Angola set to outpace Nigeria’s oil production

Angola drew level with Nigeria in May on daily oil production at 1.97 million barrels per day and sold its first gas cargo from the $10 billion gas plants after 18 months delay, as doubts over future investments in Nigeria’s oil industry linger.

The development follows a recent report by Platts survey of the Organisation of Petroleum Exporting Countries (OPEC) which analysts called ‘worrying’ that Nigeria is the OPEC producer most affected by the shale oil boom that has seen its oil sales into the United States (US) slashed.

Imports to the US from Nigeria tumbled to a record low in February, based on data from the Energy Information Administration (EIA), the US Energy Department’s statistical arm.

Nigeria, which depends largely on earnings from oil to service its budget, has seen its oil revenues drop in recent months.

The Angola gas shipment underscores the huge investment by multi-national oil companies into the country’s expanding, well-run and supported oil industry, and underlies the increasing unattractiveness of Nigeria’s oil and gas sector as an investment bride. The liquefied natural gas (LNG) project was bankrolled by Chevron Corp, which according to Bloomberg, plans to spend more than $77 billion on two LNG projects in Australia.

Bloomberg reports that, “the facility in Northern Angola plans one or more shipments in June and July before perform

ing checks on its systems and resuming output in the fourth quarter,” said people, who asked not to be identified because the information isn’t public.

Bloomberg also quotes a distributed business wire in which George Kirkland, vice chairman of San Ramon, California-based Chevron, said the project would commercialise natural gas resources in Western Africa to meet growing demand in the region and internationally.

Nigeria’s oil and gas industry has seen divestments of oil assets by some international oil companies (IOCs) in recent years, and there is uncertainty in sector, in the face of the long delay in the passage of the Petroleum Industry Bill (PIB).

Chevron’s plans to sell off its interest in two oil blocks.

Chevron’s planned sale of its 40-percent interest in oil mining leases (OMLs) 83 and 85 located in the country’s shallow waters, off the coast of Bayelsa State came on the heels of Brazil’s Petrobras’s decision to sell $5 billion of it Nigerian assets in furtherance of its move to reduce its footprint in Africa. Shell, Total and ConocoPhillips had recently sold some of their assets in the country.

Already, the decline in US imports of Nigeria’s crude oil and LNG due to its increasing domestic shale oil and gas production, and the potential export of her shale gas to the global LNG market have put pressure on Nigeria.

In 2011, U.S. imports of Nigerian LNG significantly decreased to 0.05 million metric tons (2.5 Bcf), according to data from the EIA, which is the lowest level recorded since Nigerian LNG exports began.

While Nigeria is still dragging her feet on the $16billion Bras Liquefied Natural Gas project, its competitor, Angola is cruising into the international market with its first LNG, as Chevron is lifting its first LNG project in Angola. The project is one of the largest on the African continent.

Nigeria has dragged her feet to the extent that ConocoPhillips, the initial promoter, has divested in the project and Oando, an indigenous company, is angling to take over the share of ConocoPhillips.

Also the Nigeria LNG Train-7 has remained largely unattended to because of intrigue. The presidency has delayed the take off of the Brass LNG project. Unfortunately, while there has been a string of divestments from Brass LNG, those markets that the NLNG Trains-7 is suppose to serve are now going to companies from other countries.

“The US has already started to replace Nigerian crudes for shale oil. Nigeria needs to review its export strategy and ensure they increase share in other markets like they have done for LNG in Japan,” reckons Claire Lawrie, head of oil and gas advisory for Africa, at Ernst & Young.

Wumi Iledare, director, Energy Information and Data Division, Center for Energy Studies at the Louisiana State University, US, said: “Nigeria need to worry much on the lack of transparency and fiscal responsibility within its oil and gas sector in terms of NNPC governance and financial autonomy.” She added, “Nigeria will attract much more investments to develop and produce its oil and gas resources for the global market in Nigeria, if a transparent and pragmatic PIB is enacted quickly, and an effective federal governance structure.”

President Goodluck Jonathan was recently reported to have said that investment in the country’s oil industry was falling because of delays in passing the PIB, adding that the conclusion of the bill was critical.

The PIB, which is expected to overhaul the industry, is currently before the National Assembly. It recently scaled the second reading in the legislature.