A Review of the Nigerian Energy Industry

Nigeria’s offshore rig count reduces by 7

Tower Resources rig22 July 2014, Lagos – Apparently influenced by the diminishing global rig count and the cash crunch being experienced by the Nigerian National Petroleum Corporation, NNPC, in the execution of its joint venture projects, Nigeria’s rig count reduced by seven in June 2014, the International Association of Drilling Contractors, IADC said. 

According to the Chairman of the country’s chapter of IADC, Mr. Sola Falodun, “Reasons are due mostly to budget cuts by (the state hydrocarbon company) NNPC in the second quarter of 2014, due to cash crunch.

“As soon as the cuts were made, companies who operate in Joint Venture, JV, with the NNPC, including Mobil Producing Nigeria, a local subsidiary of ExxonMobil, ENI-owned Nigerian Agip Oil Company, NAOC, as well as SPDC (the largest of the Shell Companies in Nigeria),  reacted by dropping rigs.”

Alodun further said, “The implications of the budget cuts include loss of jobs, negative impact on capacity development, drop in crude and gas production and less than rapid increase in reserves replacement.”

He further said that the IADC is concerned that these factors “will render the goals of Nigerian content initiative ineffective with regard to utilisation of drilling rigs. The situation looks bleak.”

The IADC listed 34 rigs as drilling, cementing, completing, moving from one location to another (rig move), undergoing maintenance, carrying out wireline logging, doing well control, reaming, casing, and even suspended operations. Of these, 11 rigs were cited as drilling, eight were completing, three cementing and casing, and one was logging. The remaining were either on the move, undergoing maintenance or described as suspended operations, but were all included in the 34.

Baker Hughes Incorporated team of analysts had announced that the global rig count for June 2014 was 1,336, down 14 from the 1,350 counted in May 2014, and up three from the 1,333 counted in June 2013.

It also noted that the average United States rig count for June 2014 was 1,861, up two from the 1,859 counted in May 2014, and up 100 from the 1,761 counted in June 2013, while the average Canadian rig count for June 2014 was 240, up 78 from the 162 counted in May 2014, and up 57 from the 183 counted in June 2013.

To compound the grim picture painted by Alodun, the United Nations Conference on Trade and Development, UNCTAD, had stated that the low foreign direct investments, FDIs, being experienced in the country could be attributed to divestments by the International Oil Companies, IOCs.

According to UNCTAD, FDIs into Nigeria reduced from $7.1 billion in 2012 to $5.6 billion in 2013, as a result of divestments by the IOCs.

In its recent World Investment Report 2014, UNCTAD said that Nigeria led West African region’s 14 percent decline within the period, which amounted to $14.2-billion. However, in Southern Africa, flows almost doubled to $13 billion, mainly due to record-high flows to South Africa and Mozambique, where investments in the gas sector played a role.

According to the report, “In Nigeria, uncertainties over the long-awaited Petroleum Industry Bill, PIB and security issues triggered a series of asset disposals from foreign Trans National Companies, TNCs. National champions and other developing-country TNCs are taking over the assets of the retreating TNCs. Examples are two pending mega deals that will see Total (France), and ConocoPhillips (United States), sell their Nigerian assets to Sinopec Group (China), and local Oando Plc for $2.5 billion and $1.8 billion, respectively.”


– Vanguard

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