held by indigenous companies. Indigenous E&P operators have demonstrated capability, technical and financial to manage divestment assets with confidence to drive country’s energy security agenda.
On the role of business of E&P companies; Isa pointed out that they have done 3 phases of growth and development. Between 1970 to 2000, 2008 to 2009 till date, they have made significance in different phases.
In the first phase, the Federal Government awarded indigenous licenses to companies which essentially led to the creation of the NNPC award operatorship. The first indigenous company to produce oil was Dubri Oil followed by Niger Delta Exploration Company which was awarded the Ogbele field and over 40 licenses were granted by 1998.
The second phase was awarded through marginal field programs agenda while the last phase was majorly driven by the International Oil Companies (IOCs) divestment followed by enactment of oil and gas industry content development Act. However, the IOCs divestment has significantly deepened the growth of Nigerian independent with over 200% growth in terms of crude oil production.
Fifteen indigenous independence acquiring divested assets by 2015 and 2018 contributing about 10% of production. Fifty-seven marginal fields were also awarded to indigenous companies.
The IPPG Chairman asserted on aspect of contributions to national crude oil productions that indigenous oil companies currently produce about 30% to the country. They have invested heavily on divested onshore and shallow water assets by the IOC and grown oil production by becoming dominant in the industry. These efforts by the indigenous operators should be encouraged.
Prospects of Indigenous Operators for Nigeria
Isa explained that future prospects and dream for Nigeria is 40 billion barrels of oil reserves, 4 million barrels of oil production per day, zero gas flaring, 10 billion cubic feet (bcf) of gas production for power and electricity generation, 10 million tons per annum of Liquefied Natural Gas (LNG) which is the aspiration. Then 10 bcf per day for both domestic and agro industry with fertilizers.
He noted that plans are underway to save about 5 billion barrels through deregulation of the downstream sector and domestic refining capacity to about 1.2 million barrels. Nigeria independent companies have critical role to play realizing these industry aspirations.
The key imperatives going forward. There has to be focus on immediate short, medium and long term to realize carbon potentials. First and foremost is to secure production base. Security challenges must be addressed. Sustainable solutions, technology deployment, aerial surveillance, pipeline monitoring, community engagement and partnership must be imbibed.
Also, security architecture overhaul and alternative evacuation grounds. The second phase is short to medium term, secure financing in view of transition to renewables seeking sources of funding that can be leveraged to develop assets.
He advocated for the establishment of energy bank both national and international, improve industry wide efficiency for conducive business environment. Policy consistency of Petroleum Industry Act (PIA) implementation, minimize bureaucracy and lengthy contracting cycle with cost optimization. It is hoped that these issues will be resolved.
He called for the new Nigerian National Petroleum Company Limited (NNPCL) to focus at core areas to ensure asset integrity. There has to be investment in business and upgrade ageing infrastructure assets to position for energy transition.
Nigeria needs to increase exploration activities and exploit abundant gas resources with exploration, innovation and technology deployment with elimination of gas flaring.
Investing in midstream, gas processing pipelines downstream assets, refinery operations with strong collaboration between independents and profit driven NNPC Limited is required to meet these aspirations of the industry for the country.
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