by Adewale Sanyaolu
The inability of investors to bring oilfields into production several years after they take possession of such critical national asset has become a source of concern to stakeholders.
The unproductive or dormant assets which are scattered across onshore fields are currently denying the Federal Government of the much-needed revenue that could have helped to support the hemorrhaging N7.89 trillion 2021 budget which is battling for its soul.
The development has left the oil sector which accounts for about 80 per cent of government revenue in murky waters.
Recently the Federal Government was left in the cold when Chinese lenders withheld funds for the $2.8 billion Abuja Kaduna Kano (AKK) project.
As a result, the Federal Government is seeking $1 billion loan so that work can continue on the gas pipeline after Chinese lenders which had pledged to offer most of the funds did not disburse cash as quickly as expected.
Unproductive oilfields In the midst of this embarrassing dearth of funds, many oilfields in Nigeria, which could earn the country fortunes, are, according to findings, left unproductive due to a number of reasons.
As at the last count, the Department of Petroleum Resources (DPR), Nigeria’s oil sector regulator, has begun a move to end this anomaly through revocation of some licenses that it considered unproductive through deliberate efforts of their operators. To the DPR, these fields could be made productive and earn the country money in terms of royalty and taxes, when they are revoked and re-awarded to a more competent company. This, when done, will help Nigeria out of the economic quagmire the country is facing which is affecting the implementation of some key projects, including the AKK among others.
Salvaging dormant oilfields
The DPR had revoked the licences of 11 marginal field operators for non-performance, including Dawes island marginal field located in OPL 2006, Okrika, Rivers State.
DPR justified the revocation of the field licence on the ground that nothing was done on the field from award of the licence till its revocation, adding that no field development plan was submitted for Dawes Island.
According to the DPR Director, Mr. Sarki Auwalu, the decision was taken in the best interest of the nation.
Expert throws weight behind DPR
With dwindling revenue into federation account and declining global relevance of fossil fuel as the world gradually transits to renewable energy, oil and gas industry experts in Nigeria have called for efficient use of mining assets by operators for the country to maximize its current potentials before fossil fuel loses its current value.
While speaking on the diminishing status of oil and gas in the global energy requirements in the next 20 years, industry professionals and advocacy groups are, in separate interviews, charging the Federal Government, federal lawmakers, interest groups, operators and other industry stakeholders to wrap-up the Petroleum Industry Bill (PIB) for presidential assent so that the country can have a new governing law that will improve investment, increase production, efficiency and transparency in Oil and Gas industry On the current controversy trailing the revocation of some marginal oil fields’ licenses by the Department of Petroleum Resources (DPR) and the petition to the House of Representatives Committee on Public Petition by Eurafric Energy Limited, one of the affected lease operators, Mr. Ademola Adigun, an oil sector governance reform expert said that the issue has become a test case why the Petroleum Industry Bill must be quickly signed into law because the ‘Drill or Drop’ provision in the law will prevent process abuse and usurpation of regulatory responsibilities or powers.
Adigun decried a situation why oil companies sit on mining leases for years without getting them into production capacity as ‘wasteful and unproductive’ for a country that is facing severe revenue challenges.
The country is under heavy borrowing to meet its developmental needs. So, the Nigerian government must do all it can to use the country’s oil and gas assets to build an economy of the future.
He said, “one of the greatest things that have happened, which is in the PIB, is the idea of ‘Drill or Drop’. We have had a history. I think the first attempt to Nigerianise the oil and gas sector was in 1990 when the Babangida government awarded oil blocs to some Nigerians who were thought to have financial capabilities to make the necessary investments. Of the award, only about three or four have been mined, that is Famfa, Conoil and some other two.
Now, a lot of people get these licences or win these bids then go sell it off. They sell it off to those who lack capacity and the whole thing stalls and we suffer as a country. We have two problems in the sector right now; we have declining take from the barrel and we have declining returns from crude. Now, we are limited to 1.45 million barrels a day by OPEC quota and unable to ramp up 2.1 million barrels per day.
If the oil blocs lie fallow and people are not producing from them, we are losing revenue from the field, we are losing job creation opportunity from the field, we are losing what should be the contribution to the GDP as well as field development fee. It’s a whole basket of having something you cannot use, it is therefore better you drop it for other companies with capacity to explore.’’
On what DPR must do to the new marginal fields awardees who fail to get the blocs into production with a timeframe specified by the regulator, Adigun noted that the PIB has addressed that, adding that it is one of the reasons politicians and individuals with vested interests must put national interests above personal and sectional interests and allow the PIB to be signed into law after almost 20 years of the country’s struggle to get a more progressive law that addresses the problems facing the oil and gas industry.