Production slows as crude prices skyrocket, experts lament

Nigerian oil and gas industry experts have urged the federal government to improve the investment climate to attract needed investment in the upstream sub-sector amid lagging crude oil production.

PUNCH cited a report by the Organization of the Petroleum Exporting Countries which found that Nigeria’s average daily production fell 9.28 percent from 1.40 million barrels in June to 1.27 million barrels in June. August, while the average daily July production was 1.39 million barrels.

Petroleum Resources Department Director / CEO Sarki Auwalu said in August that marginal field licensees were a critical part of FG’s plan to increase Nigeria’s oil reserves to $ 50 billion. barrels.

He said operators would help Nigeria increase production to four million barrels per day by 2022.

However, information gathered by our correspondent revealed that most of the marginal field licensees were still struggling to find land towards the end of 2021. Olakunle Dosunmu, Senior Director of Sales and Marketing at Geoplex Drillteq Limited, told our correspondent on the phone that the marginal fields would still take a long time to produce results.

He said: “Many of those who received the fields have not been able to pay their signing bonuses and some who have paid have not been able to get the right investment to develop them.

“It is achievable but it will take time. I don’t think we’ll get a lot of barrels from marginal field operators in 2022. ”

Olakunle said the country, despite its desire for local content, would need significant foreign investment to develop the necessary infrastructure in the oil and gas sector.

He said: “Looking at the environment in which we find ourselves now, some of the foreign investors need a level of proof to secure their investment because with the insecurity in the South-South and the North-East, when people think in Nigeria, most people cannot differentiate North East from South South or South West.

“So the overall image must improve to attract foreign investment to bring us to the level we want. ”

The international benchmark for crude oil, Brent, traded down 1.61% to $ 81.23 a barrel at 3:43 p.m. Nigerian time on Wednesday.

Oil prices topped $ 80 on September 28 after OPEC and its allies refused to increase production even as the world faced a shortage of supply of the product.

This raised fears of a risk of fiscal strain on FG, as subsidy payments would rise with rising oil prices pushing up the cost of landing imported oil products, while the country would lose a crucial boost to oil revenues due to delay in production.

An associate director and oil and gas analyst at PwC Nigeria, Temitope Yusuff, said that regardless of the level of production, the rise in crude prices was positive for the country.

She said higher crude prices mean higher incomes in regular situations.

Yusuff added, “However, in terms of maximizing our revenue, we would have been better off with a higher level of production. Now, as we know, all things are not equal.

“As government revenues increase due to rising prices, as our highest imports are subsidized petroleum products, there is a related cost element through petroleum subsidies.

“Higher production just doesn’t happen like that. This requires investments to increase production levels.

“As the Oil Industry Law has been pending for so long and with the level of security concerns in Nigeria, investors are not investing money in Nigeria’s oil and gas industry.”

She said many final investment decisions were delayed for a very long time due to the delay in passing the law, but the final passage was a step in the right direction.

She said the government needs to fix security as this will help improve the local investment climate.

The director general of the Center for the Promotion of Private Enterprise, Dr Muda Yusuf, said if Nigeria fails to increase its production levels, the implications for the economy will be dire.

He said: “Rising crude oil prices present a great opportunity to stabilize our macroeconomic environment.

Therefore, the output factor has become more critical than ever.

“We have a serious liquidity crisis in the foreign exchange market because there is a huge backlog of unmet demand. As current demands cannot be net, this results in spillovers to the parallel market. ”

Yusuf advised the government to spare no effort to ensure optimal production is restored.

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