A Review of the Nigerian Energy Industry

DPR warns of depleting oil reserves

Offshore-drilling-rig20 March 2014, Lagos – The Department of Petroleum Resources has warned the Federal Government, oil and gas stakeholders as well as Nigerians that the country’s oil reserves are dropping. It, therefore, asked that something urgent must be done to reverse the ugly situation.

The Director, DPR, Mr. George Osahon, during a presentation at the ongoing Nigerian Oil & Gas Conference in Abuja, on Wednesday, said the country’s oil reserves had depleted to 35 billion barrels.

He said that the Niger Delta region was finally showing signs of maturity.

He said, “What we now have in our reserves are now 35 billion barrels. Niger Delta is finally showing signs of maturity as its reserves are beginning to drop and I think everybody must be worried about this.”

According to Osahon, the country needs to boost exploration to augment the dwindling reserves.

He said, “Oil reserves are dropping; our output is dropping too. What are we supposed to do to correct this? And the only way is exploration, exploration and exploration. We started with 2D seismic; now we are at the 3D seismic. Already, 1,300 exploration wells have been drilled so far.

“We need to do more in this regard to have more reserves. We have reached the plateau of production in the Niger Delta and we are already going down. “A lot of money has to be spent to increase our reserves at the old fields. For instance, exploration in the Chad basin.  Because we have not found anything at the Chad basin as at today does not mean that oil is not in the basin. We are optimistic about this. We are sure it would help us to boost our reserves.”

Osahon recommended that the country must do everything to increase its reserves, saying more seismic data coverage and drilling of exploration wells must be done.

“We have come up with strategies to boost our reserves and in due course, we would make this known,” he said.

There is no doubt that the government wants an oil and gas industry that will continue to meet oil production targets by increasing proven oil reserves as well as encouraging increased participation by indigenous exploration and production companies.

In 2003, this aspiration culminated in the award of 24 marginal field licences as part of the government’s quest to ensure rapid involvement of Nigerian companies in the nation’s crude oil exploration and production, and the award of a total of 77 oil blocks through three bid rounds in 2005, 2006 and 2007. However, only eight out of the 24 awarded marginal field licences have been able to go into full scale production 10 years after being licensed.

Also, of all the 77 oil blocks awarded between 2005 and 2007, only one has gone into production while less than 30 per cent of the remaining 76 are actively working.

This, according to  Osahon, has made it impossible for the Federal Government to grow its declining crude oil reserve base.

He said, “Of the 24 marginal fields awarded in 2003, only eight are into production, with additional four getting close to starting full production. Also, of the 77 oil blocks awarded between 2005 and 2007, it is only one that is producing and it is being operated by a foreign firm, while the ones awarded to indigenous operators have yet to commence production.”

The DPR boss identified lack of access to finance, high taxes, community issues, technical competence, fluctuating assistance from foreign equity partners and low funding capacity of indigenous players as some of the challenges facing the marginal field operators in the country.


– Dayo Oketola, The Punch

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