21 June 2012, Sweetcrude, LAGOS – EXPERTS and stakeholders from the international oil and gas industry gathered in Nigeria for the Energy Policy and Strategy lecture series of Emerald Institute for Energy Economics, Policy and Strategic Studies, University of Port Harcourt, expressing worry over the state of the global economy.
The gathering on Wednesday, included the Director, Department of Petroleum Resources (DPR), Osten Olorunsola, and Paul Michael Wihbey, who is the President, GWEST LLC, Washington DC.
Wihbey, who was guest speaker, and visiting scholar and research fellow of the institute, identified areas of waste of the hydrocarbon resources and the need to plug these wastes and convert them into useful national use.
Wihbey noted the impact of the falling oil price in the global market and its effect on the country’s economy. He said the scenario would lead to reduced revenue flows to the Federal Government, which would have adverse effect as Nigeria is a single sector economy, though some petroleum economists at the event disagreed with him.
He added that “the recent geopolitical crisis in the Persian Gulf between the United States, Israel and Iran has been primary factor in the extraordinary oil price volatility over the last several months. Indeed, prior to this near-conflict scenario, geopolitical events in the Arab world, the so-called Arab Spring, drove oil prices to high levels during the first six months of 2011.
He emphasised the need to tackle illegal oil bunkering and other security areas through which Nigeria was losing a bulk of its oil. For instance, he recalled the loss of $7 billion lost yearly to illegal bunkering and additional $5 billion spent yearly on repairs of vandalised pipelines.
In addition, he said that because of lack of investment in the industry following the non-passage of the Petroleum Industry Bill (PIB), over $28 billion has been lost through diversion of investments to neighbouring countries as at 2010.
According to him, Nigeria has the potential to produce three or four million barrels of oil per day, but produces 2.3 million daily, indicating differentials of 700,000 bopd or 1.7 million bopd which translates to $12 billion about N2 trillion; or $26 billion about N4.2 trillion.
As a result of lack of fresh investment in the industry, Wihbey said production would fall due to onshore assets depletion and offshore delays and could make production drop by 20 percent by 2020. The government should put in place right policies, ensure regulatory certainty and avoid fiscal confusion.
Olorunsola highlighted the need to critically look into the issues in the industry. He also said the depreciation of the naira is a critical issue in the country that needs to be addressed urgently.