Energy sector records modest growth 53 years after

Diezani alison madueke01 October 2013, Lagos – Fifty three years after independence and almost six decades of oil exploration and production, Nigeria, which is currently among the world’s top 10 crude oil exporters still relies heavily on imported refined petroleum products to meet domestic energy needs, writes Chika Amanze-Nwachuku

Nigeria’s first oil field, discovered in Oloibiri, Bayelsa State in 1956 by Shell Darcy, now Shell Petroleum Development Company of Nigeria Limited (SPDC), began production in 1958.

By 1960, when Nigeria got her independence, exploration activities had commenced in earnest as rights in onshore areas had been extended to other foreign oil companies, such as Agip, Chevron and Mobil Producing.

Nigeria has 35 billion barrels of crude oil reserves and a production capacity of three million barrels per day.

In terms of proven gas reserves, the country is currently the world’s seventh largest, but with the estimated undiscovered potential, could easily be within the world’s top three in gas reserves.

With its abundant energy sources -gas, coal, hydropower, solar, wind, etc.- experts argue that, Nigeria alone could provide the electricity needs of all West Africa.

Refined Petrol Deficit
But despite these abundant hydrocarbon resources, the country still could not meet her domestic fuel requirements and at present, imports up to 90 per cent of its refined petrol from foreign countries.

Nigeria’s first oil refinery in Port Harcourt began operations five years after her independence, precisely in 1965. The plant had the capacity to refine 38,000 barrels per day, which was enough to meet domestic requirements at that time.

But the demands of a rapidly growing economy, after the civil war prompted the government to expand the refinery capacity to 60,000 barrels per day.

This however did not meet local demand. Three other refineries were subsequently constructed in Warri, Kaduna and Eleme in Port Harcourt in 1978, 1980, 1989 respectively, which brought Nigeria’s refining capacity to 445,000 barrels per day (bpd).

Despite the demands of the rapidly growing Nigeria’s economy, Nigeria’s refining capacity has remained at the same level for more than two decades and there has not been any addition to the refining capacity in the past 22 years.

At the moment, all the refineries are in poor states, and could only operate at an average capacity utilisation of about 15 per cent. This is despite the billions of dollars allocated yearly for their routine turn around maintenance.

Nigeria’s daily fuel consumption is put at about 35 million litres and current output from the existing refineries is very low. Programmes that would have helped to boost the nation’s refining capacity had suffered series of setbacks.

But hopes that the oil refining business in Nigeria is on the threshold of a significant capacity boost emerged last month, when Africa’s richest man and President of Dangote Industries Limited (DIL), Alhaji Aliko Dangote, announced that his refinery, petrochemical and fertiliser complex in Nigeria, would take off in 2016.

It is expected that the anticipated additional 400,000bpd refining and petrochemical plant, which will produce a variety of refined fuel products from local crude resources, will slash importation of refined petroleum products by 50 per cent.

Crude Output
After decades of oil exploration and production in Nigeria, output still hovers around 2.4 million barrels per day (bpd), and sometimes drops below 2mbpd owing to attacks on oil facilities.

The federal government had, in 2000, set ambitious targets to grow oil production and reserves to four mbpd and 40 billion barrels respectively by 2010, but these targets were not met due to illegal oil activities in the oil-rich Niger Delta, which reduced oil production to all-time low of 1.3mbpd in 2009.

Currently, Nigeria depends on the oil industry for approximately 95 per cent of export earnings and 80 per cent of government revenue. The country aspires to attain the ambitious production and reserves targets by 2020 and also hopes to earn as much revenue from gas as oil by 2020, but there are fears that these set targets might still not be accomplished owing to heightened activities of oil thieves, which have continued to retard the country’s oil output and the economy as a whole.

Without mincing words, oil thieving hampers the amount of barrels of oil available for export and results in lull in investments in theupstream sector of the Nigerian oil and gas industry.

Petroluem Industry Bill
The PIB is an amalgamation of 16 laws that will define and shape the future of Nigeria’s oil sector as well as transform the NNPC into a fully commercialised National Oil Company that will compete favourably with its contemporaries.

The oil industry reform bill, which industry analysts said, was the first authentic step to improve Nigeria’s oil and gas sector in over 57 years of oil exploration, had been in the works for about 13 years.

It was first presented to the sixth assembly in 2008, but efforts to sign it into law had been hampered by what industry experts described as political intrigues and wrangling within the National Assembly and the executive.

Also, the existence of different versions of the bill was said to be the major reason why it could not be passed by the sixth National Assembly.

To fast track the passage of the bill, the Petroleum Minister, Mrs. Diezani Alison-Madeke on January 19, 2012, inaugurated a special Task Force, with a mandate to review the various versions of the bill submitted to the sixth National Assembly and produce a new one that would be presented to the seventh National Assembly for passage.

The new draft bill produced by the Senator Udoma Udo Udoma-led committee was presented to the president in April same year but was submitted to the National Assembly in July.

The bill has again faced fresh hurdles following stiff opposition to some of its provisions, particularly, the proposed fiscal terms by international oil companies.

Other aspects of the bill that have been opposed, include the proposed host community fund, creation of multiple regulatory agencies as well as its provision on the powers of the petroleum minister.

The PIB had been designed to introduce sweeping changes in the oil and gas industry the delay in its passage has resulted in years of investment lull in the sector.

Indigenous Capacity
Also, local participation in the industry has remained low as international oil foreign companies still dominated the upstream end of the Nigerian oil and gas industry.

Prior to the signing into law of the Nigerian Oil and Gas Industry Content Development Bill on April 22, 2010, local participation in the upstream sector was less than 10 per cent, indicating that most white-collar jobs were carried out by foreigners.

Although oil majors, Shell, Chevron, Mobil Producing and Total still account for more about 80 per cent of Nigeria’s crude output, the local content law has no doubt, given the needed teeth to federal government’s aspiration to increase local participation in the oil and gas sector.

But as part of measures to grow in-country upstream capacity in the petroleum industry, the Nigerian Petroleum Development Company (NPDC), the upstream arm of the Nigerian National Petroleum Corporation (NNPC), acquired some oil blocks formerly owned by Shell and its partners, Agip and Total.

The company’s production has increased to about 150,000bpd, from from 65,000bpd and it hopes to meet the 250,000bpd target by 2015.

To grow its production, the NPDC has activated a plan to drill 40 wells in the next five years, with an average of eight wells drilled every year.

Also, the marginal field programme of the federal government is yielding results, as the eight out of the 24 marginal fields awarded to indigenous companies in 2004 are currently producing, while four more are on the verge of coming on stream.

It is predicted that combined crude oil production output of indigenous oil companies and the NPDC could rise to about 400,000 barrels per day by 2016.

– This Day

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