• Monday, July 22, 2024
businessday logo

BusinessDay

Nigeria has over $163bn worth of oil, gas projects lying fallow

oil and gas projects

There are over $163billion worth of oil and gas projects lying fallow waiting for financing, government approval or some other trigger to bring them alive, says Gbolahun Elias, a senior oil and gas lawyer in Nigeria.

At a presentation made at the Centre for Petroleum Information (CPI). Elias who has handled several projects in the oil and gas sector said the value of the projects unable to come on stream is six times the value of Nigeria’s Federal budget.

“These projects are just sitting down there, not generating jobs, foreign currency and just sitting there. The potential value to the economy is huge if they are developed,” said Elias.

Meanwhile, Nigeria’s loss in terms of new projects is ceding the inflow of new investments dollars to smaller African countries. Operators say that Mozambique with…. has seen over $30bn in new investments in the past three years while Nigeria has only managed less than 10 percent of these investments.

“It is also possible that why these investments are going to these smaller African countries is that they are yet to plug gaps in their laws that allow the International Oil Companies to exploit them, when they catch on perhaps they will also make their laws more competitive,” said an senior level executive in an oil company in Nigeria.

Nigeria’s PSCs for example granted generous concessions to foreign companies gifting them zero royalty rates in drilling above 1000 square meters, one of the most genereous rates in the world. the Nigerian government also did not activitate a provision its PSC that allows for increase in royalties when prices soar above $20 per barrel.

The country now wants to recoup these loss by imposing a $62billion demand on IOCs. The government has also amended fiscal terms of these PSCs and the investments have dried.

Worse still the International oil companies are selling down their stake in some of their fields in Nigeria. Energy giant Chevron has launched the sale of its stakes in two Nigerian offshore oil and gas blocks, according to a Reuters report. The company seeks to dispose of aging assets to focus on its fast-growing production in the United States.

A Chevron spokesman confirmed the sale process. California-based Chevron is offering its 40 percent stake in the shallow-water Oil Mining Lease (OML) 86 and OML 88, which produce approximately 6,200 barrels of oil equivalent per day, the document says.

The sale is also part of a broader retreat by international oil companies from Nigerian oil and gas fields that have been plagued by pipeline theft as well as uncertainty over the West African country’s tax regime.

OML 86 and 88 contain 55 million barrels of yet-to-be exploited oil barrels and 79.3 billion cubic metres (2.8 trillion cubic feet) of undeveloped gas reserves, the document said.

Foreign oil companies including Chevron, Royal Dutch Shell and Exxon Mobil have retreated in recent years from onshore and shallow-water production in Nigeria due to oil theft, selling assets mostly to local companies.