Sebastine OBASI
02 April 2013, Lagos – Nigeria is estimated to have lost more than $40 billion or N6.3 trillion investments in the last two years as a result of uncertainties in the oil and gas sector. Specifically, oil companies have held back over $40 billion worth of investment while waiting to see what happens, sequel to regulatory uncertainty. Sweeping reforms to taxes and royalties, transparency, local participation and the Nigerian National Petroleum Corporation, NNPC, have been promised since 2007.
According to estimates from the Senate Committee on the upstream oil industry, investments of at least $28 billion in the oil and gas sector have been lost or deferred since 2010. Similarly, uncertainties are holding back Shell Petroleum Development Company’s (SPDC) planned investment of about $30 billion in two offshore deep water projects in Nigeria.
At the just concluded Nigeria Oil and Gas (NOG-13) conference held in Abuja, Mutiu Sunmonu, Managing Director of SPDC, said it was regrettable that Nigeria was losing huge revenues and investments, due to oil theft and bunkering because of uncertainties. Though Sunmonu did not mention the projects where the fund would be deployed to, he stated that “SPDC would rather wait for stable and right conditions before committing finances.”
According to him, “Perhaps Nigeria’s oil and gas industry is slipping into the era when it took Mexico about 50 years to recover from such challenges in its oil industry. I recall the Mexican story where it took the country 50 years to recover from the loss in its oil production and my worry is that we are slipping towards that.”
Divestments
While Shell may have held back further investments in the sector, Conocophillips, a Houston Texas-based oil group, sold its assets after 46 years of operation in Nigeria to Oando Group. Some of these assets included its 17 percent stake in Brass Liquefied Natural Gas, LNG facility and its joint venture stakes in OMLs 60, 61, 62, 63, 131, as well as Kwale-Okpai independent power plant.
The company was estimated to have realized more than $1.7 billion from the sale of its assets in Nigeria. The sale of its Nigerian business unit was part of ConocoPhillips’ plan to increase value for shareholders through portfolio optimization, focused capital investments that deliver growth in production and cash margins, improved returns on capital, and sector-leading shareholder distributions.
Earlier, British Gas (BG) Exploration and Production, citing Nigeria’s turbulent oil and gas sector, pulled out of Nigeria, despite investing more than $500 million in its exploration activities on the offshore blocks OPLs 332, 286, 284 and Olokola Liquefied Natural Gas (OK LNG).
While announcing the divestment from OK LNG, Frank Chapman, Chief Executive Officer, said, “We are switching properties to development of projects elsewhere, most probably the expansion of our new assets in Australia. At the appropriate time, there would be further opportunities in Nigeria. For today, it is a low priority.”
International Oil Companies, IOCs are finding it easier to bye-pass Nigeria in their investment decisions, due to what they termed unfriendly oil sector operating environment. Consequently, Nigeria is estimated to have lost about $2.7 billion or N426 billion from decline in crude oil production in the last quarter of 2012 – October to December.
According to the Central Bank of Nigeria, CBN, Fourth Quarter Economic Report, Nigeria’s oil revenue in the fourth quarter of 2012 dipped by N112.6 billion, as gross oil receipts in the Federation Account stood at N1.824 trillion. That showed a 5.8 percent reduction from N1.936 trillion recorded in the third quarter of 2012.
The CBN report also stated that Nigeria’s crude oil production, including condensates and natural gas liquids stood at 2.00 million barrels per day (mbpd) or 184.00 million barrels during the fourth quarter of 2012, compared to the 2.26 mbpd or 207.92 million barrels recorded in the third quarter, thus representing a decrease of 0.26 mbpd or 11.5 per cent in production level.
The report said the average price of Nigeria’s reference crude, the Bonny Light stood at $112.73 (N17,811.34) per barrel, with crude oil export at 1.55 mbpd or 142.60 million barrels in the fourth quarter, compared with 1.81 mbpd or 166.52 million barrels in the preceding quarter, representing a decline of 14.4 per cent.
