23 September 2014, Lagos – 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.
The country, which aims to ramp up production to four million barrels per day and grow the reserves to 40 billion barrels in 2020, has seen its reserves slump to 35 billion barrels from 37 billion barrels, according to the Department of Petroleum Resources.
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.
– The Punch