…As $30bn oil sector projects await FID
Experts from the Nigeria Association of Petroleum Explorationists (NAPE) group blames PIB and have asserted that Nigeria’s oil and gas industry has continued to record heavy drop in investments, especially in the last five years.
It stated that the sector has suffered more inactivity with over $30 billion projects still awaiting Final Investment Decisions (FIDs) to take off.
The concerns were raised by oil and gas industry professionals and stakeholders at the recent 27th pre-conference workshop of the Nigeria Association of Petroleum Explorationists (NAPE).
The virtual workshop held with the theme: “Levers for Optimal Cost Reduction in Nigeria’s Oil and Gas Production: Positioning for the New Normal.”
[Also Read] President Buhari Awaits to Assent PIB Bill
A communiqué from the conference said the current slide since the price crash of 2015 has seen investment drop almost 18 per cent year-on-year to date. As a result, over $30 billion of projects are still awaiting FID.
They blamed the non-passage of the Petroleum Industry Bill (PIB) for the massive drop in investments and stalled projects in the petroleum sector because of the uncertainty it had heightened among operators and prospective investors.
The participants observed that the average production cost in Nigeria was among the highest in the world, with various estimates placing the country in at least the 70th percentile for high overall production costs in all terrains. They also argued that there had been significant tax burden associated with operating in Nigeria.
The experts held that many years since the PIB was first mooted in 2000 and the various iterations it had undergone without being passed, a development that has impacted negatively on investors’ confidence in Nigeria.
“It should be noted that even at the height of the oil price boom from 2008-2014, CAPEX (capital expenditure) investment in the sector actually fell due to the uncertainty of the passage of the bill.
“The break-even price and payback time for projects in Nigeria for new projects is one of the highest in the world. There is a capital cost premium ranging from 35-100 per cent for project costs in Nigeria,” the communiqué stated.
They stressed that the business circle in Nigeria is very long, attributing the situation partly to the long protracted contracting cycles and approval processes most companies have to undergo.
[Also Read] ‘Our rate of production as a country does not match our rate of depletion…in the last 8-10 years we have not added any significant discoveries to our oil and gas reserve, this is very worrisome’ – NAPE President
They said these are further elongated by increased travelling costs that come with inspection of facilities and operations of contractor companies outside of Nigeria.
By Chibisi Ohakah, Abuja