16 July 2015, Lagos – ExxonMobil affiliates in Nigeria have attributed the country’s stagnant oil reserves to poor funding by the Federal Government.
They said the Joint Ventures for oil production were largely underfunded, which had hampered the replenishment of oil reserves in recent times.
This was revealed in the ExxonMobil 2015 Energy Outlook Series released on Wednesday in Lagos.
Presenting the outlook to stakeholders in the oil and gas industry, the Upstream Treasurer at the Mobil Producing Nigeria Unlimited, Mr. Anibor Kragha, said aside from funding constraints, there was the need for the government to provide fiscal terms that would work.
He said players in the oil production business had continued to produce on regular basis, but failed to do the needed hydrocarbon drilling to replace the reserves.
Kragha said the Joint Venture production had dropped by about 50 per cent in recent times.
He, however, said the reason the country had not experienced any form of crisis in this regard despite the decline in Joint Ventures’ performance was because the production sharing agreements had continued to rise in multiple folds.
“This is the reason we have maintained our all time reserve level as a country,” he added.
Kragha said, “We need good funding, fiscal terms that work to grow our reserves. The Joint Ventures are grossly underfunded. We are producing everyday but we are not drilling to replace. If we have more money, I think we will be doing more.”
The government is said to be receiving the bulk of the oil revenue from the Joint Ventures, but still finds it difficult to meet its financial obligation to the JVs.
Commenting on natural gas, Kragha said the resource would be the driver of the future compared to other fuel options for electricity generation by 2040.
China and India, he noted, would be largely driven by coal, while the rest of the world would have natural gas dominating their energy sphere.
This development, according to the outlook, will see China and India contributing massively to the degree of carbon emissions in the world.
By 2040, Europe and Asia Pacific would have a very high demand for oil and gas, the outlook revealed, adding that Russia, Nigeria, and countries in the Middle East, among others, would be competing to supply oil and gas to the regions.
Kragha emphasised the need for government to revisit its gas terms and stressed that a competitive arrangement was needed to develop the Nigerian gas market.
“With the gas incentives being expected from the government and the projects expected on board by 2014, the country will have more gas than it actually needs,” he added.
The Organisation of Petroleum Exporting Countries currently puts the country’s crude oil reserves at over 37 billion barrels.
Nigeria was said to have seen the highest drop in crude oil production in March this year among its peers in the OPEC.
A monthly report from the 12-member oil cartel had put oil output from Nigeria at 1.67 million barrels per day in March, down from 1.80 million bpd in February, based on direct communication. The country pumped 1.96 million bpd in January.
Four other OPEC members, Algeria, Angola, United Arab Emirates and Venezuela, recorded declines in production, while the rest (excluding Kuwait whose production remained unchanged), led by Saudi Arabia, saw an increase.
Crude oil production from Algeria, Angola, UAE and Venezuela fell to 1.12 million bpd (from 1.13 million in February), 1.75 million (from 1.79 million), 2.91 million (from 2.98 million) and 2.73 million (from 2.74 million), respectively, based on direct communication.
Nigeria, Africa’s top oil producer, also saw the second-largest drop in rig count after Venezuela in March, data from Baker Hughes Incorporated and OPEC’s estimates showed.
Nigeria has the second largest amount of proven crude oil reserves in Africa, but reserve estimates have been stagnant as exploration activities have been low, the United States Energy Information Administration noted in its ‘Nigeria Brief’.
It said rising security problems coupled with regulatory uncertainty had contributed to decreased exploration activities.
Workers under the aegis of Petroleum and Natural Gas Senior Staff Association of Nigeria have recently called on the Federal Government through the Nigerian National Petroleum Corporation to fulfil its cash call obligations to its joint venture partners in the oil and gas sector.
According to the association, a strong commitment to the joint venture operation budget is crucial to the country’s foreign exchange earnings, adding that failure to sustain the production volume will put the expected revenue at great risk.
The President, PENGASSAN, Mr. Francis Johnson, making the recommendations to the new government on the oil and gas sector reforms, urged the NNPC not to allow its equity in the industry to fall below 50 per cent in exchange for financial gains that would not be sustainable.
– Punch
