• Saturday, May 18, 2024
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How to reverse Nigeria’s oil production decline

How oil receipts declined from $3bn to zero

Ten years ago, Nigeria boasted of the capacity to produce 2 million barrels of oil per day, today it is struggling to keep output at 1.2million bpd having fallen behind Angola for two straight months. A strategic plan will now be required to reverse this trend, experts say.

With the world’s eleventh biggest proven oil reserves, Nigeria’s 37 billion barrels proven reserves account for 2.1 percent of global capacity but the country’s challenge is the “ability to turn the resources to production and cash,” said Osten Olorunsola, Chairman, Energy Institute Nigeria in remarks at CPI Petroleum Policy Roundtable which held in Lagos on July 15.

To reverse the declining production, Olorunsola said urgent actions must be taken to protect and maximise value from existing production capacity.

Nigeria loses an estimated 200,000 barrels per day output yearly on crude theft which experts say is now at an industrial scale. Local producers report losing over 90 percent of their production to thieves and many have implemented costly options to evacuate their crude including using barges which raised their production cost.

Olorunsola who once led Nigeria’s regulatory department recommended six strategic actions to reverse the declining oil production.

One key action recommended is assuring the integrity of assets for unrestricted evacuation of oil. These include pipelines and facilities upgrades, and backups even if they prove costly.

Next is to arrest the natural decline of production facilities including secondary and tertiary recovery methods, target bypassed oils cheaply, and upgrade obsolete surface facilities.

The next action is to secure crude oil receiving plants for domestic refining this includes fixing refineries or selling them off to those who will better manage them and encouraging investments into modular refineries through policy.

Read also: Why oil operators in Niger Delta are guilty of human right abuses, by Peterside

Another policy recommendation is to reconfigure the architecture and framework of the overall evacuation system and bring it up to date with necessary requirements.

Further actions include strengthening surveillance both kinetic and technology to eliminate industrial-scale theft, sabotage, vandalization and environmental devastation and ensure the host community’s Inclusiveness which will guarantee that the provisions of the Petroleum Industry Act are implemented.

To reverse fallen oil production, the sector must restore good field practice and due diligence in a fit-for-purpose manner. This will return the sector to proper processes including licensing rounds, seismic activity, exploration drilling, appraisal drilling before field development, and production operations.

He said there must be plans to bring new oil on stream through effective management of petroleum resources, grow reserves and implement the PIA, effect refinements promptly where necessary, change the reserves depletion strategy; progressively bring on new and more oil which will require structural policy shifts guided by disruptive initiatives; not business as usual.

Nigeria’s oil production fell over the last 10 years as a consequence of policy, legislative uncertainties, and a complex environment. Nigeria’s declining oil production has also been affected by the external environment which occurred during the prolonged “embargo” on new capital injections for replacements and growth.

Nigeria’s oil production decline was impacted by the abandonment of good field practices by the industry, huge skills, and competency gaps, and exit by big oil companies.