Except urgent steps are taken, indications are that the country could lose its place as a top oil and gas producer due to decline in crude oil reserves and stagnating production level. This has hovered around 1.5 million to 2 million barrels per day in the last few years.
Stakeholders, yesterday, decried the many implications of the Federal Government’s inability to conduct petroleum licensing, or exploration bid round in the last 12 years.
While the delay in conducting the much-awaited oil licensing rounds reportedly led to significant revenue loss, particularly estimated signature bonuses of N112b at a time government is relying more on borrowing to finance key projects, a report citing the Department for Petroleum Resources (DPR) noted that about 211 out of 390 oil blocks in the country are currently idle.
Government earlier hinted on conducting bid round, and promised to offer oil blocks to Niger Delta indigenes as a way of dousing tension in the region, but there are indications that 12 oil blocks in Anambra; 39 in Benin; 41 in Benue; 17 in Bida; 40 in the Chad Basin and 34 in the Niger Delta, as well as other blocks in different locations are open, even though all may not be viable.
While most stakeholders stress the need for bid round, industry players remain divided on going ahead with it in an uncertain fiscal and regulatory system.
Already, new research conducted by United States-based Orbis Research has said that the country’s crude oil production may witness a steady decline to approximately 7.93 per cent before 2025. That is the same year the country has targeted to increase its oil reserve to about 40 billion and daily production to about three million barrels per day. The current realities, therefore, raise doubts about the projected increase.
Also, considering that it could take about 10 years to explore awarded oil blocks before the first output, Nigeria’s delay is coming at times when developed countries were already enacting stringent restriction against fossil fuel.
About 10 years ago, the country set for itself, the target of boosting crude oil reserves to 40 billion barrels, and its daily production to four million by 2020. It now appears that the reverse is the case as statistics indicate that the reserves declined by a whopping 961.47 million barrels between 2012 and 2016 alone. The increased reserve projection was adjusted to 2025.
Professor of Geology, Nuhu Obaje is concerned about prevailing challenges relating to acreage evaluation in the country, insisting that there is a link between gaps in acreage evaluation and some of the challenges in oil blocks allocation.
Projecting that legal tussles may ensue should prevailing challenges remain unaddressed, Obaje said the gaps in acreage evaluation have roles to play in challenges the country is facing in the controversial Malabu oil deal, as well as the rift between Famfa Oil and Agbami.
“We have problems with our proper acreage evaluation, Obaje declared, adding, “before you go to the market for anything, you must know the value of what you are taking to the market so that people don’t devalue it and bring it down. We have had cases like these in the Niger Delta.”
Obaje called for a decisive step towards exploring the nation’s resources by conducting the bid round but stressed it was better not to have bid round than to jump into it blindly in a manner that would cause more losses to the country.
“We cannot keep waiting and we can’t just jump in without a good knowledge of our environment. Of course, many African countries are going ahead. Let me correct the insinuation that oil would lose its relevance. Oil is not only used as fuel or energy because there are many other things that would need our hydrocarbon. Even though we are worried that things have not been done, but I think the government is looking at the situation very well,” he said.
The Founder/Principal Partner at Nextier Advisory, Patrick Okigbo, said: “Nigeria is already feeling the impact in terms of a drop in oil production and proven reserves. This is reflected in a drop in oil revenue, which is impacting available revenue for the national budget. This leads to high unemployment, poverty, etc.
“The President, as Minister of Petroleum Resources, should ensure transparent licensing processes with clarity on the bidding criteria. There is need to build investors’ and public trust. While at it, the President
should ensure the passage of the Petroleum Industry Bill,” he said.
The Edo State Commissioner of Justice and President, Nigeria Association for Energy Economists (NAEE) Prof. Yinka Omorege said as imperative as a new bid round could be, the country must urgently put in place a viable framework that would allow successful bidders and Nigerians to have a really symbiotic bid round that would make the lives of the people better.
Omorege insisted that the country has no option to the legislative reform, adding that passing the Petroleum Industrial bill was only the beginning of the reform.
The Chief Executive Officer of Oildata Energy Group (which comprises Oildata and Xenergi), Emeka Ene, said the country was failing to realise that the game has changed in the oil industry, and oil is not strictly a commodity that everyone wanted.
“Today, to find investors in Europe is more difficult because the world has moved on. We are now looking at renewable energy and other ways. So, if somebody is putting money into oil and gas, he knows he would not get his money back in 10 years.
“In 10 years, countries in Europe would have shut off the use of fuel in vehicles. We are looking at a gestation period of 10 years. The game has changed. And if the game has changed, we need to calibrate and play the game differently. I think the challenge is that we think we are still playing the same game, thinking that people are going to be scrambling for oil,” Ene stated.
According to him, the country tends to think that licensing round is a ticket to wealth, adding that the product is just an enabler, and it could also end up like a challenge, just like in the case of Venezuela.
Ene said: “I think that the question is how can we have a bid round done within the next six months? How do we have a mix of local players and international players when a lot of operating companies have started divesting.”
He urged the country to leverage the presence of local players and at the same time introduce terms that would allow foreign direct investment into the country.
Alluding to the competition for investment, Ene said the country may need to do what it did in the mid-1990s, when the oil price crashed, that is creating offers, which allowed people to invest as a way of dealing with the recession at that time.
Partner and Head of Odujinrin & Adefulu’s Energy Practice, Real Estate, and Mining Teams, Dr. Adeoye Adefulu said the country was not doing enough to replace the oil that is currently being produced.
According to him, since production reserves are being exhausted, Nigeria may have declining production in the long term, while the nation’s revenue from oil may suffer set back.
“In mature oil and gas countries, you find them running bid round every year or every other year so that they can find new places to explore and produce oil and gas. You cannot give out licenses today and find oil tomorrow. Even if you find the oil, you may not bring it to production immediately. What we are saying is, if you want to be producing oil in 10 years, you must give out the licenses now. If that does not happen, your production and revenue will continue to decline,” Adefulu said.
Though undecided between waiting for the passage of the PIB and going ahead with the bid round, Adefulu decried uncertainties caused by the PIB, but asked the Buhari-led government to come up with a clear agenda on the timeline of the PIB, especially passing the legislation in fragments.
For the Chairman of Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, the country must pass the PIB and do bid round immediately.
“Let’s pass the PIB and do the licensing round immediately. We are losing lots of money by delaying the licensing rounds.
Apart from government generating revenue, this will create more exploration and production entrepreneurs and create opportunities for many companies and Nigeria.