Experts paint gloomy picture for Nigeria’s oil, gas sector

Nigeria faces dire prospects in the oil and gas sector if the current challenges in the sector are not urgently addressed.

Some stakeholders in the sector expressed this concern, saying that current challenges in the sector might frustrate the achievement of major production targets in future.

They listed the challenges to include vandalism of oil facilities in the Niger Delta that has affected oil production and falling crude oil prices in the international market.

The stakeholders expressed these concerns in separate interviews with the News Agency of Nigeria (NAN) in Lagos on the occasion of Nigeria’s 56th independence anniversary.

They said that effects of these challenges on the economy were already manifesting.

The Nigerian National Petroleum Corporation (NNPC) reported that Nigeria lost N51.388 billion to oil pipeline vandalism in the last four months.

The report said that the country would record more of such losses if the current spate of pipeline bombings by militant groups in the Niger Delta region was not addressed

The NNPC monthly financial and operations report for April 2016 reported that the NNPC spent N33.994 billion on pipeline repairs and management during the period.

The report said also that as a result of the vandalism, N10.335 billion worth of crude oil was lost, while petroleum products losses between January and April 2016 stood at N7.059 billion.

The Minister of State for Petroleum Resources, Ibe Kachikwu, said that following the spate of attacks on oil and gas assets, Nigeria’s output of crude oil had declined to 1.4 million barrels per day from 2.2 million.

Dolapo Oni, the head of Energy Research at EcoBank, said that oil prices would continue to slide in future with some rather extreme scenarios to under 40 dollars per barrel.

Oni said that if the crude oil prices declined further, many oil and gas companies in Nigeria would face difficulties with meeting repayment obligations to banks.

He said that currently there were cost efficiency problems in the oil and gas industry and the development could make it impossible for government and other stakeholders to reposition the sector effectively.

The oil expert said that one of the challenges facing the sector was the noticeable delay in the contracting processes and this challenge also included funding and security problems.

He frowned at the situation where priority attention was given to oil to the detriment of gas production.

Oni advised that efforts should be made to tackle Nigeria’s dependence on oil to the detriment of gas when the country had about 184 trillion cubic feet of proven natural gas reserves.

Samuel David, the chairman of Divoc Energy, advised that Nigeria should continue to diversify its resource base and stop its heavy reliance on crude oil revenue.

David said that diversification required strong leadership, good policies and the political will, as well as money.

“So ironically, income from oil is required to diversify Nigeria’s economy to fill the infrastructure gap, to provide power and to create and grow other industries that are holding the country back.”

He said that the industry had witnessed dwindling fortunes, especially since 2015, when oil industry workers and facilities came under incessant and direct attacks by the militants in the Niger Delta.

David said that the dwindling fortune of the oil sector was already affecting other sectors.

“The rapid devaluation of the naira can be attributed in part to lower oil prices which have wiped out billions of naira in Nigeria’s fledgling indigenous oil and gas companies.”

A former PENGASSAN public relations officer, Oluwaseyi Gambo, said that the ongoing insecurity in the Niger Delta had forced many multi-national international oil companies to commence divestment in oil blocks and marginal fields.

Gambo said that many of these assets were Nigerian onshore assets that had been plagued by industrial-scale oil theft, insecurity and spillages.

The former PENGASSAN spokesman said the security challenges should be resolved to assure investors that the environment was safe for investment.