Petroleum Club looks at hydrocarbon and Nigeria economy in 2027

Nigeria is Africa’s largest oil producer and has been a member of the Organization of Petroleum Exporting Countries (OPEC) since 1971. The country’s hydrocarbon sector accounts for almost all the country’s export and government revenue. The economy is heavily dependent on the oil sector, which, accounts for over 95 percent of export earnings and about 40 percent of government revenues, according to the International Monetary Fund. Though the petroleum sector is important, as government revenues and foreign exchange still heavily rely on this sector, it remains in fact a small part of the country’s overall diversified economy.

The Petroleum Club Guarantors’ dinner held recently in Lagos provided an opportunity to look at the country’s economy and the hydrocarbon sector 10 years from now which Godswill Ihetu, Chairman, Petroleum Club, Lagos said is “attempt to understand whether Nigeria is an oil economy or an economy with oil”.

Austin Avuru, managing director, Seplat Petroleum Development Company, said that the target for Nigeria in the next ten years is to make oil and gas enablers instead of revenue earners that it has always been in Nigeria’s economy. This he said will be achieved through in-country processing of the hydrocarbon resources which will engender growth of other sectors such as gas-to-power, fertilizers for agriculture, cement for export and also turning Nigeria into a hub capable of supplying petroleum products to other parts of Africa.

Avuru lauded the impact indigenous participation in the hydrocarbon sector adding that much more can be achieved with strong regulation.

“If the country does not institute strong regulation in the oil industry, the sector will collapse”, said Avuru.

Avuru also appraised gas infrastructures across the country with current capacity of 300 million scf which goes through the pipeline from Escarvos to Lagos and called for enhanced distribution networks for agricultural products being conveyed from the north to the southern part of Nigeria.

“Nigeria will be deceiving itself if does not by 2027, have efficient world class rail system from north to south and west and to the east”, the Seplat chief executive said.

In the past fifteen months of the Niger Delta unrest, the economy sunk into recession and national production dipped from 2.2 million barrels per day (bpd) to 1 million bpd prompting Avuru to warn that if the country does not address the Niger Delta crisis, “we will get to a point that we lose the financial momentum that is required to get Nigeria out of this problem. If we toy with six months of production, and next year our revenue is only able to fund 30 percent of our budget because of the crisis and we think that the crisis is not serious enough, it means we are joking.”

Avuru called on the government to quickly address the fiscal and governance bill.

“These two pieces of legislation will put the industry back on track to a point where the future of the country is predictable. This will give ample opportunity to investors to have clear idea of what the fiscal regime and governance structure is before investing into the sector”.

Earlier, Godswill Ihetu, chairman, Petroleum Club said that 2017 has been a better year for the petroleum industry.

“Firstly, we are beginning to see oil prices touching $60 dollar per barrel. Secondly, the industry is recovering from the disruption of oil and gas production occasioned by the activities of the Niger Delta Agitators”.

Ihetu enumerated the positive impact of Petroleum Club on Nigeria’s oil and gas sector.

“Last year we suggested that the Federal government should encourage the Niger Delta indigenes to set up Mini Refineries of, as low as, 1,000 barrels per day capacity, in areas where they would have access to crude oil. This idea has been adopted by the Federal Government albeit in the name of “Modular Refineries”, which in fact suggests larger capacities than we recommended. This would of course be left to investors to decide based on their own economic assessments.

We have also given support to the Nigerian Liquefied Natural Gas (NLNG) in their quest to resolve the attempt by the National Assembly to amend the NLNG Act by withdrawing the Assurances and Guarantees provided to the NLNG in that Act”, Ihetu said

FRANK UZUEGBUNAM