Oil & Gas Groups Warn Govt Of Looming Economic Crisis

Oil & Gas Groups Warn Govt Of Looming Economic Crisis

...Point at depleting oil and gas reserves  

Sopuruchi Onwuka

Professional groups in the Nigerian Petroleum industry have advised the new administration of President Muhammdu Buhari to ensure robust consultations with players in the sector in order to evolve workable polices that would deliver on prime national aspirations.

The position follows calls by the groups on government to speedily stimulate exploration and production activities in the Nigerian petroleum industry in order to place the country on competitive reserves and production status with peer members in the Organization of Petroleum Exporting Countries (OPEC).

The calls were the central message at the 2015 industry dinner and awards night hosted by the Petroleum Technology Association of Nigeria (PETAN) in Lagos weekend where leaders of key professional groups took a common stand on the way forward for the Nigerian petroleum industry.

The event which rounded off meetings, conferences and other pan-industry forums that form platforms for policy debates pooled leaders of key industry groups including PETAN, Nigerian
Association of Indigenous Petroleum Companies (NAIPEC), Nigerian Association of Petroleum Explorationists (NAPE) and Society of Petroleum Engineers (SPE).

Whereas PETAN, the platform of indigenous oil service firms, and NAIPEC are beigest employers of indigenous oil industry workforce; SPE and NAPE house of over 85 percent of total industry core workforce comprising engineers and geologists working in both indigenous and multinational firms in Nigeria and elsewhere.

Chairman of PETAN, Mr. Emeka Ene, an eminent petroleum engineer, stated in his opening speech at the event that the nation’s crude oil reserves might not sustain realization of the country’s long term economic targets if urgent measures are not activated to boost exploration activities.

Mr. Ene who is also the erstwhile Chairman of the Nigerian Council of SPE said the low price cycle in the global oil market and consequent drop in cost of services in the industry have provided government the opportunity to drive exploration of more oil and gas across all the terrains in the Nigerian sedimentary basins.

In explaining that exploration is best at times of low price cycle, Mr. Ene who is the Managing Director of Oilserv Group, urged Nigerian to follow the steps of her peers in the Middle East and North Africa (MENA) where he pointed out that exploration rig counts have sharply risen since the fall in oil prices.

He pointed out that Nigeria’s long term economic aspirations are at stake in the current industry impasse where exploration investments have fallen, dragging down field activities and compelled redundancy and massive staff lay off across the industry.

In proffering most cost effective approach to driving realization of national aspirations in the petroleum industry, Mr. Ene declared that value added local content in the oil and gas industry is a guarantee of cost reduction.

He urged the government to provide solid basis for its medium to long term economic aspirations by pursuing realization of the set agenda to boost the nation’s crude oil reserves to 40 billion barrels, build production capacity to 4.0 million barrels per day, monetize the country’s vast natural gas resources and increase the local content of the industry activities.

The only way to continue driving the aspirations under the prevailing low price cycle in the industry, he said, is to optimize the use of indigenous and local capacity for job delivery.

In his keynote presentation at the dinner, erstwhile President of Nigerian Association of Petroleum Explorationists (NAPE), Mr. Austin Avuru, decried the low reserves status of the country saying that despite the highly advertised economic contributions of the petroleum industry, the sector has become a drag on the country’s gross domestic product (GDP).

Mr. Avuru, an eminent geologist who the Managing Director of Seplat Petroleum, blamed the direct impact of the oil price drop on the inability of the government to build sovereign wealth fund to buffer against sudden price shock in the export market.

He pointed out that whereas other OPEC countries are driving exploration activities with sovereign wealth funds despite the current low oil prices Nigeria has been plunged into deep cash crunch due to unavailability of no such funds.

The UNION reports that the sovereign wealth fund established by the previous administration of federal government was shared at the request and subsequent pressure from governors of the federating states of the country.

He corroborated Mr. Ene’s position that the medium to long term economic aspirations of o the country have become unrealistic because, according to him, little or no exploration activities in the industry means that the nation’s lean oil and gas reserves can no longer provide support for the much hyped economic projections.

He pointed at falling oil production from the traditional onshore and shallow water terrains from 2.4 million barrels per day to current 1.2 million barrels per day (mbd), explaining that production from the deepwater which could have increased the nation’s production has ended up only stabilising output at 2.4 mbd.

Mr. Avuru also drew attention to imminent gas crisis, saying that rising domestic gas demand means that the existing reserves could not support medium term demand projections.

Domestic gas demand, he said, has jumped from previous 300 million standard cubic feet per day (300 scf/d) to current 1.0 billion scf/d with projections that demand would balloon to 3.0 Bscf/d by 2017.

“The projected domestic gas demand is about four times more than what the country’s current estimated gas reserves can support,” he declared pointing at industry estimates that place the nation’s proven and probable gas reserves at 100 trillion cubic feet.

He blamed the unworkability of government policies on the collapse of industry-government interface, stressing that government has become increasingly unable to listen.

Mr. Avuru who is one of the pillars of NAIPEC stated that government has been formulating polices from the point of ignorance with national economic aspirations underpinned by unrealistic and untenable projections and aspirations for the petroleum industry.

He pointed out that policy makers have resorted to playing to gallery with popular catch phrases that are not underpinned by detailed planning.

In rolling out a pan-industry recommendation to government, Mr. Avuru demanded that government’s planning must derive from the outcomes of proper industry interaction, adding that industry groups must have regular and unfettered access to government.

He also pointed out that industry targets and programme executions must be focused on clear deliverables, enablers and expected objectives. He added that the processes of policy executions must be transparent, credible and clearly understood by all stakeholders for easy performance benchmarks.

He stressed that government must also see the industry as enablers of economic growth and not just as revenue earners. He said government must fully fund activities and re-inject vibrancy in the upstream petroleum industry in order to guarantee optimum rental income to the nation.

On the whole the groups warned government to map out plans to reactivate exploration activities in all domestic industry terrains, pointing out that gains of Nigerian Content Policy in the past years might be lost if investments in robust capacity development is left unutilized in driving realization of national aspirations in the oil and gas sector.