The aspiration of the Federal Government to attain a crude oil reserve of 40 billion barrels, last week, suffered a huge setback as the apex body of professional geoscientists – the Nigerian Association of Petroleum Explorationists (NAPE) –foreclosed the target.
The Federal Government in 2010 set the target of 40 billion barrels of crude oil reserves and a production of four million barrels per day by 2020. But with two years to the 2020 timeline, stakeholders in the nation’s oil and gas sector are apprehensive that the target may after all be a mirage.
Prior to now, experts had believed that the country would meet the target, which was aimed at boosting reserves through increased exploration and production activities.
NAPE President, Dr. Andrew Ejayeriese, in arriving at his conclusion, submitted that the lack of a clear cut fiscal terms, failure to conduct oil bid rounds, multiple taxation, poor infrastructure and a hostile business environment remained some of the factors that would make the target an impossible task.
Already, the development has pitted operators and commentators against each other. While some believe the target is achievable, others have described it as a tall order that may not see the light of day.
More importantly, the pragmatic group believes that should government implement the recommended policies, including matching its thoughts with action rather than its policy summersaults, the industry could achieve the 40 billion reserve target.
Ejayeriese, while listing the several obstacles towards the realisation of the target, also observed that there was no working template to suggest that the 40 billion barrels oil reserve target by 2020 could be achieved.
He noted that the target had become more of mere talk, which was gradually turning to a cliché rather than an action plan, a development, he said, remained worrisome.
The NAPE President also expressed worries that exploration that ought to have boosted oil reserves are not happening because the country’s investment climate is not business-friendly as oil firms are subjected to all manner of taxes and levies, leaving them with a lean bottom line.
‘‘Oil companies that have refused to go into exploration in Nigeria are doing same elsewhere because the investment climate is conducive in such regions. Businesses will rather take their funds to places where return on investment, security and infrastructure are guaranteed,’’ he disclosed.
He equally took a swipe at the National Assembly for not being able to pass the Petroleum Industry Bill (PIB), saying the proposed law that was meant to unlock potential in the country’s oil and gas sector has suffered several setbacks, thus discouraging fresh investments into the sector.
‘‘All these obstacles pose a threat to the realisation of the 40 billion barrels oil reserve target by 2020. If Ghana could get its oil reform laws sorted out in 18 months, why should ours drag for over 18 years without a headway,’’ he lamented.
Former NAPE President, Mr. Abiodun Adesanya, had in his submission at last year’s 10th Annual Sub-Saharan Africa Oil and Gas Conference in Houston, Texas, USA, assured that the 40 billion barrels of reserves target by 2020 was achievable because the country has been able to identify where the resources to achieve the target are, adding that there are quite a number of fields that have been discovered but not yet certified by the Department of Petroleum Resources (DPR) into being called reserves.
He hinted that a formula has been found to address that challenge and it seems to be working because the country has witnessed a reduction in the vandalisation of production infrastructure and that again has increased the confidence of operators to step out.
The former NAPE boss equally advised the Federal Government to make provisions for incentives for prospective investors willing to explore the hydrocarbon potential in frontier basins to increase the depleting reserves in the country.
Adesanya said that this became necessary against the backdrop of government’s intention to increase the country’s crude oil reserves to 40 billion barrels by 2020. A frontier basin is a basin where exploration activities have not been carried out or a basin with short-term exploration activities and a significant volume categorised as undiscovered.
He listed Nigeria frontier basins to include Chad, Anambra, Bida, Dahomey, Gongola/Yola and the Sokoto basins, as well as the Middle/Lower Benue Trough.
According to him, government must provide incentives to investors that are willing to explore in the frontier basins because there is something that takes these companies to such basins in the first instance.
Also, a former President of NAPE, Mr. Chikwendu Edoziem, advised government to grant fresh incentives to oil firms to encourage exploration and find new oil. Indeed, the aspiration of the Federal Government to grow indigenous oil producers’ contribution to the national crude oil basket from the current 10 per cent to 30 per cent within the next five years also remained a welcome development.
Kachikwu, had at the closing ceremony of the maiden edition of the Nigerian International Petroleum Summit (NIPS) held in Abuja last February set the target.
According to him, the nation aspires to pump 2.5 million barrels of crude oil per day by 2023 and the expectation is that indigenous producers will contribute about 25 or 30 per cent of the projected volume.
In his 2017 end of the year message to staff of the Nigerian National Petroleum Corporation (NNPC), the Group Managing Director, Dr. Maikanti Baru, had disclosed that Nigeria has recorded some addition to its oil and gas reserves.
Baru had said that the country’s oil and gas reserves had increased to 37 billion barrels and 192 trillion cubic feet of gas respectively. He ascribed the growth to the relative peace in the Niger Delta.
He explained that the corporation had created security management platforms that would enable it identify and evaluate risks, develop and superintend implementation of investigations, as well as aggregate and deploy necessary resources to guarantee a peaceful business environment in the region.
The lack of final investment decisions on seven offshore deepwater oilfield projects in the country also poses a threat to the country’s target of 40 billion barrels of crude oil reserves by 2020.\
The nation’s crude oil reserves fell to 36.74 billion barrels in 2016 from 37.06 billion barrels in 2015 and 37.45 billion barrels in 2014, according to DPR.
Last year, Baru had said to achieve the target, the country would need an increment of at least one billion barrels in reserves year-on-year up until 2020 and a half of a million barrels in incremental production capacity per day within the same time frame.
A petroleum expert, Mr. Bala Zakka, who expressed concerns about the delayed deepwater projects, had said that international oil companies would continue to invest in the nation’s oil and gas industry if the investment climate was good. He said, “practically, once there is a delay in what we call drilling or exploration campaign, the ability to build reserves will also be affected because when you embark on exploration campaign, the essence is to build up reserves.