14 March 2014, Houston – Speaking at CERAWeek in Houston recently, Diezani Alison-Madueke, the Minister of Petroleum Resources of Nigeria and the Organization of the Petroleum Exporting Countries (OPEC) alternate president, laid out a global context for energy markets that focused on some of the challenges and uncertainties facing the economies of the world, and particularly those in developing countries.
The Minister noted that more than half of the world’s fossil fuel demand ends up in fuel tanks, thus tying demand to the transportation sector.
A growing need for transportation fuel in China and India will keep a support floor under overall demand, which is expected to rise from 89 million barrels of oil per day (bopd) to 97 million bopd by 2020, and 115 million bopd by 2040, according to the U.S. Energy Information Administration (EIA). However, there are several issues that add uncertainty to long-term projections of world energy markets, including changes in economic growth rates of countries, debt downgrades, population changes, government-driven austerity programs, and other potential issues, Alison-Madueke said.
Outside of North America, tight oil production is expected to contribute only marginally to the global supply of oil, and it is important to developing countries to acquire and exercise the financial discipline necessary to underpin development in industrial sectors to sustain economic growth.
Africa and other oil producing countries in the developing world need to shift from predominantly crude oil production to an integration of oil and gas production that emphasizes the natural resources of the country.
Particular emphasis should be placed on power and industrial sectors and resources that help the economy to grow, and that fuel job growth, Alison-Madueke said.
Technological advances both increase supply and lessen demand, she said, noting that while supply in shale formations will rise on advancing technology, demand will moderate on increased transportation efficiencies, including the growing use of electric and hybrid cars, and vehicles powered by natural gas and fuel cells.
Alison-Madueke expects U.S. and Canadian tight oil production to plateau in the period between 2017 and 2019, based on information from the World Oil Outlook. A plateau in North America will result in the continued dependency in many countries for oil from the Gulf countries and Africa.
Any unrest in the supplying countries will continue to affect global prices. Alison-Madueke said an additional challenge was the issue of theft, kidnapping and piracy, which were becoming the norm for crude oil operations in some regions of the world. Estimates are that each month, pipeline oil theft is as much as $1.5 billion.
In Nigeria alone, oil theft in the past three years has been as high as 100,000 to 300,000 barrels per day (bpd). Enormous environmental risks and damage from spillage add to the costs. Theft and piracy require regional, continental and global coordination to track illegal money from crude oil theft, Alison-Madueke said.
A legal framework that is internationally binding is essential, as is the participation and cooperation of the international energy and financial communities. Measures in Nigeria, such as the Pipeline Right of Way, have been enacted to make access to potential thieves as difficult as possible.
A new horizontal direct drilling system (HDD) has also been introduced which calls for pipelines to be buried further underground, Alison-Madueke said.
“We have made some progress. Of course, as you make progress on one of the trunk lines that is being vandalized, the thieves or the vandals scurry round to another pipeline to sabotage,” she said at an Honorary International Investors Council meeting in London.
At CERAWeek, Alison-Madueke said that a key step in controlling the stolen supply was to work with other countries to dry up the market for the stolen crude oil. “We need to encourage more private participation in the oil and gas sector, rather than the historical majority control by governments in developing countries,” she said.
Finally, Alison-Madueke noted that the population of the whole country needs to benefit from the country’s resources. Currently, a petroleum industry bill in Nigeria was out of ministerial control and in the hands of the national parliament.
The bill was designed to make the industry more transparent and accountable, and it calls for the creation of an independent regulator. The proposed legislation will give investors additional clarity and help promote a more competitive environment, she said. Additionally, Nigeria intends to avoid an overreliance on oil by unlocking natural gas reserves, Alison-Madueke said. That will help the local economy through the development of chemical plants and supply chains to help the money reach more of the country’s population.
*Gene Lockard – Rigzone