Four months ago, the Department of Petroleum Resources said Nigeria will start producing 4 million barrels of crude oil per day by 2020, but Feb. 23 general election may not lead Africa’s biggest crude producer to this destination.
This is because the country’s oil sector gasps for long overdue reforms and despite many of its previous leaders making huge promises, progress has been slow, delayed by a lack of political will.
In the last five years, Nigeria’s oil production has dropped by an average of about 200,000 barrels a day (200 kbpd) and in January the country produced just below 1.7 million. This means the country would need to more than double its output to hit the government target.
Apart from cuts in Iran and Libya, which were beyond the control of governments in these countries, Nigeria contributed notably to the Organisation of Petroleum Exporting Countries output cuts in January, with the third-largest drop within the group.
Oil production in the country fell by 80,000 barrels a day to 1.69 million barrels a day. Ramp-up at Total’s offshore Egina field, expected to produce 200,000 barrels a day at plateau, may add to Nigeria’s output levels this year.
However, this increase may be subdued by the upcoming election which carries seeds for potential disruptions, especially in the Niger Delta region, if militancy resumes. Regulatory uncertainty also continues to hold back investment into the country’s oil industry longer term.
Despite Nigeria’s dependence on oil sector revenue, the country has failed to set up mechanisms that will guarantee the stability of this all-important revenue source in terms both legal and fiscal frameworks.
Nigeria’s constitution allows the President and Minister of Petroleum to “gift” oil blocs to whoever they like. What this means is that oil blocs, the live wire of Nigeria have and can be owned by people who lack the capacity to maximise its potential to deliver development to the Nigerians.
The Petroleum Industry Governance Bill (PIGB) that sought to end this wastefulness which results to sporadic increases in oil and gas prices, has been passed by the legislators. However, in September 2018, President Muhammadu Buhari rejected the PIGB.
The country has replaced India as the poverty capital of the world largely owing to the failure of successive governments to pass institutionalised laws that control the licensing of oil blocs in Nigeria.
According to Open Oil License, an advocacy group with Twitter handle @OpenOilLicense, in the licensing round of 2005, 2006 and 2007; 77 oil blocks were awarded and 76 of those oil blocks were dormant meaning only 1 oil block was developed for production.
Oil and gas industry players with deep understanding of the matter say efforts to quash the Petroleum Industry Bill, and later the PIGB, did not just come from compromised legislators but from officials of government-run parastatals, the petroleum ministry inclusive, whose preference was to maintain the status quo.
“The politics, lobbying and so on from those who did not want the bill to see the light of the day was terrible. Unless you can withstand pressure, you won’t be able to do what I did” Tayo Alasoadura, chairman, Senate Committee on Petroleum Resources (Upstream) was reported to have said in September, 2017.
The sector’s opacity has starved it of much needed foreign direct investments, which has also impacted capital expenditure. Without capital expenditure on exploration and production activities, Nigeria’s output will remain stunted.
STEPHEN ONYEKWELU
