A Review of the Nigerian Energy Industry

‘Dwindling oil price is an incentive to upstream investors’

Drilling operations on Bamboo 1 Well offshore Cameroon.
Drilling operations on Bamboo 1 Well offshore Cameroon.

28 July 2015, Lagos – PETROLEUM engineers have argued that the dwindling global oil price has been identified as an incentive to investors in upstream sector of the country oil and gas industry.

The Council Chairman, Society for Petroleum Engineers, SPE, Mr. Emeka Ene, made this known in an interaction with journalists ahead of the 39th Nigeria Annual International Conference and Exhibition, NAICE, billed to hold between August 4 and 6, 2015, at Eko Hotel and Suites, Lagos.

The SPE boss said that the challenges’ facing the sector is an opportunity for the various investors within the oil and gas value chain, as any investment done at this period is specifically meant to serve for long term purpose. Such investment is estimated to last for roughly 10 years and above or the entire life of a particular reservoir.

He said: “the dwindling oil price is an opportunity to further increase the amount of oil that is being drilled out of the oil blocks across the country. Such huge production and investment decision is tied to a long term return. Therefore, in the case of Nigeria, which is a conglomerate of different oil blocks, strategic objectives are needed to be made by investors in down cycle, in order to reap in the up cycle.

“The great economic decision that could be taken by any investors is to buy low and sell high. It is when the prices are low that an investor needs to buy the barrels. However when the prices are high you start selling.”

On challenges facing investors to access funding, he argued that “While it is difficult to source for funds from the local financial sector due to CBN’s regulation, the owners of the oil blocks must harness other means of raising funds. They need to get partners and ensure liberal terms to attract investors. If you have a partner during the low cycle, when the price goes higher everybody benefits.

“We have to understand that the industry has evolved. In the past we had buyers already waiting for our product. But today, the US imports zero crude from Nigeria, and they are set to export their barrels. We must understand that the market dynamics have changed. The challenge the country has is not that they have problem to sell their barrels, but there is a glut for sweet oil which is what we have because of the type of product our refineries accept.”

He stressed that Nigeria needs to work out partnerships with other countries with hard crude like Venezuela, who depend on light crude likes ours to blend their crude for the production in their refineries. “Industry analysts have forecast that by 2016 that the gap between supply and demand would narrow, which means that the benefactors would be those who currently have sufficient reserves. Excess reserve today offers huge benefit tomorrow,” he added.

Consequently, Ene urged the Federal Government to engage major operators in discussing ways of solving the various quagmires within the oil and gas sector. He further said: “It is important to note that government cannot function in isolation of the operators in the industry; this is because these people are the ones who have seen the ups and downs of the sector.

They are better partners in fixing the challenges.” Regarding the forthcoming international conference and exhibition, he said: “The conference, NAICE 2015 will provide unparalleled world-class opportunities for knowledge sharing, capacity building, networking and marketing of products and technology.”

He maintained that the SPE has consistently shown its devotion to drive the industry forward, adding that issues in focus will include: marginal field workshop: Nigeria gas monetisation and infrastructural development; and women development programme. The theme of the conference is:
“Global Oil Price Trend; Lessons From The Past And Insights Into The Future – Perspective of Women Leaders.”
*Ediri Ejoh – Vanguard

In this article

Join the Conversation