Nigeria needs $50b to pump 3m barrels of crude oil per day by 2021

….as crude oil production rises to 2.1 mbpd. 

The Federal Government says it is targeting the production of three million barrels of oil per day within the next five years.

Ibe Kachikwu, minister of state for petroleum resources, who disclosed this yesterday, at the on-going Nigeria Oil and Gas Conference and Exhibition in Abuja, said the infrastructural gap in the industry must be closed if the target is to be achieved.

Kachikwu said the industry would need to invest $10 billion every year on infrastructure for the next five years, which is a cumulative spend of $50 billion to achieve the target.

He lamented that the oil companies, inspite of placing a high premium on safety, have neglected their infrastructure over the years.

“We must be bold enough to take steps to reduce the cost of production, as average cost of production for joint ventures in Nigeria is about $26, $27 per barrel. That absolutely has to come down within the $15 mark, it is a tough order but it is something that we must work on and I am absolutely committed to driving it because unless we do that, we are not getting anywhere,” the minister stated.
Kachikwu, however, noted that stakeholders must collaborate to reduce production cost, as it made no economic sense for Nigeria to be producing a barrel of oil at the cost of between $27 and $31, given the current fluctuations that are being experienced in the price of crude oil in the international market.

Some industry operators argue that militancy in the Niger Delta has largely been responsible for the increase in the cost of production in the industry because operators have to pay for security and other costs which are not even relevant to their production process.
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Kachikwu said private investors and the government are working out terms that will begin to massively address over $45 billion of infrastructural gap that is essential for the oil and gas industry to work effectively.

“Over the next four, five years, we will have to begin to look for ways of bringing into this country, an average of about $10 billion of investment in the area of constructing additional oil infrastructure and this is essential if we are going to survive economically.”

This, he said, will go into the construction of industrial parks, new pipelines to send products across the country and increasing the refining capacity to 90 percent, as most of the refineries are now abandoned due to lack of pipeline capacity.
“Most of the infrastructure you have today are infrastructure of old. Pipelines have deteriorated, which have been built about 40, 50 years ago, no replacement plans have been taken and even the oil producing companies that have one of the best safety measures in the world, failed to do so in Nigeria,” he observed.

He said the issue of militancy also was key, and companies that are able to bring down cost of production must see some level of incentive schemes and those that insist to run on very excessive costs will see the difference and change, because times have changed.

The minister further observed that Nigeria still has to close a lot of policy gaps, as some policies have not been revised for up to 50 years and some tariffs have not been revised for 50 years.

“Gas flaring should be addressed and we need to begin to commercialise gas, which is something we need to do rapidly, not only to meet the UN target of 2030 but to also meet our own economic needs by 2020.

“The importation of petroleum products will have to seize. It is a shame on this country, it is a fraud on the system and we have to end it. We are committed to 2019 template, it is something we have to do. It is not going to be easy but we are going to do it.”
Also speaking at the event, Maikanti Baru, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) disclosed that the country’s crude oil production now stands at 2.1 million barrels per day (mbpd)
“Crude oil production has steadily increased to 2.1mbpd due to some strategic dialogue efforts embarked by the Federal Government in the Niger Delta.”
Every forecast for Nigeria’s crude oil output looks positive after the efforts of Acting President Yemi Osinbajo, and Ibe Kachikwu minister of state for petroleum resources, to calm Niger Delta militants begin to gain traction.

The boost in production is positive news for the funding of Nigeria’s N7.3 trillion budget and also for attracting the much-needed investments in the oil and gas sector, to fund Nigeria’s oil production ambitions.
“Some frontier investors may well be able to find value in the country at an oil price of $55/bl and an exchange rate of NGN450-500/$,” said Charles Robertson, a leading emerging and frontier markets specialist at Renaissance Capital, an investment advisory in a note to BusinessDay
Baru in his address also expressed optimism that the resolution of cash call arrears would increase the confidence of JV Operators and therefore trigger more investments in new projects.
The Petroleum Industry Bills and the National Oil and Gas policies released by the ministry of petroleum resources have made exciting proposals to fast track reforms in the sector such as liberalising gas prices, smarter regulation and increased transparency.
“I think it will take some time before we can begin to see results from the JV cash call exit but I am sure there are discussions between government and the IOCs over the issue, says Omowumi Iledare, a professor of Petroleum Economics and Policy Research at the Center for Energy Studies.