At a time when major oil producing countries are preparing for life beyond oil, Nigeria’s optimism in oil exploration at the Chad basin or Gongola basin has been seen as a poor investment decision and lack of understanding of the future of oil.
After about 40 years, the Nigerian National Petroleum Corporation (NNPC) returned to the search for oil in the North in February 2019, a decision which has generated debate concerning viability of the search, primarily championed by President Muhammadu Buhari.
“Our next level is to ensure exploration effort in all our frontier Basins of Lake Chad, Gongola, Anambra, Sokoto, Dahomey, and Bida Basins, as well as Benue Trough are intensified to usher in more prospects in Nigeria,” Buhari said in February at the inauguration of oil drilling at the border village between Gombe and Bauchi States.
Some stakeholders in the petroleum sector believe that the country is sitting on a huge natural resource like hydrocarbon which NNPC can explore by law, especially as the future of oil goes bleak and the country seeks to grow reserves and daily production.
Other stakeholders have questioned why the government keeps spending money it doesn’t have instead of creating a favourable investment climate to attract investors who can easily explore or invest in cleaner source of energy which will reduce the country’s risk to crude oil.
A geologist who said he was part of the team that explored the Sokoto Basin years ago described the whole exercise as a wild goose chase. According to him, the frontier basins are too shallow and not matured.
Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER), said by every economic consideration, NNPC’s oil exploration is purely a political exploration as no economic consideration will allow loss-making companies like NNPC to focus on oil.
“Nigeria is not maximising its present oil wells, so why would NNPC spend money on oil exploration when they can simply create an investment environment that will allow International Oil Companies (IOC) to perform such task?” Henry asked.
He said other state-owned oil companies like Saudi Aramco and Norway’s Equinor are looking at life beyond oil.
“So what’s NNPC’s understanding on the future of oil?” he queried.
Ode Ojewu, a Nigerian economics professor and a former chief executive of the National Planning Commission, said oil exploration is a risk that can either be successful or unsuccessful depending on how successful the drilling plan was.
The NNPC has failed to announce results of drilling activities at the spud-in of Kolmani River-II Well in Gongola Basin of Upper Benue Trough which President Buhari started early this year.
Maikanti Baru, group managing director of NNPC who leaves office July 8, had said the outcome would be announced in 60 days after activities began on February 2, but the drilling has lingered for over 140 days. Recall that President Buhari, last week, appointed Mele Kyari to replace Baru as NNPC’s GMD.
Speaking during the commencement of work on the facility, Baru had said, “This well is designed to be 14,500 feet. We are looking at about 60 to 70 days to be able to reach our target depth. This rig is modern and we are ready to go deeper.”
Wumi Iledare, National Petroleum Professorial Chair in Oil and Gas Economics at the University of Cape Coast’s Institute for Oil and Gas Studies, Ghana, believes at this phase oil business should be reserved for investors with high-risk profile and a large portfolio of assets to absorb failure.
“I hope we are not chasing the wind even with highly expensive modern technology,” he said.
Currently, the nation’s economy is choked as data from Debt Management Office (DMO) revealed the country has a total debt of N24.3 trillion. The country’s refineries are in a shambles, needing a subsidy, which deprived the economy of N10 trillion between 2006 and 2018, according to BudgIT.
These and other developments have pushed the number of extremely poor Nigerians to 91 million, while unemployment figure settles at 20.9 million.
Buhari had kick-started the drilling activities at the Gongola Basin as part of efforts to boost the nation’s oil reserves to 40 billion and a daily production of 3 million barrels.
The president, who has been resolute on the possibilities of oil discoveries in the North since he was petroleum commissioner over 40 years ago, gave NNPC a marching order to explore hydrocarbon deposits across the federation immediately he assumed office on May 29, 2015.
Buhari had insisted that the need to explore oil in the frontier inland basins remained a national priority that must be sustained for the country’s economic benefits, adding that oil and gas were critical to Nigeria’s economy of today and the future.
But analysts believe this is the time for the country to look beyond oil.
“Nigeria needs to ensure sustainable fiscal management that is resilient to global oil price cycles. Improving tax collection and administration have become imperative for achieving national growth objectives,” PricewaterhouseCoopers (PwC) said in its publication ‘Nigeria: Looking beyond Oil’.
DIPO OLADEHINDE
