Why Nigeria May Miss Targets for Oil Reserves
A 10-year target set by the Federal Government to boost crude oil reserves to 40 billion barrels and daily production to 4 million by 2020 is becoming unrealistic due to uncertainties that decrease investments in the sector.
Indeed, instead of making progress, the country may be taking steps backward, going by statistics from the Department of Petroleum Resources (DPR), which indicate that the reserves declined by whopping 961.47 million barrels between 2012 and 2016 alone.
The situation, which is already building anxiety among experts, has been blamed on uncertainties in the Oil and Gas sector associated with the delay in the passage of the Petroleum Industry Bill (PIB), rising security challenges, growing corruption rating, competition fueled by increasing oil discoveries across Africa, obsolete fiscal terms as well as other global challenges confronting the industry.
Just like savings and earnings, the reserves and daily production are key to creating energy security, increasing the income from crude oil, boosting economic development and showcasing an index that is capable of wooing investors into the country.
The Organisation of Petroleum Exporting Countries (OPEC)’s recent statistics on reserves across the world showed that since Nigeria set the target in 2010, the reserves and daily production have remained almost stagnant, hovering in the region of 37 billion barrel and two million bpd.
According to the statistics, the reserve which stood at 37.200 billion in 2010, dropped to 36.247 billion in 2011. It was 37.139 billion in 2012 before it went down to 37.071 in 2013. In 2014, it stood at 37.448 billion, and later dropped to 37.062 in 2015 and remained at 37.453 billion in 2016.
In terms of production, the country’s average daily record in 2010 was 2,048 million, it dropped to 1.975 million in 2011. There was further reduction in 2012 to 1.954 million. In 2013, the figure went down to 1.754 million, in 2014 and 2015 it was 1,807 million and 1.748 million. In 2016, it reduced to 1.427, but in January this year, the Nigerian National Petroleum Corporation (NNPC) said the figure increased to 2.25 million.
Similarly, while the level of active rigs in the country as at 2010 stood at 35, it moved to 38, 44 and 59 in 2011, 2012 and 2013. The figure dropped to 46 in 2014, 29 in 2015 and eventually crashed to only nine in 2016. The number of active rigs indicates the level of exploration, development and production activities occurring in the Nation’s Oil and Gas sector.
The Nigeria Natural Resource Charter (NNRC) estimated over $235Billion as loss to the non-passage of PIB alone, while the U.K-based research institute, Consultancy Wood Mackenzie (WoodMac) has found that international oil companies like ExxonMobil, Royal Dutch Shell and Total would cut spending on oil and gas exploration for a fifth year in a row in 2018 in countries like Nigeria.
The National President, Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare, said the Nation’s Oil sector is witnessing investment drought because of unclear governance structure. “Unfortunately, there are so many other countries competing with those investment opportunities and Nigeria has not woken up to the need to find a way to make the country attractive again. In 1975, there were only five countries producing oil and gas in Africa, today we are 25, nearly every country along the coast of Africa has discovered Oil,” the professor of Petroleum Economics and Policy Research said.
According to him, there must be incentives if Government will get people to explore and expand reserve base, but obviously Nigeria doesn’t have the money unless it woos international investors who will only come when the business environment is conducive.
To the Managing Consultant, Degeconek Nigeria Limited, who is also the immediate past president of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, said it would be impossible for Nigeria to meet such a target in the next two years.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who admitted that inherent challenges were frustrating investment in the sector, said the country would eventually meet the reserve and production targets, especially if all aspects of the PIB were passed.
According to him, the prevailing development in the sector has increased the need “to address the institutional, fiscal and regulatory uncertainties bedeviling the sector, bringing to an end exacerbated decline in foreign investment in Nigeria’s hydrocarbon projects.”