02 February 2017, Lagos – The number of active oil rigs in Nigeria extended its decline last year, as it dropped to 23 in December, down from 38 in January 2015, data from Baker Hughes Incorporated and the Organisation of Petroleum Exporting Countries showed.
The reduction in the rig count was mostly triggered by the slump in global crude oil prices since mid-June 2014 as oil companies were forced to slash their capital budgets and suspend some projects.
Rig count is largely a reflection of the level of exploration, development and production activities occurring in the oil and gas sector.
Nigeria, Africa’s top oil producer, saw the fourth-largest drop in rig count among its peers in OPEC last year. The number of rigs in the country averaged 25 in 2016, down from 30 in 2015 and 34 in 2014.
Industry experts have attributed the decline in rig count to the general fall in crude oil prices in the international market; inability of the Nigerian National Petroleum Corporation to meet its cash-call obligations to its joint venture partners, and growing security problems facing operators on land and in shallow waters.
They said some operators had decided to scale back their activities and investment due to the regulatory uncertainty in the industry occasioned by the delay in the passage of the Petroleum Industry Bill.
“Regulatory uncertainty has resulted in fewer investments in new oil and natural gas projects, and no licensing round has occurred since 2007. The amount of money that Nigeria loses every year from not passing the PIB is estimated to be as high as $15bn,” the United States Energy Information Administration said in its ‘Nigeria Brief’.
Nigeria has the second-largest amount of proved crude oil reserves in Africa, but exploration activity has slowed.
“Rising security problems, coupled with regulatory uncertainty, have contributed to decreased exploration,” the EIA said.
According to the agency, the PIB, which was initially proposed in 2008, is expected to change the organisational structure and fiscal terms governing the oil and natural gas industry if it becomes law.
It said, “International oil companies are concerned that proposed changes to fiscal terms may make some projects commercially unviable, particularly deepwater projects that involve greater capital spending.”
Other OPEC members whose rig counts fell last year are Venezuela (from 110 to 100), Iraq (from 52 to 43), Ecuador (12 to 4), Angola (11 to 6), Kuwait (from 47 to 44), and Libya (from 3 to 1), while Algeria, Iran, United Arab Emirates, and Saudi Arabia recorded increases in their rig counts.
In Algeria, another African country in the 12-member oil cartel, rig count rose to an average of 54 from 51 in 2015, while it increased from 42 to 51 in the UAE, according to OPEC’s latest monthly report.
The number of rigs in Iran averaged 57 in 2016 from 54 in 2015, and increased to 156 in Saudi Arabia from 155 in 2015.
Global oil prices have increased in recent months, raising expectations that may soon consider working on projects that had been suspended.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said last week that crude oil prices, hovering around $55 a barrel since early December, would climb by about $10 in the coming months as OPEC-led measures to curb a glut had taken hold.
“Ultimately, the effects over the next few months will get us to where we want to be, which is in the mid-$60s,” Kachikwu said in a Bloomberg Television interview from Rome.
Oil surged at the end of November and in early December after OPEC surprised the market with output cuts and enlisted the help of non-member suppliers to eliminate a surplus.