Stakeholders in Nigeria’s oil and gas industry say that given certain conditions, the country can attain the production of three million barrels per day of crude oil and 10 billion standard cubic feet of gas by 2020.
The conditions are the reduction of contracting circle, using the Nigeria LNG model for the joint ventures(JV), funding the JVs properly and on time, settling cash call arrears, reducing security risks, and ensuring that oil companies are fair, friendly and supportive of their host communities.
The stakeholders who spoke at the Petroleum Technology Association of Nigeria (PETAN) organised panel session, titled “The Nigeria Oil and Gas industry: Current Realities ,Exciting and Opportunities” at the ongoing Offshore Technology Conference (OTC) in Houston Texas, U.S.A, said if the listed issues are properly addressed, the country would be able reduce the cost of production by about 40 per cent in the next five years.
Already, Nigeria’s production through joint venture operations has dropped by 45 per cent, as it has moved from 2.2 million barrels per day to 1.2million barrels, on account of the listed challenges, the stakeholders observed.
Austin Avuru, managing director, SEPLAT Petroleum Development Company Plc, stated that production from the JVs has declined rapidly from 2.2million barrels per day (bpd) to 1.2million bpd due to poor JV funding.
Avuru further said the only reason the country is still doing 2.2millions barrels per day (bpd) is because of deepwater production which is bridging the gap. He added that in the next five years, the country’s deepwater production would also be declining and the real impact of poor funding of the JVs would start to manifest, and that then, the country’s production could decline to about 1.6million bpd. “So we must begin to address the challenges by doing the right things,” he said.
Avuru urged government to design a structure which will give each JV sufficient operational and financial independence.
“JV today is a producing venture and if the minority is able to fund its shared operation from its revenue, why wouldn’t the majority party be able to do same? The structure of the JV and the JV agreement allows for self-funding mechanisms”, he said.
He observed that once their budget is approved for the year, it would require no new legislation, other than for the minister and the group managing director of the NNPC to have the courage and allow the JV to have self-funding autonomy”.
“If you borrow for a contract and you have to wait for two years to get approval, the interest rates would have added to the cost. If these challenges can be addressed, we will reduce cost by 40 per cent in the next five years,” he said.
Also speaking at the event, Ademola Adeyemi-Bero, managing director and chief executive of First E and P, said government should see gas supply in the country as a game changer and that there is urgent need for the country to refocus the operational environment, so that it can be more competitive.
He said: “We need to change our attitude towards investment by creating an enabling environment”.
He further observed that a new JV operating framework can deliver three millions barrels to the country and 10 billion scf/day of gas by 2020.
But the country must change its current style of doing business, he said. This would help drive down production unit cost in the oil and gas industry.
Bank-Anthony Okorofor, chairman Petroleum Technology Association of Nigeria (PETAN) said Nigerian companies must take the lead for investment purposes.
He noted that opportunities abound for local companies to take advantage of the prospects in the industry and that the country needs to construct about 7,000 kilometres of pipelines, just as about 25,000 tons of fabrications would be required annually, by the industry.
PETAN is ready to collaborate with the international oil companies IOCs and other stakeholders to make things happen, he said.
Olusola Bello
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