By Ikenna Omeje

The struggle of the Africa’s largest crude oil producer, Nigeria, to meet its OPEC+ production quota has not abated as the country only averaged 1.183 million barrels per day (mbpd) in July, a far cry from its allotted quota which stood at 1.8mb/d.
The Organisation of Petroleum Exporting Countries (OPEC), in its Monthly Oil Market Report for August 2022, said the figure represents an increase of 7,000 barrels per day when compared with 1.176mb/d average production in the month of June.
“According to secondary sources, averaged 28.92 mb/d in July 2022, higher by 216,000 barrels per day month-on-month.
“Crude oil output increased mainly in Saudi Arabia, the United Arab Emirates, and Kuwait, while production in Venezuela and Angola declined,” OPEC said.
While oil price has remained elevated since 2021, Nigeria is not cashing in on the current market situation because of low production and excess expenses on petrol subsidies. Crude oil accounts for about 90 percent of the country’s foreign exchange earnings and about 70 percent of its revenues. The country’s inflation rate rose to 19.64 percent in the month of July 2022 compared to 18.6 percent recorded in the previous month, with food inflation accelerating to 22.02 percent from 20.6 percent recorded in June, according to the National Bureau of Statistics (NBS).
Nigeria is the largest crude oil producer in Africa with over 37 billion proven oil reserves and about 209 Trillion cubic feet (TCF) of proven gas reserves. Despite having these enormous resources, the country has been struggling to meet the nameplate production quota to it by OPEC+. The country’s inability to meet its quota has been attributed to years of underinvestment, high cost of production, poor infrastructure and oil theft in the Niger Delta.

Nigeria is not cashing in on the current market situation because of low production and excess expenses on petrol subsidies.

Also, the delay in the passage of Petroleum Industry Bill (now PIA) led to the suspension of key upstream development projects in the country. Most of the International Oil Companies (IOCs) had wanted issues around uncertainties in terms of investments in the country addressed. However, Final Investment Decisions (FIDs) are expected to be taken on key projects in 2022 with the assent of PIA by President Muhammadu Buhari, as well as current efforts being made to improve security situation, and the utilization of dispute resolution mechanism as contained in the Nigerian Upstream Cost Optimisation Programme initiative of the Federal Government.
‘‘While the country was waiting for the PIA, Nigeria’s oil and gas industry lost about $50 billion worth of investments. In fact, between 2015 and 2019, KPMG states that “only 4 percent of the $70 billion investment inflows into Africa’s oil and gas industry came to Nigeria even though the country is the continent’s biggest producer and the largest reserves.

Muhammadu Buhari

‘‘While the country was waiting for the PIA, Nigeria’s oil and gas industry lost about $50 billion worth of investments.

‘‘We are setting all these woes behind us, and a clear path for the survival and growth of our petroleum industry is now before us,’’ said the Minister of State for Petroleum Resources, Chief Timipre Sylva at the recent unveiling of the new Nigerian National Petroleum Company (NNPC) Limited.
Some of the FID candidate projects include Shell’s Bonga South-West and Aparo, which is expected to add about 225,000 barrels per day (bpd); Bonga North (100,000bpd); Eni’s Zabazaba-Etan (120,000bpd); Chevron’s Nsiko (100,000bpd); ExxonMobil’s Bosi (140,000bpd); Satellite Field Development Phase Two (80,000bpd) and Ude (110,000bpd).
The combined estimated cost of these projects is put at around $100 billion. They are expected to boost the country’s production by as high as 875,000 bpd and increase revenue by about $1.5 billion.

Timipre sylva

They are expected to boost the country’s production by as high as 875,000 bpd and increase revenue by about $1.5 billion.

Renegotiations of PSCs
As part of the efforts to increase Nigeria’s crude oil production output, NNPC Limited and its Production Sharing Contract (PSC) contractors earlier in August announced the execution of fully-termed agreements for renegotiated PSCs.
The parties renewed their agreements in five Oil Mining Leases (OMLs 128, 130, 132, 133, and 138), a development that would not only unlock further investments in the upstream sector and boost investors’ confidence but would also unlock over $500bn in revenue for the country.
The renegotiations will put to rest the protracted dispute between the NNPC Limited and the contractor parties in Oil Mining Leases (OMLs) 125, 128, 130, 132 and 133, as well as 138 PSCs). The PSCs and their leases, except OML 130, will run for another 20 years term under pre-PIA laws, while OML 130 is to be renewed under PIA terms.
Recall that the PIA in Section 311(2) stipulates that new PSC agreements under new Heads of Terms will be signed between NNPC Limited as Concessionaire and her Contractor Parties within one year of signing the PIA into law, giving a deadline of 15th August 2022.
This provision paved the way for the resolution of lingering disputes which created investment uncertainty and stifled new investments in the nation’s deep offshore assets.
According to NNPC Limited, these renewed PSCs would provide several benefits such as improved long-term relationships with contractors, elimination of contractual ambiguities especially in relation to gas terms, enable early contract renewal amongst others.

Stakeholders speak
Group CEO, NNPC Limited, Mele Kyari, said renegotiations of the assets were in line with the provisions of sections 311 of the PIA with other improvements to the PSCs aimed at driving performance in the PSC operations.
“The real impact of this is that we will have much better, much clearer relationship with our partners. We’ll have clear agreements for new production sharing contracts that must have recognized all the issues that we have with the 1993 PSCs,” Kyari said.

Mele Kyari

The parties renewed their agreements in five Oil Mining Leases (OMLs 128, 130, 132, 133, and 138), a development that would not only unlock further investments in the upstream sector and boost investors’ confidence but would also unlock over $500bn in revenue for the country.

“Our country kept its promise, and I understand very clearly that it would not have been possible except you had some courage of leadership, and all of us must give this credit to President Muhammadu Buhari, who agreed that we must resolve this most amicably, in a manner that benefits the country, but also in a way investors recover their cost and make the competitive benefits that they must have from their investments.
“In the end, the PIA recognises all those terms. The fiscal terms are re-engineered to make sure that these terms are met and also allowed us by law to close our disputes amicably so that we stop all litigations; so that some terms and conditions will enable us to move forward with our relationship and that is why we are here today.”
The Group General Manager of the National Petroleum Investment Management Services, Bala Wunti said the new deal has the potential to develop over 10 billion barrels of crude oil.
“However, the implementation of the PSCs in Nigeria was characterised by disputes over the years between the Contractors/Operators and the Concessionaire (NNPC). The disputes stifled investment in major Brownfield and Greenfield Deepwater projects.
“The execution of the revised PSCs today will deepen investment and development of Nigeria’s rich petroleum resources and ensure that the trifold mandate of the NNPC Ltd to ensure security of energy supply, sustainability of energy supply and accessibility is achieved,” Wunti said.
“In anticipation of this history signing of the PSC, NAPIMS had been actively working in collaboration with PSC Contractors to emplace essential Final Investment Decision parameters for major Deepwater projects including Chevron operated AGBAMI Gas Projects, OWOWO and BOSI development by ExxonMobil, SNEPCO’s BONGA North and BONGA Southwest Aparo, BOLIA-CHOTA, the PREOWEI Project being operated by TotalEnergies,” Wunti added.
The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, noted that the renegotiations is a major success story of the PIA implementation.
He said, “I have just two messages. The first is that the nation looks up to the NNPC. The NNPC should lead in turning our weaknesses

into strengths and we are very confident that as a regulator, the NNPC is fully prepared to lead operators; and the second is the fact that with the reports that we see happening with the new NNPC, that in no times, NNPC will have presence expanding its portfolios like Petrobas and Aramco.”

Gbenga Komolafe

On his part, the Chief Executive of the Nigerian Downstream and Midstream Petroleum Regulatory Authority Farouk Ahmed, said: “Another area that I want to emphasize, as you are here and planning for future investments, please focus on gas assets. Let’s focus on gas assets so that we can develop that midstream sector of oil and gas industry.”

Osagie Okunbor

In his remarks, Country Chair, Shell Companies in Nigeria, Osagie Okunbor described the execution of OML 133 PSC contract as a significant progress towards harnessing the deepwater resources of Nigeria.
Also speaking, the Chairman/Managing Director of ExxonMobil Companies in Nigeria, Richard Laing noted that the renewal of the Usan and Erha leases validates his company’s commitment to maintain a significant deepwater presence in Nigeria, through Esso Exploration and Production Nigeria (Deepwater) Limited.

 

Richard Laing

Chairman/Managing Director of Chevron Nigeria Limited (CNL), Rick Kennedy said Chevron is proud of its strong partnership with Nigeria and its various partners and remains committed to supporting the country to develop its energy resources safely and reliably.

Rick Kennedy

Nearer term production

TotalEnergies, operator of OML99 (40%) in partnership with the Nigerian National Petroleum Company (NNPC Limited, 60%), in August announced the start of production from the Ikike field.
Located 20 kilometers off the coast, at a depth of about 20 meters, the Ikike platform is tied back to the existing Amenam offshore facilities through a 14 km multiphase pipeline. It will deliver peak production of 50,000 barrels of oil equivalent per day by the end of 2022.
“TotalEnergies is pleased to start production at Ikike, which was launched a few months before the covid pandemic, and whose success owes a lot to the full mobilization of the teams. By tapping discoveries close to existing facilities, this project fits the Company’s strategy of focusing on low-cost and low-emission oil projects,” said Senior Vice President Africa, Exploration and Production at TotalEnergies, Henri-Max Ndong-Nzue.
Similarly, First E &P’s Madu Conductor Supported Platform (CSP), which was recently load-out by Dorman Long Engineering Limited at the Nigerian Naval Dockyard, Lagos, will add 20,000 bpd of oil to Nigeria’s production.
The CSP is a small platform that can contain eight to 10 wells, which when operational in September, will operate at a unit cost of less than $10 per barrel, in line with the government’s directive of producing and developing oil and gas for less than $20.

TotalEnergies, operator of OML99 (40%) in partnership with the Nigerian National Petroleum Company (NNPC Limited, 60%), in August announced the start of production from the Ikike field.

According to the Chief Executive Officer of the company, Ademola Adeyemi-Bero, the firm was working toward reaching a production capacity of 100,000 barrels of oil per day, as well as gas to enable Nigeria be self-independent and boost employment of locals.

Ademola Adeyemi-Bero

However, on the outlook for 2022, Seplat Energy in its second quarter results said the full-year production guidance for the year “reflects expected third party downtime and the derecognition of Ubima and has been narrowed to 50,000 to 54,000 boepd on a working interest basis, comprising 30,000 to 33,000 bopd liquids and 116 to 121 MMscfd (around 20,000 to 21,000 boepd) gas production.
“Capital expenditure expectation for 2022 remains at around $160 million. The Company expects to drill four additional oil wells in the coming quarter to arrest decline and support production growth across the asset base, complete ongoing projects, invest in maintenance capex to secure the existing assets and continue investments in gas,” Seplat said in its third quarter results.

First E &P’s Madu Conductor Supported Platform (CSP), which was recently load-out by Dorman Long Engineering Limited at the Nigerian Naval Dockyard, Lagos, will add 20,000 bpd of oil to Nigeria’s production.

New operators

The NUPRC, the country’s upstream regulator, in June awarded Petroleum Prospecting Licences (PPLs) to the 161 successful 2020 marginal fields awardees.
Some of the companies issued with licenses include Ardova Plc, Matrix Energy Ltd., Sun Trust Oil Company Limited, Deep Offshore Integrated Service Ltd., Island Energy Ltd. and Sigmund Oil Field Ltd.
Other successful companies are Shafa Exploration and Production Company Ltd., Emadeb Energy Ltd., Zigma Ltd., Inland Basin Ltd. and Petraco Oil Ltd., among others.
Out of the 57 fields, 41 were fully paid for, while 37 fields were issued with the PPL having satisfied all conditions for award.
“The implementation of the PIA 2021 is in top gear. Consequently, the new awardees should note that their assets will be fully governed by the provisions of the PIA 2021,” said Minister of State for Petroleum Resources, Sylva.
“As you develop your assets with the special purpose vehicles (SPVs), ensure that good oilfield practice is employed, environmental considerations and community stakeholders’ management are not neglected.
“It is my strong belief that the awardees would take advantage of the current attractive oil prices to bring these fields into full production within a short period to increase production, grow reserves and reduce cost of production.
“The onboarding of new oil and gas players in the petroleum sector is part of this government’s policy to encourage more indigenous participation in our petroleum operations.”
The national aspiration of Nigeria is to increase its oil reserves from 37 billion barrels to 40, produce 3 million barrels of oil per day, produce 10Bcf of gas for power generation and ensure zero gas flaring in the next three years.
With the recent issuance of licenses to successful companies in the 2020 marginal field bid round by the Commission, industry experts say that the focus should be on increasing the country’s crude oil production as well as gas.

Refining capacity vs crude export demand
The demand from local refineries could affect performance on Nigeria’s quota when Dangote and other refineries come on stream. With a population growth of 2.7 percent, there is increasing investments in refineries to meet local demand and save the country’s foreign exchange.
Nigeria is expected to become a net-exporter of refined petroleum products in the next few years through the combined capacity of 375,000 barrels per day from 27 modular refineries, 650,000 barrels from the Dangote refinery, and the 445,000 barrels from NNPC Limited refineries.
As of September 2020, there were 27 valid refinery licenses issued to private companies in the country by the defunct Department of Petroleum Resources (DPR). Out of this number, the construction of two – OPAC refineries and Waltersmith refining and Petrochemical Company – have been completed. Dangote refinery is expected to start production first quarter of 2023. With Nigeria’s current low oil production, the coming on stream of these refineries will further affect the country from meeting its OPEC+ quota as priority will likely be given to feeding local refineries with feedstock.
“The NNPC owns 20 percent equity in the Dangote refinery and not only that, and we’re very proud of this. We’re not only owning 20% equity, we have the first right of refusal to supply crude oil to that plant.

But we saw this energy transition challenge coming we knew at that time will come when you will look for people who will buy your crude oil you will not find and that means that we have locked down the ability to sell crude oil for 330,000 barrels minimum by right for the next 20 years,” said NNPC Limited Group CEO, Kyari at a press briefing, recently.
“Also, by right, we have access to 20% of the production from that plant. That means that whatever it does, you know we have a right to take 20 per cent of that production as part of our equity and this refinery will come on stream latest by the middle of next year.
“Projection is the first quarter, but we think that it can come up latest by the middle of next year. If it does, this refinery alone, because it has a 650,000 per barrel capacity and different technology, means that it can crack the crude in a manner that you can have more gasoline than a typical refinery.
“That means that the refinery has the ability to produce up to 50 million litres of PMS. So, the combination of that and our ability to bring back our refinery will completely eliminate any potential petroleum product into this country next year. You will not see any importation into this country next year. This is very practical. This is possible.”

“Capital expenditure expectation for 2022 remains at around $160 million. The Company expects to drill four additional oil wells in the coming quarter to arrest decline and support production growth across the asset base, complete ongoing projects,

 

Reality check: new projects in the West

The window to enjoy OPEC+ quota might not always be open as North Sea investments in oil and gas has taken a U-turn. There are a couple of FIDs being taken by Canada, Norway, and most recently the United Kingdom. These are happening on the back of the war in Ukraine. Some of these assets have over one billion barrels in reserves. Also, there are indications ahead of winter that production from Iran could be reconsidered in the global market just to ease the pressure ahead of the foreseen energy demand. The United States could also increase export from its reserve even further. The country’s rig count is currently over 700. According to Baker Hughes in its August 26th rig count report, there were 765 active drilling rigs in the US.
The North Sea Transition Authority (NSTA) in April disclosed that the annual performance review for the United Kingdom’s top producers showed that there are new projects with the potential of 1.3 billion barrels of oil and gas reserves — significant enough to boost the country’s energy security.
Out of this number, NSTA said that a total of 890 million barrels could be sanctioned in 2023, which the regulator expects operators to speedily deliver in line with the UK’s net zero target.
According to NSTA, exploration and appraisal activity is expected to return to the way it was prior to the outbreak of Covid-19 pandemic, with 20 wells per year forecast from 2022-24. There is also a plan by NSTA to hold a new licensing round this year, though the possibility depends on Climate Compatibility Checkpoint.
Insiders have also notified that the United Kingdom will be putting up a bid round for a couple of oil and gas fields as it intends to address the energy challenge facing its people. Sometime in the second quarter of this year it took steps to fortify its energy security, committing to support oil and gas projects in the North Sea.
“We are setting out bold plans to scale up and accelerate affordable, clean and secure energy made in Britain, for Britain – from new nuclear to offshore wind – in the decade ahead. This will reduce our dependence on power sources exposed to volatile international prices we cannot control, so we can enjoy greater energy self-sufficiency with cheaper bills,” said the Prime Minister, Boris Johnson.
On his part, the UK’s Business and Energy Secretary, Kwasi Kwarteng, said: “The simple truth is that the more cheap, clean power we generate within our borders, the less exposed we will be to eye-watering fossil fuel prices set by global markets we can’t control. Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”
A former Cabinet Minister, Lord Frost, is of the view that there is no climate ’emergency’ and is urging the incoming British Prime Minister, which would be Liz Truss, to be more pragmatic in response to climate change.

Out of the 57 fields, 41 were fully paid for, while 37 fields were issued with the PPL having satisfied all conditions for award.

“The current evidence does not support the assertion that we are in a climate “emergency,” he wrote.
“Rather, the effects of climate change are a problem, one of the many we face, and should be tackled in that pragmatic way rather than by asking us to up-end the whole way our societies work.
“Western society, and indeed world civilisation, depends on copious supplies of energy.
“Yet the prevailing mood is one in which individuals are asked to restrict their use of energy and in which unsatisfactory renewables technology is touted as the best solution to our problems.

Boris Johnson

Nigeria is expected to become a net-exporter of refined petroleum products in the next few years through the combined capacity of 375,000 barrels per day from 27 modular refineries, 650,000 barrels from the Dangote refinery, and the 445,000 barrels from NNPC Limited refineries.

“Instead of focusing on technological solutions that enable us to master our environment and get more energy in a more carbon-efficient way — nuclear, CCS, fracking, one day fusion – we have focused on managing demand so we can use medieval technology like wind power.”
Canadian government in April gave approval to Equinor’s $12 billion offshore oil project, following conclusion of an environmental assessment that it would have no significant inauspicious effects.
The project, Bay du Nord, would include erecting a floating platform to drill approximately 300 million barrels of light crude oil in the Atlantic Ocean, around 500 km offshore Canada’s Newfoundland and Labrador province.
Also, first power is expected soon from the world’s first floating wind farm to power offshore oil and gas platforms, Hywind Tampen, preparing for the start-up of the world’s largest wind farm, Dogger Bank. Gas is the primary fuel used to generate power in Europe. Equinor’s Hywind Tampen and Dogger Bank will be key hubs for power generation for Europe for many years to come. First power is expected in the second half of 2023, with commercial operations beginning in 2024 for Dogger Bank A, 2025 for Dogger Bank B and 2026 for Dogger Bank C respectively.
“The North Sea will continue to play a key role for Europe’s energy transition and security towards 2050. The region is expanding from oil and gas production into a broad energy province utilising world-class offshore wind resources. The North Sea is uniquely positioned to help meet European objectives of reliable, affordable and sustainable energy supplies. Renewable mega-projects like Dogger Bank and Hywind Tampen are nearing start-up, enabling Equinor to boost renewable energy to the European market. New projects such as Trollvind and Utsira Nord have the potential to deepen Norway’s lead in making floating offshore wind competitive and affordable,” said Executive Vice President for Renewables at Equinor, Pål Eitrheim.

 

Funding

As a result of the global push towards energy transition, investment in fossil fuel has taken a nosedive, with most international lenders cutting lending to fossil fuel related projects, which is also affecting investments in Nigeria’s oil and gas industry negatively.
“Capital is our main constraint in Nigeria’s oil and gas sector. We have problems with investment from everywhere because the world is moving fast to renewables. But now, everyone is coming to terms with the fact that we need to stick with fossil fuels. Europe for instance, is considering gas as clean energy along with nuclear. As a result, the funding constraints will ease in due course. Africa is not ready to move away from oil and gas because we have a huge amount of people without access to energy and hydrocarbons will enable us to meet SDG 7 goals of providing access to reliable energy. We have decided that Africa-based financial institutions such as the African Energy Bank which the African Petroleum Producers Association is working towards will be the ones to fund African energy developments. International oil companies are increasing their interest in offshore investment because fiscal terms are attractive. If we keep fiscal terms attractive, we will get more funding from international parties,” Sylva stated during an exclusive roundtable interview organized and hosted by the African Energy Chamber (AEC).
Considering the difficulty in obtaining loans from Europe, and financial institutions like the International Finance Corporation (IFC), International Monetary Fund (IMF), African Development Bank (AfDB), African Export-Import bank, among others, indigenous oil and gas companies will have to improve on their ESG for easy access to loans to operate their onshore and shallow water assets divested by IOCs. And NNPC Limited has set a good example in this regard.
In January, NNPC Limited secured a $5bn corporate finance commitment from the African Export Import Bank to fund major investments in Nigeria’s upstream sector.

Scaling up cheap renewables and new nuclear, while maximising North Sea production, is the best and only way to ensure our energy independence over the coming years.”

The move is a major milestone achievement in the company’s quest to scale up investments in the oil and gas industry following the commencement of the implementation of the PIA.
Under the NNPC Limited funding strategy for selected upstream investments, the company would be raising between $3.5bn and $5bn as corporate finance to fund major upstream investments. Afrexim Bank is the major lender to Dangote refinery.

“Instead of focusing on technological solutions that enable us to master our environment and get more energy in a more carbon-efficient way — nuclear, CCS, fracking, one day fusion – we have focused on managing demand so we can use medieval technology like wind power.”

Production cost and security challenges

Nigeria’s production cost currently hovers around double digits, with IOCs spending between $17 and $19 per barrel while most indigenous oil producers spend between $30 and $35 per barrel. This is unlike Saudi Arabia which holds record of between $4 and $5 production cost.
Also, oil theft has been a major concern for exploration and production companies, especially for those that have assets onshore and shallow water, with losses as of 2019 in the region of 30 percent.
Also, oil theft in the Niger Delta has taken a new dimension with losses now in the region of 80-90 percent, from 30 percent in 2019, according to various sources. This has forced companies to declare force majeure.
Few months ago, Shell and Eni declared force majeure on their export terminals as a result of vandalisation of their pipelines by oil thieves.
Reacting to the current challenges facing the country in a Twitter thread in March, the Chairman of Heir Holdings, Tony Elumelu, expressed unhappiness over hikes in the price of diesel, food inflation and epileptic power supply.
According to Elumelu, exploration and production companies are losing over 95 percent of oil production to thieves, adding that the Bonny Terminal that should be receiving over 200k barrels of crude oil daily, now receives less than 3,000 barrels because of theft.
“This morning, I am listening to my colleagues at the office bemoan the very pressing issues that they face every day in this country, and how things have been getting worse and worse – no electricity for 5 days, hikes in the price of diesel, frightening food inflation, etc,” he said.
“How can a country so rich in natural resources have 90 percent of its citizens living in hardship and poverty? I have often said that access to electricity is critical for our development, alleviation of poverty and hardship. And speaking of security, our people are afraid!
“Businesses are suffering. How can we be losing over 95% of oil production to thieves?
“Look at the Bonny Terminal that should be receiving over 200k barrels of crude oil daily, instead it receives less than 3,000 barrels, leading the operator @Shell to declare force majeure.”
In an op-ed published by the Africa Oil + Gas report, Executive Chairman AA Holdings revealed that up to 80 percent of oil produced in oil production wells is lost before it gets to the terminals due to oil theft.
“The stark reality today is that the IOCs are leaving, their decision is outside our control as a nation, in fact, over the last twelve years, Shell and Chevron have divested from a total of 21 blocks. It is now public knowledge that shell and ExxonMobil are now exiting the onshore/shallow water altogether.
“In fact, my projection is that, by Christmas of 2025, TOTAL would be the only IOC in J.V with NNPC.
“The situation is the same with domestic gas delivery, even though we are weaving all the right slogans about the future of gas in Nigeria, in the past 5 years, I can only point at a couple of Nigerian independents who are investing in gas development and processing of the domestic market,” he said.
According to the Group Chief Executive Officer (CEO) of Oando Plc, Wale Tinubu, while speaking at the 2022 Nigeria Oil and Gas Conference and Exhibition, Nigeria’s crude oil production dropped 43 percent in 26 months (March 2020- May 2022), adding that about 20 percent of the country’s daily production is lost to oil thieves and pipeline vandals.

Wale Tinubu

But now, everyone is coming to terms with the fact that we need to stick with fossil fuels. Europe for instance, is considering gas as clean energy along with nuclear. As a result, the funding constraints will ease in due course.

“There has been a 43 percent reduction in our production from March 2020 to May 2022. We lose almost 20 percent of our daily crude production to oil thieves and pipeline vandals. And 20,000 barrels a day of oil is lost to oil theft. Basically, some three million barrels on average yearly is lost to oil theft and pipeline vandalism,” he said.
The regulator, NUPRC, in July, disclosed that the country lost $1 billion in revenue in the first quarter of 2022, due to oil theft in the Niger Delta region.
Crude oil theft has turned into an organised crime that costs Nigeria roughly $10 million per day in losses, said the Managing Director of TotalEnergies EP Nigeria Limited, Mike Sangster, at the NOG.

Mike Sangster

He noted that addressing the lingering oil theft and vandalism of infrastructure would require a concerted effort, and pointed out that the continued crude theft in the region was a much bigger issue than the host communities’ hostilities.
Citing the company’s activities on OML58, he said “Since February 24, we haven’t had any significant production from that field. “Some discussants made points earlier today that the security issue is a very concerning one and it’s a determinant of future investments.
“If I were to go to my board to try to convince them about future investments in Nigeria, it would be difficult. I mean, I wouldn’t be able to do that because we are not producing onshore.
“I can see figures in the press of about 100,000 bpd stolen, which, if you did the numbers at 100 US dollars per barrel, it comes to 10 million US dollars daily! Now NNPC has 58 per cent in the JVs; and when you consider company tax of about 35 per cent, that’s a huge loss for the nation.
“I recommend that everyone needs to put hands together for a long-lasting solution to crude oil theft once and for all. Having incentives to stop vandalism is a good idea but there has to be more. The Host Community Trust Fund alone won’t solve it.”

In January, NNPC Limited secured a $5bn corporate finance commitment from the African Export Import Bank to fund major investments in Nigeria’s upstream sector.

Niger Delta agitators & security portfolio

The Federal Government, through the NNPC Limited, recently awarded pipeline surveillance contract to an ex Niger Delta militant, Government Ekpemupolo, otherwise known as Tompolo. The contract is reportedly worth N48 billion annually (N4b per month). Award of contracts to private individuals in the oil reach region could curtail incessant oil theft in the area, experts say. The award of contract on pipeline surveillance to private individuals was successful under the previous administration of President Goodluck Jonathan, and there is a likelihood that such level of success could be registered under the current administration.
Also at an event recently, the Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr. Bashir Jamoh, gave assurances that two special mission aircrafts in the deep blue project fleet of the agency will be deployed to fight oil theft and protect the nation’s economy.

Ekpemupolo

 

Jamoh said the aircrafts from the mobile assets of the deep blue project, will support existing platforms being deployed by other security agencies, which NIMASA has subsisting Memorandum of Understanding with.
He said: “We shall be deploying our 2 special mission aircrafts for aerial surveillance to prevent and fight oil theft in the country. With this, we aim at using the aircrafts to patrol sensitive areas, record suspicious human and vessel movements to process intelligence for timely action by our security agencies

Bashir Jamoh

“In fact, my projection is that, by Christmas of 2025, TOTAL would be the only IOC in J.V with NNPC.

the oil industry is critical to our national economy and no space of the sector should be left for criminals to occupy or operate. We have recorded gains in our maritime security efforts and more needs to be done to sustain and consolidate on these gains.
“Our collaborations with security agencies which we have MoUs with is, among other reasons, to collaborate and work ahead of criminal elements. I am happy to state that our synergies have been beneficial to the country in many ways.”
Moreso, there are other proposals on the table in recent times aimed at protecting the pipelines with the use of technology.

Future

Despite the global push towards energy transition, the future of oil and gas looks bright, especially with the expected geometric increase in population in the next 28 years. In April, OPEC projected world oil demand growth to increase by around 3.7 mb/d to average 100.5 mb/d in 2022.
OPEC+ earlier in August agreed to raise production quotas by additional 100,000 bpd in September as pressure from the consuming nations on the group to ease tightening international market persist.
Should Nigeria achieve its national aspiration of 3 mb/d with the current elevated oil prices the government’s revenue will spike and cushion the effect of debt servicing, which has almost exceeded revenue. However, the market is expected to change sooner or later as the West looks for solutions, and Nigeria needs to capitalize on the current situation.
A spokesperson for the French Government in June had requested that petroleum products from Iran and Venezuela be allowed into the world market, Orinoco Tribune reported.
Both countries have been having difficulties getting their crude oil into the world market, because of sanctions imposed on them by the United States and its allies.
Sources from President Emmanuel Macron’s administration told Orinoco that France sees it as a priority that the international community, buyers and producers, work together to ensure that the right volume of petroleum products is in place to ease tensions and lower prices.

 

Emmanuel Macron

“We believe that all options deserve to be explored given what is at stake, including Iran and Venezuela, but these are conversations to have with our partners,” a government representative told Orinoco.
Analysts project that Iran’s nuclear deal could see oil falling to below $70 and even to $60 per barrel. Earlier in September, the G-7 agreed to cap the price of Russian oil as part of measures to incapacitate the country financially, because of the current war Russia is waging in Ukraine.
“We will simply not supply oil and petroleum products to such companies or states that impose restrictions, as we will not work non-competitively,” said Russia’s Deputy Prime Minister Alexander Novak, as carried by the state news agency TASS.
Russia is already selling its petroleum products at discounted rates, and China and India are taking advantage to stock up. A cap on Russian oil will likely lead to supply glut as the country will do everything possible to remain in the market, including slashing prices, which will force OPEC+ to cut production to rebalance the market.

“I recommend that everyone needs to put hands together for a long-lasting solution to crude oil theft once and for all. Having incentives to stop vandalism is a good idea but there has to be more. The Host Community Trust Fund alone won’t solve it.”

Going forward

With growing global population, which will lead to increase in demand for energy, experts note that inclusive energy transition is key as the 2050 net-zero goal gathers momentum, to ensure that no country is left behind. However, the role of technology is critical in the industry as solutions are sought to the energy need without necessarily compromising the pursuit of transition targets. To this end, Carbon Capture and Storage technologies will play big roles.
University of Delaware researchers earlier this year achieved a milestone that could bring more environmentally friendly fuel cells closer to commercialization. The University Engineers demonstrated a way to effectively capture 99 percent of carbon dioxide from air using a novel electrochemical system powered by hydrogen. The research team, led by UD Professor Yushan Yan, reported their method in Nature Energy.

Analysts project that Iran’s nuclear deal could see oil falling to below $70 and even to $60 per barrel.

Carbon Capture and Storage (CCS) or carbon capture and sequestration is the process of capturing Carbon dioxide (CO2) before it enters the atmosphere, transporting it, and storing it (carbon sequestration) for centuries or millennia. Usually, the CO2 is captured from large point sources, such as coal-fired power plant, a chemical plant or biomass power plant, and then stored in an underground geological formation. The aim is to prevent the release of CO2 from heavy industry with the intent of mitigating the effects of climate change.
The research team’s results showed that an electrochemical cell measuring 2 inches by 2 inches could continuously remove about 99 percent of the carbon dioxide found in air flowing at a rate of approximately two liters per minute. An early prototype spiral device about the size of a 12-ounce soda can is capable of filtering 10 liters of air per minute and scrubbing out 98 percent of the carbon dioxide, the researchers said. This and other technologies on the table will be crucial in exploration and production activities in the coming years for oil and gas companies across the world, and in Nigeria.
To address the funding challenges confronting oil and gas companies in Nigeria and Africa, the Executive Secretary of the Nigerian Content Monitory and Development Board (NCDMB), Engr. Simbi Wabote, advocated for the creation of an African Local Content Fund to support the continent’s fossil fuel projects, while speaking at the 6th Sub-Saharan Africa International Petroleum Exhibition and Conference (SAIPEC).
He said, “Let me use this opportunity to once again canvass for the creation of an African Local Content Fund that could be utilized to set up large finance institution for the funding of the development of oil and gas projects in Africa. This is especially important against the backdrop of the reluctant and outright declaration by some banks and financial institutions to stop funding hydrocarbon-related projects. I hope the AfreExim bank, the AfDB, or the AU, through the AfCFTA secretariat, need to institute a form of contribution no matter how little as a fund to support the continent’s needs in developing hydrocarbon.”

Engr. Simbi Wabote

The University Engineers demonstrated a way to effectively capture 99 percent of carbon dioxide from air using a novel electrochemical system powered by hydrogen.

The Minister of State for Petroleum Resources, Sylva, recently informed that the Federal Government was working to create the enabling environment for interested investors in the country’s oil and gas industry. This step and other factors like deployment of state-of-the-art technologies by oil and gas companies in their operations to minimize carbon footprints, will define the growth of Nigeria’s oil and gas production, particularly in the upstream subsector in the coming years.
“To facilitate this, the Ministry of Petroleum Resources, in fulfilment of its mandate to “Promote an enabling environment for Investment in Nigerian Petroleum Industry” as enshrined in Section 3 (e) of the PIA, is setting up a one-stop Oil and Gas Investment centre to create an enabling business environment for would-be investors,” he said.

“Let me use this opportunity to once again canvass for the creation of an African Local Content Fund that could be utilized to set up large finance institution for the funding of the development of oil and gas projects in Africa.