• Sunday, May 26, 2024
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BusinessDay

Nigeria @ 54: From Oloibiri…

From Oloibiri, Bayelsa State, in the Niger Delta in 1956, oil was discovered in Nigeria and after several years and an investment of over N30 million by Shell D’Arcy, the first commercial discovery production commenced in 1958 with 5,100 barrels per day (bpd) from the first oil field onshore. By the late sixties and early seventies, Nigeria had attained a production level of over 2 million barrels of crude oil a day. Although production figures dropped in the eighties due to economic slump, 2004 saw a total rejuvenation of oil production to a record level of 2.5 million barrels per day. Nigeria thereafter, attained the status of a major oil producer, ranking 7th in the world in 1972, and has since grown to become the sixth largest oil producing country in the world.

At the time of oil discovery, Shell D’Arcy was the sole concessionaire. After 1960, exploration rights in onshore and offshore areas adjoining the Niger Delta were extended to other foreign companies.

By 1971, Nigeria joined the Organisation of Petroleum Exporting Countries (OPEC) and established the Nigerian National Petroleum Company (NNPC) in 1977; a national oil company and also a major player in both the upstream and downstream sectors.

Ever since oil was discovered in Nigeria, petroleum production and export play a dominant role in Nigeria’s economy and account for about 90 percent of her gross earnings.

Proven reserves remain stagnant

A 2003 estimate showed recoverable crude oil reserves at 34 billion barrels. The reserve base is expected to increase due to additional exploration and appraisal drilling. Already, over 900 million barrels of crude oil of recoverable reserves have been identified. The government set a target to achieve a reserve of 40 billion barrels by 2010 but the reserves have so far remained stagnant.

Gas flaring persist

Nigeria has an estimated 180 trillion cubic feet (Tcf) of proven natural gas reserves, giving the country one of the top ten natural gas endowments in the world. Due to a lack of utilization infrastructure, Nigeria still flares about 40 percent of the natural gas it produces and re-injects 12 percent to enhance oil recovery. Official Nigerian policy is to end gas flaring completely by 2008 has fallen flat despite continuous shifting of the goal post. The World Bank estimates that Nigeria accounts for 12.5 percent of the world’s total gas flaring. However, the new industry strategy is to collect the associated gas and process it into liquefied natural gas (LNG), greatly enhancing Nigerian natural gas revenues while simultaneously reducing carbon dioxide emissions.

The Nigerian LNG project being implemented in phases with an initial production from two trains is at train six at present with final investment decision being awaited for the train 7 project. Uncertainties remain the bane of the other two LNG projects; Brass LNG and OKLNG.

Downstream remain a lingering sore

At present, Nigeria has four refineries, with a combined installed refining capacity of 445,000 barrels per day (bpd). The four refineries are; the first Port Harcourt Refinery was commissioned in 1965 with an installed capacity of 35,000 bpd and later expanded to 60,000 bpd; the Warri refinery was commissioned in 1978 with an installed refining capacity 100,000 bpd, and upgraded to 125,000 bpd in 1986; Kaduna refinery was commissioned in 1980 with an installed refining capacity of 100,000 bpd, and upgraded to 110,000 bpd in 1986 and the second Port Harcourt refinery was commissioned in1989 with 150,000 bpd processing capacity, and designed to fulfil the dual role of supplying the domestic market and exporting its surplus.

The combined capacities of these refineries exceed the domestic consumption of refined products, chief of which is premium motor spirit (gasoline), whose demand is estimated at 33 million litres daily. The refineries are however, operating far below their installed capacities, as they were more or less abandoned during the military era, skipping the routine and mandatory turnaround maintenance that made products importation inevitable. Importation notwithstanding, there have been persistent product shortages that gave strength to the argument for deregulation of the downstream oil subsector and totally removal of subsidy on petroleum products in Nigeria.

Oil theft poses real threat

According to Chatham House, Nigeria lost at least 100,000 barrels of oil per day (b/d), about five per cent of Nigeria’s total output in the first quarter of 2013, to theft from its onshore and swamp operations alone. This figure does not include what may happen at export terminals.  Chatham House identified the United States of America, West Africa – some of Nigeria’s neighbours in the Gulf of Guinea, Brazil, China, Singapore, Thailand, Indonesia, Ukraine, Kosovo, Bulgaria, Romania and Greece, as possible recipients of Nigeria’s stolen crude.

Frank Uzuegbunam