Nigeria is far from attaining its full potential in the oil and gas industry as the country’s proven oil reserves are not rising to replace oil being pumped daily despite a current quest by some war-torn countries to supply more crude oil.
Despite two Gulf wars and United States’ sanctions, the Organisation of Petroleum Exporting Countries’ (OPEC) two top crude producers, Iraq and Iran are not only boosting oil production, they are also increasing reserves and developing more oil wells, while Nigeria continues to dilly- dally.
Data gleaned from British Petroleum (BP) Statistical Review of World Energy 2021 showed Iran, Iraq and Libya recorded better performance compared to Africa’s biggest oil-producing country, regarding reserves replacement ratio, an index which measures how many new barrels come in to replace the ones pumped out.
“Nigeria has one of the lowest reserve replacement ratios because it’s unable to obstruct its petroleum sector from political interference while other countries are deliberately building structures that obstruct externalities from their energy sector,” Charles Akinbobola, energy analyst at Lagos based Sofidam Capital said.
For instance, Libya boasts of a reserve replacement ratio of 339.2, Iran recorded a replacement ratio of 139.8 while Iraq recorded a reserve replacement of 96.3, despite internal turmoil that has killed thousands and destroyed towns in the three respective countries.
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The BP report also showed Libya has increased oil reserves from 47.1 billion barrels in 2010 to 48.4 billion barrels as of 2020, Iran increased oil reserves from 151.2 billion in 2010 to 157.8 billion in 2020 while Iraq also increased reserves from 115 billion barrels in 2010 to 145 billion barrels in 2020.
For Nigeria, the storyline is different. Data from BP’s Statistical report showed the country’s oil reserves and daily production has declined by 543 million barrels and 500,000 barrel production per day (bpd), respectively.
Further findings also showed Nigeria’s reserve replacement ratio stood at 56.1 while oil reserve decreased from 37.2 billion barrels in 2010 to 36.9 billion barrels in 2020.
Declining investments in fossil fuels meant most IOCs cut back on exploration activities which added further woes to Nigeria’s replacement ratio,” Akinbobola said.
A 10-year target set by the Federal Government to boost crude oil reserves to 40 billion barrels and daily production to four million by 2020 was unrealistic as analysts say corruption and government shenanigans have decreased growth in the sector.
The decline has been attributed to the fact that little or no significant investment has been recorded in oil exploration in the last five years and the number of wells drilled has also been on the decline since 2006.
“Nigeria needs to boost the trust deficit between regulators and investors,” Abayomi Fawehinmi an oil expert in a Lagos based oil firm said.
While Nigeria continues to struggle, Iran said the country could “easily” boost its oil production capacity to 6.5 million bpd, according to Iran’s Oil Minister Bijan Zanganeh, as US, Iranian and European negotiators are set to convene this week for more talks over reinstating the nuclear deal.
“We can easily reach 6.5 million barrels per day,” Zanganeh said at a ceremony to award studies on the country’s giant Azadegan oil field, the oil ministry’s Shana news service reported.
At the ceremony, Ali Aghamohammadi, who is a member of Iran’s arbitration body Expediency Council, noted that Iran has long-term goals of using more crude output domestically for refined products, which in turn can be exported at higher margins.
Iraq, OPEC’s second-largest producer, is also in talks with the international oil majors such as Exxon Mobil, Lukoil and Italy’s Eni operating in the country to help boost its crude production capacity by 60 per cent to about 8 million barrels per day, in the next six year.
“There is a new discussion with all our IOC partners to optimise the production to about 8 million bpd by end-2027,” the country’s oil minister Ihsan Ismail said on Wednesday.
In contrast, Nigeria’s oil industry woes which first became an issue 10 years ago, are worsening and investment fleeing, amidst persistent poor management by government officials supervising the industry.
The industry has never witnessed the spate of divestment as it has seen in the last four years, as the IOCs sell down in Nigeria and move their capital elsewhere.
Following the signing of the Petroleum Industry Bill by President Muhammadu Buhari, Fitch Solutions Country Risk & Industry Research said attracting new oil and gas investment to Nigeria over other destinations is likely to be a race as decarbonisation efforts divert more capital to alternative energy and high margin barrels.
