• Monday, July 15, 2024
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Millions of dollars down the drain, oil in the north remains elusive

oil

After three decades of the elusive search for hydrocarbons in the Lake Chad Basin where the Federal Government spent about N149.4 billion, in the seismic expedition, yet the state-run energy company is giving it another shot in 2021, but this time around the world is racing away from oil and the government is broke.

In a move most experts regard as a poor investment decision and lack of understanding of the future of oil, Nigerian National Petroleum Corporation (NNPC) is aggressively searching for new oil deposits to achieve its target of raising the nation’s oil reserve to 40 billion barrels by 2025.

NNPC’s insatiable quest of finding oil in the north is built on a certain premise that the country is sitting on a huge natural resource in the Chad Basin, which is adjacent to the Niger Republic, a country already exploring crude oil.

“In NNPC, we’ve continued to make giant strides in inland rift basin exploration. Our sustained quest is informed by the matured and the practical discoveries of commercial quantities of hydrocarbons in neighbouring Niger and Chad,” said Mele Kyari, NNPC’s Group Managing Director, while delivering a keynote address at this year’s 56th Nigerian Mining & Geosciences Society (NMGS) Conference.

Believed to be President Muhammadu Buhari’s pet project considering that he started the agitation over 40 years ago, this journey is costing Nigeria millions of dollars despite the warning by petroleum engineers, investment experts and geologists who insist on the geography of the zone may not guarantee a commercial find.

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 after he assumed office on May 29, 2015.

“Hydrocarbons have provided a majority of the world’s energy for centuries, and that path is not going to change all of a sudden,” Timipre Sylva, Nigeria’s minister of state for Petroleum Resources said at this year’s Nigeria International Petroleum Summit (NIPS) in Abuja.

Read Also: Big business, low profile: opaque oil contracts keeping Nigerians hooked on cheap petrol

Apart from the discovery of non-commercial hydrocarbon deposits in the Kolmani River II Well, on the Upper Benue Trough, Gongola Basin, about 23 other wells drilled in the Nigerian sector of the Chad Basin were all reported dry.

This wild goose chase has gulped about N149.4billion since its inception, this amount is exclusive of the $340 million, and an additional N27 billion committed by the Federal Government in seismic expedition since the beginning of the search for oil in the new frontier.

Even if commercial hydrocarbon deposit is discovered, those who are conversant with investments in the sector say the NNPC’s plan to resume exploratory activities in the Chad Basin would seriously be hampered by economies of scale projections, insecurity and the unwillingness of oil companies to drill outside the Niger Delta with already proven reserves.

“If you do the cost-benefit analysis, you can see that it is not viable in the short and medium-term,” said Henry Boise, Petroleum Economics, Management and Policy Researcher at Emerald Institute for Petroleum and Energy Economics, Policy Strategy, University of Port Harcourt.

His views were equally supported by the publisher of Africa Oil and Gas Report, a magazine focusing on the petroleum sector, Toyin Akinosho, who warned against the wasteful involvement of NNPC in the presumed search for oil prospects in the Chad Basin.

The publisher who is also a geologist with several years of working experience with Chevron said though the IOCs were not interested in getting involved in exploration activities in that region, they prefer to concentrate their energy and resources in deepwater operations, having gradually moved out of onshore prospects as a result of attendant security challenges.

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 mature.

Niyi Awodeyi, CEO at Subterra Energy Resources Limited, said that 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 a task?” Awodeyi asked.

Other stakeholders have questioned why the government keeps spending money it does not have instead of creating a favourable investment climate to attract investors who can easily explore or invest in cleaner sources of energy, which will reduce the country’s risk to crude oil.

For instance, at a time Nigeria was on a lengthy but still fruitless search for oil in the country’s Lake Chad Basin, Saudi Arabia, the world’s biggest oil-producing country, announced it was no longer an oil-producing country.

“Saudi Arabia is no longer an oil country, it’s an energy-producing country,” Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told S&P Global Platts.

He added, “I urge the world to accept this as a reality. We are going to be winners of high green ambitions that include gas production, renewables, and hydrogen.”

Saudi Arabia is implementing Vision 2030, which aims at transforming the kingdom from oil dependence to build a sustainable economy.

Unlike Nigeria, which is yet to fully maximise its current oil production, Saudi Arabia plans to take full benefit from current higher oil prices which will fund its shift to new energy, as Riyadh seeks to finance green energy projects from oil sales.

The OPEC kingpin is also planning to generate 50percent of its energy from renewables by 2030, in part to reduce its dependence on oil. In 2017, renewables made up just 0.02percent of the overall energy share in Saudi Arabia.

Also, NNPC’s quest for more oil exploration is also coming at a time traditional oil investors and big oil companies are coming under a plethora of attacks from all directions, ranging from uncooperative financiers and investors amidst a global shift to renewable energy to hostile governments and hardline climate activists.

Already, the New York State’s pension fund, one of the world’s largest investors with $226billion in assets, said it will drop many of its fossil fuel stocks in the next five years and sell its shares in other companies that contribute to global warming by 2040.

Also, Norway’s $1.3 trillion sovereign wealth fund – the largest in the world – announced it is funnelling money into clean energy projects as part of diversification away from bonds, equities and real estate amid a global push to fight climate change.

Despite the global gospel to shift away from fossil fuel, Nigeria has over time remained stuck in the oil era. The country relies on crude oil sales for around 90 percent of its foreign exchange earnings and more than half of government revenue.

Currently, the nation’s economy is choked as data from the Debt Management Office (DMO) revealed the country has a total debt of N33.1 trillion as at March 31 2021. The country’s refineries are in 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 the unemployment figure settles at 23 million people.

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 said in its publication ‘Nigeria: Looking beyond Oil’.

Support for this report was provided by the Premium Times Centre for Investigative Journalism (PTCIJ) through its Natural Resource and Extractive Programme.