Dr. Ibe Kachikwu, Minister of State, Petroleum Resources
In his ministerial address at the recent Nigeria Oil and Gas Conference that was held in Abuja, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, noted that there is need to set the pace for the future of the oil industry. Kachikwu observed that in the past three years, there is a huge amount of works done in the industry that may not have been documented. The oil industry is at its critical stage of its life cycle. Operators need not to be worried about the recent trend of oil becoming less useful in the near future as claimed globally. The reality is that electric cars still represent about 2% while the fossils to replace oil may not be realized because demand for oil still increases and more discoveries are made projecting up to 2040 with about 30% increase in the demand for oil. Present reality shows that more oil is found daily.
The Minister made a stunning revelation that in Nigeria, the figure released by the Department of Petroleum Resources (DPR) recently points to figures of excess of 39 billion barrels of oil which will last up to fifty years and “There is enough reasons to be convinced that oil will remain for a long time.” Although the performance in the oil sector differs and it is not how long it lasts but the value it creates. How will Nigeria utilize the resources it finds? There is need to project other development sector of the economy such that by the time it filters away, there would have been an environment that will be different from oil. The reality factors include energy supply and demand, technology innovation, national and international energy policies.
He was of the view that continued pressure in the global oil market is intensifying and without the huge work that OPEC has done, its members would have been in difficult situations. Although, there is huge amount of investments on shale and the US tends to be independent in terms of energy provision and less reliance in foreign imported oil, the oil market will be impacted. This is where Nigeria has a challenge in terms of how to sustain its own market.
Notwithstanding, Kachikwu said Nigeria has increased its barrels with 36.1 billion of proven reserves as at 2018 and there are about 80 acreages under review to enhance the sector. There are also huge Final Investment Decisions (FIDs) in the horizon such as Bonga Southwest and Zabazaba. The country’s current production levels run between 2 to 2.5 million barrels per day which has been sustained due to the peace in the Niger Delta. There are many E&P companies producing from over 180 fields as at 2017.
Nigeria’s gas reserves is about 199 to 200 trillion cubic feet (tcf) up from 192 tcf with the capacity of almost 600 tcf. “With this resource base, it means that we have to absolutely begin to look at how to provide gas both for electricity and for industrial production,” he added. Huge amount of success is made in terms of gas.
According to Kachikwu, refinery has always been a challenging aspect of the industry, Nigeria National Petroleum Corporation (NNPC) and the Ministry of Petroleum Resources are working together to put the four refineries in place while the modular refineries have been successful. By 2019, some of those who got licenses would have finished construction while production will commence.
Kachikwu commented on the Dangote refinery which is making significant progress and there is commitment that by March 2019, the refinery will start production. Refinery is critical and its cost implications is enormous due to fund.
The Minister made it known that a lot of works have been done in NNPC by imbibing transparency which was led by President Mohammadu Buhari, “Quite frankly in my experience as Petroleum Minister of State, have not received a single call from his Excellency, the president urging me to go and issue somebody or give a block to somebody, the president deserves an applause for this.”
Kachikwu lamented the cost of producing oil in Nigeria which is extremely high on a comparative basis and is one of highest in OPEC countries. Since other countries are pruning down cost of producing oil, Nigeria will do same. Over the last ten years, Nigeria has moved its volume of production to 2 million barrels.
In terms of gas flaring, the Minister reiterated that 2020 timeline is complied by operators to ensure that it does not exist in order to avoid environment and health hazard across the country. He made it known that host community issues have been largely driven by government policies and companies must take initiatives to solve security matters through Memorandum of Understanding (MoU) to enhance relationship.
The Minister challenged Nigerian players in the oil industry to be involved and participate in the production process. Kachikwu hoped that at least indigenous participation should be 30% to aid production growth of Nigeria. According to him, average entrepreneurs in Nigeria’s oil sector which is domestic are obsessed with contracting bids, allocations and crude terms, “We need to leave that and get into more serious issues.” They should set global recognizable structures such as massive procurement, engineering and take advantage of existing opportunities that come to Africa. He advised indigenous operators to brace up and move forward.
There should be creativity and innovation in the industry by setting new benchmark that are workable in the oil sector in Nigeria. Enhanced transformation with new corporate parameters focused on high benchmark are necessary for the oil sector so as to meet aspirations of Nigeria to compete with best performing oil reliance economies in the world.