Nigeria Risks Economic Instability Over Declining oil Production, IPPG Warns

Samuel Mobolaji

The Independent Petroleum Producers Group (IPPG) has warned that, except if some drastic measures are taken, Nigeria may find itself neither able to produce the required volume of crude oil to support the long-term aspiration to scale up in-country refining of products nor can export to boost revenue earning.

This is because, despite its world-class hydrocarbon resource base, with over 37 billion barrels of proven crude oil reserves and 207 trillion cubic feet of tcf and 600 tcf of proven and contingent gas reserves respectively, the country finds itself in a situation where daily production has significantly dropped and lies at about 1.3 million barrels of oil and 8.5 bcf of gas today.

The chairman of the IPPG, Abdulrazaq Isa, in his keynote address at the Nigeria Oil And Gas Summit, NOG, in Abuja, with the theme; ‘Showcasing Opportunities, Driving Investment, Meeting Energy Demand,’ observed that, notwithstanding some laudable Government policies and the gradual positive turnarounds being experienced, the industry is in dire need of extraordinary focus to mitigate the genuine concerns on its long-term sustainability.

Isa, said, this is way below capacity as a nation and by all globally acceptable standards, this reserves-to-production ratio is extremely low and a clear indicator that the industry is in a dire situation.

He warned that the country is running the risk of partial implementation of its national budget considering an estimated deficit of 400,000 bpd from the forecasted 1.78 million bpd.

This trend in production, he added, portends another frightening dimension where in the not-too-distant future the overall installed domestic refining capacity, currently closing in on about 1.2million barrels per day, may soon outstrip current crude oil production level with the risk of Nigeria’s finding itself in a position where it is unable to meet its domestic refinery crude demand or even become a net importer of crude oil.

It is against this scary backdrop that the group is calling for urgent measures to be undertaken by all relevant stakeholders to immediately arrest this dwindling production level and under-investment.

Proffering solutions, he called for immediate conclusion of all pending IOC divestment transactions, stressing that, its member companies which include Seplat, the Renaissance Consortium and Oando have the proven track record to successfully take over and manage these onshore and shallow water assets to realise incremental production in the region of 100,000 – 200,000 barrels of oil and over 1.5 billion cubic feet, bcf, of gas per day within 24 months and well over 500,000 barrels of oil per day in the long term.

The IPPG believes that the timely approval of these IOC divestment transactions will also be a clear signal capable of restoring global investor confidence in Nigeria in an era of competing global investment destinations in Africa and very limited access to capital.

Isa, also called for an urgent need to address deepwater development and production, particularly in terms of a competitive fiscal regime being negotiated with Shell, Total Energies, ExxonMobil and Chevron, which he said has the potential to unlock incremental production of 700,000 barrels per day from this terrain in the short to medium term.

The IPPG Chairman, called for the development of Nigeria’s gas resources to catalyze economic growth and complement the decarbonisation drive.

In his submission, he said that Nigeria’s vast gas resources must be exploited with immediate focus placed on restoring production to existing installed LNG capacity and expanding production (FLNG).

With Strategic Policy Makers, Business-Enabling Regulators and Commercially Focused and Socially Responsible operators working in unison towards achieving the shared goal of energy security, he expressed optimism that the country can unlock the full potential of the industry.

He reaffirmed IPPG’s continuous commitment and support to the policies of the government, particularly on its quest for energy availability, affordability and energy security for all Nigerians.