Anxiety over Nigeria’s lack of new oil investments as reserves shrink

Stakeholders in Nigeria’s oil and gas industry are expressing concern over the lack of new investments in exploration in the past ten years, as the country is depleting her reserves and making no efforts to develop new fields.

Nigeria’s rig deployment fell to five this week, from 19 in 2012 (Angola, Africa’s largest crude oil producer deployed 19) indicating that any hope for reserve addition in the short-term will be a mirage. As exploration and production dip, the 2.2 million barrels per day projection on which the 2016 budget is anchored and the nation’s  ambition to achieve 40 billion reserves by 2020 looks illusory.

Also, multi-million dollar oil exploration projects in the country’s  North-East have been suspended due to insecurity, occasioned by almost a decade of armed rebellion by Boko Haram insurgents, a fundamentalist Islamist terror group.

Against this backdrop, a new study by Rystad Energy, an independent oil and gas consulting services and business intelligence data firm , which estimates that total global oil reserves now stand at 2,092 billion barrels, or 70 times the current production rate of about 30 billion barrels of crude oil, is resurfacing old worries about Nigeria’s lack of upstream investments.

The study also states that the US now holds more recoverable oil reserves than both Saudi Arabia and Russia, largely in unconventional shale oil. It also states that Nigeria’s most likely estimate for existing fields, discoveries and yet undiscovered fields amount to 30 billion barrels.

“This data confirms that there is a relatively limited amount of recoverable oil left on the planet,” writes Per Magnus Nysveen, head of analysis, Rystad Energy.

However, a source contacted at the Department of Petroleum Resources (DPR) said Nigeria’s proven reserve is close to 30 billion barrels and estimates of unproven reserve is over 30 billion barrels.

While information from the Organisation of Petroleum Exporting Countries, (OPEC) published in 2010 said Nigeria’s proven crude oil reserve is about 37 billion barrels, Nigerian Petroleum Investments and Management Services (NAPIMPS) website, says recoverable reserve is estimated at 28.5 billion barrels.

“There has not been any significant investment in Nigeria’s oil exploration in the past ten years. We are fast depleting our oil reserves and are not trying to explore new fields,” said Isreal Aye, oil and gas consultant and managing partner, SterlingPartnership.

Dauda Garuba, Nigerian Officer for Natural Resource Governance Institute (NRGI) said Nigeria needs to promote transparency, integrity and accountability, through best practices in crude oil term contracts and bidding processes, to curb dwindling upstream investments.

Recently, Ibe Kachikwu, minister of state for petroleum, said the NNPC was committed to exploring for oil and gas in inland basins around the country, especially in the Chad Basin and the Benue Trough but safety concerns have halted operations since 2014.

Kachikwu said NNPC, through its Frontier Exploration Services and Renewable Energy Division (FESRED), had progressed with seismic acquisition activities in the Chad Basin frontier area, up until insurgency necessitated the suspension of operation there.

BusinessDay findings show that eight phases out of the planned twelve-phase project covering 3,550 square kilometers had been acquired by the time that operations were suspended on November 24, 2014.

Also, data for a total of 1,962 square kilometers of the said area have been acquired and processed, while interpretation is currently on-going at about 90 per cent completion, but the drilling activities that were slated to commence by the last quarter of 2016 remain a mirage, according to BusinessDay sources from the NNPC.

Renewed militancy in the Niger Delta has resulted in a loss of N60 billion in three months, according to figures from the NNPC and have discouraged upstream sector investment.

Militants blew up an oil pipeline in Lasukugbene, Bayelsa State, operated by a subsidiary of Italy’s Eni, which operates through Nigerian Agip Oil Company on Thursday, according to a statement from the Nigerian Security and Civil Defence Corps (NSDC).

Industry operators however cheer the move by Aliko Dangote, president of Dangote Group, to build an oil refinery in Lagos at the cost of $12 billion, a fertiliser plant at the cost of $2 billion, and a subsea pipeline at the cost of $3 billion, bringing the total cost to $17 billion.

Dangote on the occasion of the visit of vice president Yemi Osinbajo to inspect his Lagos based project site, stated that $100 million was paid the Lagos State government for a site measuring over 3,000 hectares of land for the establishment of its petrochemical facility.

It has been estimated that upon completion, the gas plant will generate 12,000 megawatts of electricity, an amount more than what the nation currently requires, and the excess energy will be exported to neighbouring countries.

ISAAC ANYAOGU &YANGE IKYAA