Guyana’s new $10bn field project exposes Nigeria’s inability to pump more oil

Africa’s biggest oil producer who sits atop over 36 billion barrels of crude oil reserves is struggling to attract private capital to build its energy sector whereas Guyana, South America’s third tiniest oil country is attracting a $10 billion investment from America’s biggest energy company, ExxonMobil.

Guyana, which has a population of roughly 800,000 people and a GDP of less than 1percent of Nigeria’s, is creating a conducive environment for oil majors to produce the same amount of oil as Nigeria in a few years because of favourable investment circumstances unlike operators in Nigeria who are contending with insecurity, hostility from host communities, increasing cost of oil and gas projects and contentious ease of doing business models.

While ExxonMobil says it’s still having “continuing discussions with the government regarding development plan” for Nigeria’s Bosi 80,000bpd crude oil offshore deepwater asset for an oil field it discovered in 2006, the US company has commenced plans in Guyana to develop a fourth $10 billion offshore oil and gas field project aimed at producing up to 250,000 barrels per day.

“Yellowtail’s development further demonstrates the successful partnership between ExxonMobil and Guyana, and helps provide the world with another reliable source of energy to meet future demand and ensure a secure energy transition,” said Liam Mallon, president of ExxonMobil Upstream in a statement.

The new project is expected to come onstream by 2025.

Mallon said that nearly two dozen successful oil wells since the first in 2015 allowed it to so far have access to more than 10 billion barrels of oil in the Guyana Basin.

“We are working to maximise benefits for the people of Guyana and increase global supplies through safe and responsible development on an accelerated schedule,” he added.

ExxonMobil employs more than 3,500 Guyanese workers, up more than 50percent since 2019. It has spent more than $600 million locally, on more than 880 suppliers, since 2015.

With vast oil reserves, Nigeria is punching below its weight. Foreign investment into Nigeria’s oil and gas hit a low of $101 million in 2021 which is still a sharp decline compared to $327.30 million recorded in the fourth quarter of 2016, data from the National Bureau of Statistics (NBS) shows.

“The rate at which investments were taken away was too fast,” Timipre Sylva, minister of state for petroleum resources said in a statement issued on March 10 by Haratius Egua, his media aide.

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“Lack of investments in the oil and gas sector contributed to Nigeria’s inability to meet OPEC quota. We are not able to get the needed investments to develop the sector, and that affected us,” he added.

Some experts have recommended that for Nigeria to turn the tide against its declining oil and gas investments there must be deliberate multi-agency efforts to bring about needed reforms. But the efforts must start with bringing credibility to both fiscal and monetary policies.

“Investors were optimistic about Nigeria turning things around with the coming of Petroleum Industry Act (PIA), however there is skepticism about the implementation,” Kelvin Atafiri who runs Cavazzani Human Capital Limited, an investment firm exposed to the oil and gas sector, said.

In August 2021, Nigeria signed the Petroleum Industry Act into law. This was supposed to be an epic accomplishment after failed attempts for two decades.

The new oil law reviewed fiscal rules that made Guyana, Equatorial Guinea and some smaller African countries more attractive for oil investors. It streamlined taxes, revised royalties and clarified the collection process and how leases are managed.

It was supposed to be the silver bullet for attracting new investments and halting the exodus of International Oil Companies (IOCs) from the troubled Nigeria Delta.

Barely six months after its enactment, state-oil firm, the Nigerian National Petroleum Corporation (NNPC) Ltd sought to undo Seplat Energy’s deal with Mobil Producing Nigeria, a local subsidiary of ExxonMobil.

“With many other countries extending efforts to ramp up their oil and gas production and reserves, Nigeria has struggled to achieve FID on some of its biggest idle oil assets,” Ola Alokolaro, Partner Energy and Infrastructure at Advocaat Law Practice said.

For instance, an Owowo oil reserve field discovered in October 2012 by United States’ oil giant, ExxonMobil Corporation, with about one billion barrels of oil in the Owowo field, offshore Nigeria, capable of spinning whooping oil revenue has remained docile without FID.

According to energy experts, the field would have boosted Nigeria’s effort in increasing her crude oil reserves from the current 36 billion barrels to 40 billion barrels target, which was set for 2010 but could not be achieved as a result of lack of investment in exploratory activities.

Other docile assets include Chevron’s Nsiko 100,000 barrels per day (bpd) offshore deepwater project, ExxonMobil’s Uge 110,000bpd deepwater project; Satellite Field Development Phase 2 project belonging to ExxonMobil; Bosi 80,000bpd crude oil offshore deepwater; Eni’s 120,000bpd Zabazaba-Etan offshore deepwater project.

Others are Bonga Southwest and Aparo 2250, 000bpd operated by Shell Nigeria Exploration and Production Company, SNEPCo & Exxonmobil; Total’s Egina 200,000bpd offshore deepwater project and Shell/Exxonmobil Bonga North 100,000bpd offshore deepwater project.