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Against the backdrop of OPEC's oil production quota of 1.5
million barrels per day, recent data from the Nigerian Upstream Petroleum
Regulatory Commission (NUPRC) reveals a production shortfall of over 3.011
million barrels in the first five months of the year, resulting in a revenue
loss of approximately $264.97 million (equivalent to about N400 billion) based
on an average Bonny Light price of $88 per barrel.
Vanguard's research indicates that the nation's oil
production has decreased to approximately 1.2 million barrels per day, a
significant drop from the peak of 2.5 million barrels per day in the early
2000s.
Experts in the field suggest that the factors contributing
to this decline are still prevalent, and warn that the situation could
deteriorate further in the coming months if immediate action is not taken to
address the issue.
They are projecting that the production shortfall might push
the attendant oil revenue shortfall to N1.0 trillion by the end of the year, a
situation which would have significantly reduced the government’s budgeted
N15.7 trillion revenue for the 2024 fiscal year.
Already, the Federal Government has hinted that it may not
achieve its proposed revenue estimate for the fiscal year due to factors,
including under-performance of the oil sector.
In its report, titled ‘’Accelerated Stabilisation and
Advancement Plan (ASAP)’’, the Finance Ministry stated: “Our ability to achieve
the 2024 budgeted revenue step-up of 77.4 per cent from 2023 actual is at risk
should oil production remain 27.0 per cent below budget.
“50 per cent of the annualised YTD (year-to-date) variance
suggests a lower-than-budgeted revenue of N15.7 trillion at the current run
rate.”
Output constraints
Despite being Africa’s largest oil producer, Nigeria’s oil
industry is grappling with output constraints arising from infrastructure decay
and a lack of investment in exploration and production.
A breakdown of the data showed that average oil production
in January was 1.43mbpd, February 1.32mbpd, March 1.43mbpd, April 1.28mbpd and
May 1.25mbpd.
Speaking of the sustained slide in oil production, industry
operators and regulators have said the challenges facing the sector needed to
be urgently addressed.
According to the Chairman of the Independent Petroleum
Producers Group, IPPG, Mr Abdulrazaq Isa, the country is producing at a level
significantly below its capacity.
He pointed out that despite Nigeria’s world-class
hydrocarbon resource base, with over 37 billion barrels of proven crude oil
reserves and 207 tcf and 600 tcf of proven and contingent gas reserves
respectively, it had found itself “in a situation where our daily production
has significantly dropped and lies at about 1.3 million barrels of oil and 8.5
bcf of gas today.
Isa said: “This is way below our capacity as a nation and by
all globally acceptable standards, this reserves-to-production ratio is
extremely low and a clear indicator that the industry is in a dire situation.
“In addition, we now run the risk of partial implementation
of our national budget considering an estimated deficit of 400,000 bpd from the
forecasted 1.78 million bpd.
“This trend in production portends another frightening
dimension when we consider that in the not-too-distant future our overall
installed domestic refining capacity, currently closing in on about 1.2million
barrels per day, may soon outstrip our current crude oil production level with
the risk of Nigeria finding itself in a position where it is unable to meet its
domestic refinery crude demand or even become a net importer of crude oil.”
4 priority areas to improve oil production
He listed four priority areas that must be fixed for oil
production to improve and meet the government’s target.
The areas include the conclusion of all pending IOC
divestment transactions including those involving its member companies –
Seplat, the Renaissance Consortium and Oando; untangling of issues around
deepwater development, particularly in terms of the competitive fiscal regime
being negotiated with Shell, Total Energies, ExxonMobil and Chevron; adoption
of a national value-retention strategy; and the development of Nigeria’s gas
resources to catalyse economic growth and complement decarbonisation drive.
The challenges, according to the Group CEO, NNPC Limited,
Mallam Mele Kyari, have pushed not just investors away but also international
contractors, disclosing that there was only an international contractor now
playing in the deep water space.
Kyari also disclosed that lack of activities and new
projects had also led to a low number of active rigs in the Nigerian
environment.
While listing lack of investment and oil theft as some of
the limiting factors, he noted that the obsolete pipeline network was also a
major challenge.
He said NNPC led the push for the complete replacement of
the two export pipelines to Excravos and Bonny.
He said: “We are talking about increasing production but
rigs come here, stack up in deep water and they drill one well and leave. This
is why there are no guarantees around rigs in this country.
Nobody will come here, mobilize for one week and leave.
That’s why you are seeing the scarcity of the right rigs coming into the
country.
“We have also taken another step, we will set up a rig share
club with our partners. So that everyone can put on the table drilling
programme so that we can all align and when rigs come here they can stay three
to five years. Then we can be sure that the trend in production can increase.”
He explained that the practice was what was obtainable in
many jurisdictions, lamenting that it was not happening in Nigeria because many
people had turned the procurement process into a business.
‘Attract more projects in Nigeria’s deep waters’
The Chairman and Managing Director of Chevron Nigeria, Mr. Jim Swartz, emphasized the need for the government to attract more projects into Nigeria's deepwater, highlighting the high costs and uncertainties associated with operating in such areas.
He stressed the urgency of addressing cost-related issues and streamlining project procurement processes to ensure that investments flow into regions with lower costs and contractual compliance.
Speaking about the efforts made by President Bola Tinubu's administration to enhance the operational landscape, the Special Adviser to the President on Energy, Mrs. Olu Verheijen, mentioned that the three Executive Orders issued in February 2024 have significantly benefited the industry.
The three Executive Orders, which became effective from
February 28, 2024, are: Oil and Gas Companies (Tax Incentives, Exemption,
Remission, etc.) Order, 2024; Presidential Directive on Local Content
Compliance Requirements, 2024; and the Presidential Directive on Reduction of
Petroleum Sector Contracting Costs and Timelines.
Verheijen noted that the directives will instil confidence
and stimulate the economy by making the Nigerian environment more appealing for
energy projects.
According to her, the first order “was establishing a clear
and transparent regulatory framework. A stable regulatory environment and
clearly defined agency roles are crucial to unlocking our untapped potential as
an industry and making it more transparent, efficient and competitive now and
in the future.
“The second directive is focused on providing fiscal
incentives for oil and gas projects and making us more competitive for
investments. Directives 40 and 41 offer incentives for midstream gas
utilisation, projects and non-associated gas projects.”
She said the government has also completed a comprehensive
assessment of Nigeria’s deepwater competitiveness compared to 13 peer countries
to attract investments, adding the government is “working on new fiscal
incentives that will facilitate deepwater projects will be critical to
Nigeria’s four million barrels per day target”.
NUPRC adds 17 new blocks to the 2024 oil bid round
As part of efforts to boost activities in the sector and
improve production, NUPRC has added 17 new deep offshore oil blocks to the 2024
oil bid round, bringing the total blocks on offer to 36.
The blocks which are located across the onshore Niger Delta,
Continental shelf, and deep offshore are expected to increase the country’s
reserves and boost its oil production.
NUPRC had in April unveiled 12 new acreages for the 2024 bid
round with another seven deep offshore blocks from last year’s bid round.
The commission in a document released recently signed by its
Chief Executive, Engr Gbenga Komolafe, titled: Nigeria oil block licencing
round- Updates on 2022/2023 and 2024 licencing rounds, also reopened the
commercial bid for the 2022/2023 licencing round.
Engr. Komolafe explained that the reopening was to allow
investors to take advantage of improved fiscal incentives approved by President
Bola Tinubu who doubles as the country’s minister of petroleum resources.
Speaking on the issue, oil and gas governance expert, Henry
Adigun, said there were a lot of issues in the Nigerian environment which have
led to investors abandoning the country.
He harped on the need for the country to tackle oil theft
and pipeline vandalism to bring confidence back to the sector.
“The government has a lot to do to improve incentives and
get the majors investing again. We need a lot of production to meet domestic
demands and also for export,” he added.
Global Affairs Canada, ActionAid laud Gov Mbah on
empowerment programmes
Global Affairs Canada, GAC, and ActionAid Nigeria have
commended Governor Peter Mbah of Enugu State for the series of empowerment
programmes initiated by his government to improve the standard of living of
women, promote gender equality and protect both women and children from
gender-based violence and other forms of abuse.
They gave the commendation when a delegation, led by the GAC
Head of Development Cooperation, Djifa Ahado, and the Country Director of
ActionAid in Nigeria, Andrew Mamedu, paid a visit to the governor at Government
House, Enugu, yesterday.
Expressing the desire of GAC to continue its partnership
with the state government, Ahado said the organization had 15 implementing
partners who were engaged to address gender-based violence, women’s peer
education programmes to eliminate gender mutilation, women’s political
participation and leadership, and women’s economic empowerment, among other
programmes. She added that GAC, through ActionAid Nigeria, had invested ¦
261,382,261.29 as grants to its partners, which had impacted over a million
beneficiaries.
Calling for more collaboration between the body and the
state government, Ahado lamented that among the challenges faced by GAC
included rising violence against women, limited support for gender equality
initiatives and insufficient funding and resources to support the women’s
rights movement.
On his part, Mamedu of ActionAid lauded the effective and
strong collaboration between the state government and ActionAid in promoting
gender equality and women’s empowerment, saying that deliberate investment in
women’s rights had a profound impact on sustainable development.
The Country Director, who was represented by the ActionAid
Head of Programmes, Celestine Odo, further underscored that one of the laudable
projects of the two bodies that had achieved significant results in the
empowerment of women and girls was the Women’s Voice and Leadership Nigeria
(WVL-N) made possible by the cooperation of all the organs involved.
According to him, the achievements made so far by the
organisations in the state were a result of the resilience and collective
effort of all their partners and the communities that benefitted from the
projects.
Governor Mbah expressed his gratitude towards the
development organizations for choosing Enugu as a project state. He believed
that their decision was influenced by his administration's commitment to
transparency, accountability, and integrity.
He also mentioned that the state had recently enacted a
ranching law to put an end to open grazing, implement a modern grazing method,
and guarantee the safety of farmers in all 17 LGAs of the state.
The governor emphasized the administration's unwavering
commitment to eradicating gender-based violence, highlighting multiple
instances where perpetrators had been apprehended and assuring that justice
would be upheld as they underwent prosecution.
Governor Mbah further revealed a number of crucial measures
being implemented by the government to reduce maternal and child mortality
rates, including enhancing the primary healthcare system, building 260 type-2
primary healthcare hospitals equipped with modern amenities, and hiring
numerous healthcare professionals to be stationed at various health centers
throughout the state.
Additionally, he emphasized the administration's commitment
to Affirmative Action, with women making up over 28 percent of his appointees
since taking office.