In spite of a decline in oil reserves and
increasing competition for investments from other African countries,
Nigeria remains sluggish in attracting new investments estimated at
$100bn needed to grow reserves and production.
Oil
production in Nigeria, Africa’s top producer, has continued to hover
between 1.9 million bpd and 2.3 million bpd in recent years. The country
pumped an average of 2.21 million bpd in the three months to June 2014,
up from 2.11 million bpd in 2013, due to an increase in production,
according to data released by the National Bureau of Statistics early
this month.
The lack of reserves
growth 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.
Oil
wells completed in Nigeria, which include development and exploration
of oil and gas wells, dropped from 124 in 2011 to 107 in 2012, according
to the Organisation of Petroleum Exporting Countries’ annual
statistical bulletin 2013.
Energy
analyst at Ecobank, Mr. Dolapo Oni, in an emailed response to questions
from our correspondent, highlighted some of the implications of the
decline in the country’s oil reserves.
He
said, “We have lesser years of production left. Nigeria currently has
35 billion barrels of oil reserves left. At 2.2 million barrels per day,
this gives us roughly 45 years of production, compared to 53 years
previously when the reserves were at 37.2 billion and production was
2mbpd.”
“More importantly, because
more of our reserves are likely to lie offshore in deep and ultra
deepwater, exploration costs are more expensive. If oil companies are
not given attractive fiscal terms to quickly assess these reserves,
falling oil prices could make them uneconomic in the future.”
Global
oil prices recently fell by 12 per cent to below $100 a barrel.
Nigeria’s benchmark Bonny light crude oil traded at $97.9 per barrel on
September 12, down 14 per cent from $111.9 per barrel in May, according
to data from the Central Bank of Nigeria.
The
Nigerian oil and gas industry is currently being undermined by a poor
investment climate, a situation which industry analysts have attributed
largely to the non-passage of the Petroleum Industry Bill.
“Nigeria
needs $100bn investment to achieve four million barrels per day of oil
production,” the General Manager, Development, Shell Petroleum
Development Company, Mr. Bayo Ojulari, said at a recent conference in
Lagos, adding that a balanced PIB could be an enabler to funding, as
billions of dollars investments were awaiting the passage of the bill.
International
oil companies under the aegis of the Oil Producers Trade Section of the
Lagos Chamber of Commerce and Industry recently said that Nigeria’s
deepwater had the potential to generate $66bn in investments up to 2025,
contributing additional 900,000 barrels of oil equivalent per day
production in 2020 to offset natural decline.
The
country has in recent times seen a decline in revenue from the industry
as crude oil theft and pipeline sabotage continue to hold sway in the
oil-producing areas of the country.
Oil
accounts for more than 80 per cent of the country’s revenue, and the
decline in oil export revenue in August saw the total revenue fell to
N601.6bn from N630.3bn in July. Oil revenue declined to N481.3bn in
August from N483.5bn in July due to disruptions to crude production and a
force majeure declared by Shell, according to the Finance ministry.
“The
implication of not growing our oil reserves is obvious. We may soon
become a net importer of oil for our domestic needs apart from losing
oil revenue,” said the Executive Vice Chairman, Terra Energy Services
Nigeria Limited, Mr. Akin Adetunji.
Industry
analysts have continued to stress the need for Nigeria to create an
enabling environment for investors to invest in the country’s oil
industry, urging the National Assembly to expedite action towards the
passage of the PIB, which is expected to overhaul the industry.