Abdulrazaq Isa, Chairman, IPPG
…Despite its world class hydrocarbon resource base, Nigeria daily production has significantly dropped and lies at a about 1.3 million barrels of oil and 8.5 bcf of gas
…IPPG calls for urgent measures to be undertaken by all relevant stakeholders to avert dwindling production level.
…Domestic crude oil refining and petrochemical capacity have to be sustained for domestic crude oil and gas production.
-Felix Douglas
Speaking during his keynote address at the 2024 NOG Energy Week Industry, Chairman, Independent Petroleum Producers Group (IPPG), Abdulrazaq Isa, commended President Bola Ahmed Tinubu, for transformative reforms being undertaken by his administration.
Isa noted that specifically, the recent presidential executive orders and directives are a welcome development for the industry. Also of note is President’s direct intervention in untangling issues in some of the long-overdrawn International Oil Companies (IOCs) divestment transactions – these delays have been costly to the industry and extremely detrimental to the nation as a whole. “We are encouraged to see swift progress on implementation and some tangible results within a relatively short period of time. Such progressive and impactful policies are exactly what the industry has consistently clamoured for to sustainably develop and move the industry forward.”
According to the IPPG Chairman, notwithstanding, these laudable policies and the gradual positive turnarounds being experienced, the industry is in dire need of extraordinary focus to mitigate the genuine concerns on its long-term sustainability. Despite its world class hydrocarbon resource base, with over 37 billion barrels of proven crude oil reserves and 207 tcf and 600 tcf of proven and contingent gas reserves respectively, “we find ourselves in a situation where our daily production has significantly dropped and lies at a about 1.3 million barrels of oil and 8.5 bcf of gas today.”
“This is way below our capacity as a nation and by all globally acceptable standards, this reserves to production ratio is extremely low and a clear indicator that the industry is in a dire situation. In addition, we now run the risk of partial implementation of our national budget considering an estimated deficit of 400,000 bpd from the forecasted 1.78 million bpd.”
Isa made it known that this trend in production portends another frightening dimension when considering that in the not-too-distant future, the country’s overall installed domestic refining capacity, currently closing in on about 1.2million barrels per day, may soon outstrip current crude oil production level with the risk of Nigeria finding itself in a position where it is unable to meet its domestic refinery crude demand or even become a net importer of crude oil.
It is against this scary backdrop that IPPG is calling for urgent measures to be undertaken by all relevant stakeholders to immediately arrest this dwindling production level and under-investment by focusing on the following priority areas.
The Priority Areas
The immediate conclusion of all pending IOCs divestment transactions. Companies like Seplat, Renaissance Consortium and Oando have proven track record to successfully take over and manage these onshore and shallow water assets to realise incremental production in the region of 100,000 – 200,000 barrels of oil and over 1.5bcf of gas per day within 24 months and well over 500,000 barrels of oil per day in the long term.
IPPG believes the timely approval of these IOCs divestment transactions will also be a clear signal capable of restoring global investor confidence in Nigeria in an era of competing global investment destinations in Africa and very limited access to capital.
The Urgent Need to Address Deepwater Development and Production
Untangling issues around deepwater development, particularly in terms of competitive fiscal regime being negotiated with Shell, TotalEnergies, ExxonMobil and Chevron, has the potential to unlock incremental production of 700,000 barrels per day from this terrain in the short to medium term. Enabling deepwater development will attract significant economic benefits as Nigeria has one of the world’s largest untapped deepwater resource base.
The Adoption of a National Value-Retention Strategy
Nigeria’s domestic crude oil refining and petrochemical capacity must be sustained primarily from domestic crude oil and gas production in order to transform the country’s into a net exporter of refined petroleum and petrochemical products that will lay a strong foundation for the rapid industrialisation of the Nigerian economy.
It is therefore imperative to grow daily production to 2.5 million barrels of oil and 10 bcf of gas to ensure Nigeria is able to meet its domestic refinery and petrochemical demands and export commitments to generate the much needed foreign exchange earnings for macro-economic stability.
Development of Nigeria’s Gas Resources to Catalyse Economic Growth and Complement Decarbonisation Drive
The IPPG Chairman added that Nigeria’s vast gas resources must be exploited with immediate focus placed on restoring production to existing installed LNG capacity and expanding production (FLNG).
In addition, the country must expand domestic gas utilization (Gas-to-Power; Gas-Based Industries) by investing heavily to address gas infrastructure deficit facing Nigeria. IOCs will lead the charge on export gas while IPPG members will drive the domestic gas agenda led by NNPCL.
These priority areas provide the most realistic and sustainable pathway towards meeting national long term production aspiration of 4 million barrels of oil per day and 13 billion cubic feet of gas per day.
Consequently, as a matter of national importance, Nigeria must act fast and hasten the pace of recovery across the entire industry, even if it means the President declaring a state of emergency in the oil and gas sector! “We must be seen to do everything possible to unleash the industry. Unlocking this incremental production is achievable only through collaboration and commitment between the industry regulators, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the industry operators, Nigerian National Petroleum Company Limited (NNPCL), Oil Producers Trade Section (OPTS) and (IPPG), this must be done for the sake of the country.
The IPPG helmsman reminded stakeholders of the vital role the industry plays in sustaining national economy. Hence the theme of this year’s conference; “Showcasing Opportunities, Driving Investment, Meeting Energy Demand” is yet another clarion call to collectively confront challenges and opportunities shaping the energy landscape. Stakeholders must remain steadfast in dedication to driving positive change within the energy sector and beyond.
“With Strategic Policy Makers, Business-Enabling Regulators and Commercially Focused and Socially Responsible operators working in unison towards achieving shared goal of energy security, I believe we can unlock the full potential of our industry.”
IPPG re-affirms its continuous commitment and support to policies of government, particularly on its quest for energy availability, affordability and energy security for all Nigerians.
He expressed gratitude to President Tinubu for his exceptional support and unwavering commitment in resolving underlying industry challenges.
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