The Nigerian oil and gas industry holds the key to harnessing the nation’s growth potentials despite the downturn in the economy occasioned by the fall in the global oil prices. To make the most of the industry, the Nigerian National Petroleum Corporation, NNPC recently expressed its commitment to grow the Nigerian Petroleum Development Company, NPDC’s crude oil production capacity to 500,000 barrels per day by 2020.
Additionally, the Corporation said it would also grow NPDC’s gas production to 1500mmscf per day within the same period.
The Group Managing Director of NNPC, Dr Maikanti Baru, who stated this in a keynote address entitled: “NNPC’s Commercial Strategy and Priorities” at the recently concluded Nigeria Oil and Gas (NOG) Conference and Exhibition in Abuja, added that everything was being done to achieve the target reserve growth as well as increase national crude oil production to 3million barrels per day up from the current 2.2 million barrels per day.
According to him, the NNPC would sustain frontier exploration in the inland basins to meet government’s aspiration to achieve crude oil and gas reserves of 40 billion barrels and 200 trillion cubic feet respectively by 2020.
Dr. Baru put the current oil and gas reserves at 37 billion barrels and 192 trillion cubic feet (tcf) respectively.
“Furthermore, efforts are currently ongoing amongst all stakeholders to reduce the level of gas flaring by converting most of the flared volumes to ensure commerciality of the gas resources”, he noted.
While declaring open the 2017 edition of the NOG Conference and Exhibition at the International Conference Centre, Abuja, Dr. Maikanti Baru, said Nigerian oil and gas industry was on the path of recovery with crude oil price on the upswing, decline in pipeline vandalism and drop in restiveness in the Niger Delta.
Dr. Baru, who expressed delight that the NOG Conference which could not hold in 2016 has roared back at a time when hope was rising for the industry, stated that there were indicators that things were beginning to shape up for the industry.
The first indicator in this regard according to him was that cases of pipeline vandalism have reduced with a positive impact on crude oil production.
“We are having a lot of engagements with people in our core area of operations in the Niger Delta and this is bringing a lot of hope. If we go by the number of pipeline vandalism cases, they have dropped to an average of 20 per cent on a monthly basis as against a similar period last year. This is an indicator that calm is returning to the environment”, he said.
On gas commercialization, the NNPC boss said efforts were on top gear to raise between $3.6 and $4.5 billion to build the Abuja-Kaduna-Kano (AKK) pipeline, capable of generating 3.2 gigawatts (GW) of electricity for the country.
“Beyond growing gas for the power sector, there has been a strategic positioning of the sector to support massive gas-based industrialization. We will incubate and midwife a portfolio of critical and mutually dependent investments (Central Processing Facilities, CPFs, Fertilizer, Petrochemical, Free Trade Zone, FTZ, infrastructure and Ports) which will jumpstart the gas revolution agenda. NNPC intends to develop or take equity in some of these gas-based industries such as fertilizer and others”, he said.
Another priority for the Corporation, according to the GMD, is the rehabilitation of the refineries, adding that his management has secured the approval of the Board to pursue the Turn Around Maintenance, TAM with a view to increasing their capacity utilization to above 60 per cent.
He expressed confidence that diligent execution of the initiatives would increase the commerciality and profitability of the Corporation in the near term.
Meanwhile, legion of big players in the oil and gas industry were not left out of the optimism as speaker after speaker expressed hope in the ability of the country to take comparative advantage of her natural endowment to drive the change needed to make the nation truly the giant of the African continent.
Of paramount importance, they warn, is the need to formulate and implement key policies directed at revamping the industry for good. Senator Omotayo Alasoadura, chair of the Senate Committee on Petroleum (Upstream) who was a panelist on Day 2 of the conference said the National Assembly would do everything within its power to ensure the smooth conduct of business in the sector.
In the words of the lawmaker, a lot is being done to make Nigeria reap maximum revenue from its oil and gas resources, noting that in no distant time, the Petroleum Industry and Governance Bill (PIGB) would be passed into law; a remark that elicited thunderous applause from conference participants.
“The PIGB is almost certain to become law as it has reached the third reading stage. Most likely, before the end of March or first week of April, we will be through with it,” the lawmaker assured.
Important as legislations are to the revival of the industry; there is the increasing need to place premium on local refining of crude if only to save enough foreign exchange for a country still battling the weight of a recession. Apart from the routine TAM, the refineries need to be run efficiently and profitably with a near zero tolerance to wastage and low capacity. Quick fixes would have to be done away with in preference for a total overhauling of the existing refineries to make this noble aim attainable.
Good enough, Anibor Kragha, Chief Operating Officer, Refineries at the NNPC disclosed the plan of the corporation to comprehensively fix the refineries to make them deliver optimal service in the long run.
“The NNPC is determined to move away from the approach of quick fixes and undertake a comprehensive revamp of the plants,” said Kragha, adding that for a start, the three existing refineries would be able to meet domestic demand at the end of the exercise. “Bringing the refineries back on stream would mean increased capacity to meet local demand,” he noted, arguing that the trouble stemmed from the fact that there was no meaningful investment in the refineries in the past 15 years. This coupled with militancy in the oil producing areas of the Niger Delta negatively impacted production and ultimately birthed low earnings for the country.
“We had over 2000 attacks on pipelines in the last four years and the NNPC spent nearly N10 billion annually on gas pipeline repairs. These challenges have had a negative impact on the company’s bottom-line,” Kragha lamented.
It’s gratifying that the Organization of Petroleum Exporting Countries (OPEC) is working round the clock to sustain the current incremental but gradual leap in oil prices. Consistent engagement with relevant stakeholders is key to making this a reality as stated by Mohammed Barkindo, OPEC Secretary General at the recently concluded Nigeria Oil and Gas Conference and Exhibition.
According to the OPEC scribe, the organization is determined to address the challenges which threatened the market, almost knocking it off balance. He said, “For the first time in history, we were able to build a platform of 24 producing countries within six months in order to address the stock overhang which has been the variable to the supply equation that had sent this market off balance since 2014.”
Barkindo further added that the smart move by OPEC in the wake of price fall is now fated to turn the economies of member countries for good, especially in the long-run. “I can confidently report that those…events have altogether changed the energy landscape and turned a historic page in oil for good,” he said, noting that Nigeria is on the verge of reaping the gains of OPEC’s initiatives as well. “We are on course of pulling this industry out of the worst recession that we have entered to restore stability to the market on a sustainable basis that will allow investments to come back on a continuous basis,” Barkindo submitted.
Oil prices fell abysmally low in the last quarter of 2014 from over $100 a barrel to less than $40, culminating in the inability to carry out many capital projects highlighted in the budgets for the oil and gas industry.
However, there are reasons to be optimistic about the future given the encouraging assurances given by Dr. Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources. The government of President Muhammadu Buhari, according to Kachikwu, is committed to creating an enabling environment that would guarantee returns on investment and value for money. Speaking extempore at the NOG Conference, the Minister said a sustained investment of $10 billion annually for the next four years is needed to transform the oil and gas industry given the infrastructural decay occasioned by years of negligence by successive administrations.
While calling on oil companies to cut cost, Kachikwu noted that though oil prices are currently on the rise, there’s no guarantee against further fall; a development, he said call for some form of mitigation, especially on the part of oil companies, including the indigenous and the International Oil Companies, IOCs.
“There is no guarantee that oil prices may not tumble to as low as $40 per barrel again. I believe oil companies should look at cutting cost in their operations,” he stated.
And more than ever before, the Minister promised continuous engagements with relevant stakeholders in the Niger Delta to tackle incidences of oil theft, vandalism and all forms of criminality in the region.