Nigeria’s push for higher OPEC quota threatened by PIB

Nigeria is finding it difficult to push for an increase in its oil production quota at the Organisation of Petroleum Exporting Countries (OPEC) due to flat investments arising from the continued delay in the passage of the Petroleum Industry Bill (PIB).

Failure to pass the PIB has stifled fresh investments in the country’s oil and gas sector, as international oil companies which are the major operators in the industry are withholding new investments until certain grey areas of the fiscal regime contained in the bill are resolved. As a result, exploration activities have been stalled, with just maintenance being carried out by the oil companies.

According to oil and gas industry operators, one of the factors that would allow OPEC to grant production increases to any of its member nations is that the country must have a steady growth in its reserve base, in addition its population size.

Some industry analysts who are attending the on-going Offshore Technology Conference (OTC), taking place in Houston, Texas in the United States of America, say Nigeria is currently being sustained by old investments without any fresh ones lately. The implication of this is that the country’s oil reserve base is being speedily depleted without replenishment.

Nigeria has been pushing for an officially approved increase in production quota from the current 2.5 million to three million barrels per day from OPEC. The move, which was initiated during the president Olusegun Obasanjo era, is yet to be approved by OPEC.

Emeka Eni, president of the Petroleum Technology Association of Nigeria (PETAN ) commenting on the sidelines of the conference, told BusinessDay that further delay in passing the PIB would have a negative effect on the nation’s net oil reserves and revenue.

Eni said, “If you look at the net oil reserves in the country, for the first time, it has started to decline. If the oil reserve is on the decline today, so what are we are going to produce in the future? The oil reserve is also a tool to negotiate OPEC quota, if the oil reserve is declining, it is going to be extremely difficult to make a case for higher OPEC quota and it will affect oil revenue to the country”.

He said that it is in the interest of operators to have the PIB passed, as it would address the needs and concerns of both short-term and long-term investors in the oil and gas sector. “It is not just about passing the PIB alone, but a PIB that would encourage investment in the oil and gas sector.”

The lack of new investments in the upstream sector of the petroleum industry has caused the country about $100 billion loss between 2008 and 2012, according to BusinessDay investigations, a situation that has made the passage of the PIB more expedient than ever.

Nigeria as at end 2012 could only reaslise about 2.1 million barrels of oil per day, as against the targeted production level of 2.5 million barrels per day, leaving her with a shortfall of about 0.5 million barrels per day. This production level gap is equivalent to a loss of about $10 billion in the year under review. The situation has even worsened, as daily crude oil production nose-dived to 1.9 million barrels in March 2013.

Eddy Wikina, managing director of Treasure Energy Resources and former external affairs executive for Shell Nigeria Exploration and Production (SNEPCO) said it might be difficult for the country to achieve its target of 40 billion barrels reserve, if the PIB is delayed, based on political and trivial issues.

Wikina said an oil industry like Nigeria’s, which cannot boast of more than nine oil rigs a day, is not considered as promising, adding that it tells so much about our economy.

Approximately a third of global oil output is produced by the cartel’s 12 members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

The delay in passing the PIB may make Nigeria lose its market position since there are several discoveries around the world and in particular Africa, where investors would prefer to go to due to perceived friendly and enabling environment for their investments to thrive.

For instance, a country like Angola is attracting more investment in the oil and gas sector presently. It is reported that Ghana has recorded more production than it budgeted because of its favourable investment climate.

This, for Nigeria, would also entail the loss of several jobs that should have been created through fresh investments, which are not forthcoming in the meantime

OLUSOLA BELLO, Houston Texas