FG urged to review operating terms with IOCs

• Reserves risked by investment draught

Sopuruchi Onwuka

Nigeria must restructure its petroleum asset lease administration and investment partnership patterns in the face of the prevailing push for energy transition or risk holding large stranded reserves by 2050 when significant demand shift from fossil energy is expected to happen.

Analysts that participated in the panel debates at the ongoing annual international conference and exhibition hosted in Lagos by the Nigerian Association of Petroleum Explorationists (NAPE) agreed on the need to fast track petroleum resource monetization by spiking investments in production and go-to-market infrastructure.

To achieve the target of enhanced production of oil and gas, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr Simbi Wabote, proposed that existing operating models in the country be reviewed to provide operators with the liberty of eclectic funding opportunities outside the traditional cash calls from government.

The Oracle Today reports that the Nigerian petroleum industry has suffered severe oilfield development and production investments in the past 20 years due to inability of the Nigerian National Petroleum Company (NNPC) Limited to meet funding obligations equivalent to its 57 percent in all operated joint ventures with private exploration and private companies in the country.

Besides the joint ventures in which the NNPC Limited holds direct participating interest, players with production sharing agreements (PSAs) for deepwater operations demand fiscal waivers and operating conditions for unilateral investments in development of discovered reserves.

Engr Wabote whose NCDMB is saddled with the responsibility to extract economic values from the operations of the petroleum industry into the domestic economy stated at the event on Tuesday that the failure of NNPC Limited in living up to its project funding obligations in the industry is responsible for activity lull, associated economic losses and missed investment opportunities in the industry.

In a separate event, the Chairman of AA Holdings Limited, Mr Austin Avuru, had declared that that Nigeria should immediately ramp up crude oil production from current lows below 1.5 million barrels per day to over 3.0 million barrels per day in order to beat the imminent peak oil demand projected by several industry advisory firms to fall between 2050 and 2060.

With the current low output volumes, Mr Avuru observed, energy transition would inevitably catch up with the country and result in huge stranded reserves. The possible situation, he noted, could lead to consequent cash draught for further developments after commercial lucre of the global oil market might have waned.

He called on government to float investment incentives that would push players to stake commercial funding in production boost and reserves depletion with the period of strong global demand and high commodity prices.

In echoing Avuru’s voice yesterday, the erstwhile Managing Director of Nigeria Liquefied Natural Gas (NLNG) Limited, Mr Tony Attah, lamented the myriad of issues that negatively impact investments and industry activities in the operating environment.

 He noted that Nigeria has continued to slide back in the global competition for production capacity across all sectors, pointing out that installed capacity for gas liquefaction and export has fallen to 60 percent availability due to falling production by exploration and production companies.

Nigeria’s LNG production woes, he lamented, are coming at a time countries with bullish capacity expansion projects intensify of intense global scramble for available international market shares.

He pointed out that Nigeria is currently paying the price of over three decades total production capacity collapse, a situation he attributed to huge gaps in production infrastructure.

In stressing huge opportunities that country has missed in the energy sector, Mr Attah noted that Nigeria has remained resource rich and energy poor as a result of sitting too long on passive petroleum reserves.

The result, he counted, include fast depleting foreign reserves due to low inflow from exports, low production capacity due to huge infrastructure gaps, and weak Naira due to dwindling exports.

To navigate out of the current mess, Engr Wabote called for discontinued reliance on international oil companies to lead realization of prime national aspirations in the petroleum industry, adding that existing operating agreements with foreign players should reviewed to prioritize the nation’s domestic economic interests.

He pointed at models already recommended by stakeholders to include incorporation of existing joint ventures address the cash call conundrum, empowerment of a new set of capable indigenous players to operate asset sizes currently managed by the international oil companies, and adoption of mixed currency financing of industry projects for ease of funding.

The panel called on government to dismantle all operating barriers in the industry and float a new set of incentives for investments in gas development and production. Such incentives, they demanded, must capture development of infrastructures that enable access to market.