It is often said that the stone age did not come to an end due to a lack of stones, in the case of crude oil, neither peak demand nor depleted reserves looks to herald its end, but a dearth of investment dollars.
According to a Rystad Energy analysis, the proven oil and gas reserves of some of the world’s biggest oil companies are falling at an alarming rate, as produced volumes are not being fully replaced with new discoveries.
It is estimated that the remaining proven reserves are set to be produced in less than 15 years, hence oil companies need to add proven volumes by new commercial discoveries – or revisions of existing ones – to keep a balance.
“The task is becoming more and more challenging as investments in exploration shrink and success rates slump. The declining proven reserves could create serious challenges for Big Oil to maintain stable production levels in coming years, “ the analysts say.
The implication of this for Nigeria and other African oil producers is alarming.
Some of the biggest oil and gas projects awaiting final investment decisions hang in the balance as shareholders of oil companies rebel against proposals to invest in more oil developments and European governments and think tanks are in a hurry to start off the energy transition.
Africa holds about 125billion reserves of crude oil, according to data by analytics firm Statista, but accounts for only 4 percent of global oil production.
The continent has some of the world’s poorest people and uses the least energy accounting also for the least environmental pollution.
But its poor economies, limited technical know-how coupled with troubled governments make it dependent on big oil companies to exploit its huge untapped natural resources.
For example, some of the biggest oil and gas projects on the continent are largely financed by the IOCs, and when they pull out these deals usually fall apart.
In April this year, French energy giant Total announced suspension of work on a $20 billion gas project in northern Mozambique following attacks by jihadist on a nearby town.
“Considering the evolution of the security situation… Total confirms the withdrawal of all Mozambique LNG (Liquefied Natural Gas) project personnel from the Afungi site,” the company said in a statement.
The construction works on the $30billion liquefied natural gas (LNG) project in Tanzania has a 2023 start date because talks have resumed with Norwegian oil giant, Equinor.
In Nigeria, several oil and gas projects including the 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko deepwater project; 1billion barrel Owowo field development await final investment decisions based on the whims and caprices of Big Oil.
A recent report from the International Energy Agency (IEA) notes that global investment in energy is set to rebound by nearly 10 percent in 2021 to $1.9 trillion, reversing most of last year’s drop caused by the COVID-19 pandemic.
2021 is on course to be the sixth year in a row that investment in the power sector exceeds that in traditional oil and gas supply, according to the World Energy Investment 2021 report.
But global power sector investment, which is set to increase by around 5 percent in 2021 to more than $820 billion, its highest ever level, after staying flat in 2020, will go to renewables.
This will only increase. “Much greater resources have to be mobilised and directed to clean energy technologies to put the world on track to reach net-zero emissions by 2050. Based on our new Net Zero Roadmap, clean energy investment will need to triple by 2030,” says Faith Birol, the IEA’s executive director.
However, upstream oil and gas investment is expected to rise by about 10 percent in 2021, as companies recover financially from the shock of 2020, but their spending remains well below pre-crisis levels, the IEA says.
So, oil majors would prioritise projects in countries with the least challenges. Nigeria with its high regulatory and fiscal risks would need to keep the pace of current reforms, tackle insecurity and rein host communities if it hopes to attract dwindling investment dollars.
