… To increase reserve 40bb/d in three years
…Low, high crude prices have negative effects, says OPEC
Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr. Maikanti Baru, said the corporation would raise funds from the capital market to finance a minimum of seven new oil and gas projects in the country.
In his keynote address at the ongoing Nigerian Oil and Gas Conference and Exhibition in Abuja, titled ‘Driving Nigeria’s Oil & Gas Industry towards Sustained Economic Development and Growth,’ Baru listed the projects as NNPC/Nigeria Agip Oil Company Joint Venture Idu-Re-development and South Gas Project.
Others, he said are the North Gas Project, Central Gas Project, NNPC/Total Exploration and Production Nigeria JV’s Ikike Project, NNPC/Shell Petroleum Development Company JV Southern Swamp and Associated Gas Solution Step 2 Project.
He added that the NNPC was on the verge of concluding the Bonga South West/Aparo, BSWA, project with Shell Nigeria Exploration and Production Company, SNEPCO, pending the resolution of certain disputes with its partners.
The NNPC boss said that “We intend to sanction the multibillion US dollars Bonga South West/Aparo (BSWA) project as soon as we conclude an agreement on the Heads of Terms with SNEPCO on the various pending PSC Arbitration disputes. This will jump start the resolution of all the other PSC Arbitration Disputes.”
Also speaking in the conference, the Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Mr. Mohammad Barkindo, insisted that both low and high crude oil prices have negative effects for both oil producing countries as well as consumers.
According to him, Barkindo stated that extreme volatility in the crude oil market has very negative consequences for such consumers and producers.
He said, “Low oil prices are bad for producers today and create situations that are bad for consumers tomorrow. And high oil prices are bad for consumers today and lead to situations that are bad for producers tomorrow.”
Barkindo noted that volatility is a devastating disincentive for investment, which is the lifeblood of the petroleum industry and which is also essential for ensuring adequate supply in the future.
He explained that from 2014 to 2016, during the last industry downturn, world oil supply growth outpaced that of oil demand, with world oil supply growing by 5.8 million barrels per day, while world oil demand increased by 4.3 million barrels per day.
According to him, what was particularly ominous for consumers was the fact that investments were choked-off, with exploration and production spending falling by an enormous 25 per cent in both 2015 and 2016.
He disclosed that nearly one trillion dollars in investments were frozen or discontinued, while thousands of high quality jobs were lost.
As a result, Barkindo noted that a record number of companies in the petroleum industry filed for bankruptcy.
He said, “Lack of investment on this scale has very serious repercussions for future consumers, especially given the increase in world oil demand which is expected in the long term.
“According to OPEC’s World Oil Outlook, long-term oil demand is expected to increase by 15 mb/d, rising from 94.5 mb/d in 2016 to 111.1 mb/d in 2040. To meet the projected increase in global oil demand, investments worth an estimated $10.5 trillion will be required.
“Investment is also necessary to offset the impact of natural decline rates, which can be as high as five per cent per year. To maintain current production levels, the industry might need to add upwards of four million barrels per day each year.”
Meanwhile, Baru said that the corporation was considering increasing Nigeria’s crude oil reserves by one billion barrels annually, growing the country’s reserves base from 37 billion barrels to 40 billion barrels within the next three years.
He said that “The outlook for 2018 and beyond is to increase crude oil reserves by one billion barrels Year-on-Year from the current 37 billion barrels to 40 billion barrels by 2020 and also increase national oil daily production to three million barrels per day.”
On the challenges confronting the sector, Baru stated that, “We recognised the challenges, as well as the opportunities oil demand growth presented us, particularly as a major exporter experiencing a surge in local demand for petroleum products.
“The balance of these objectives required that we undertook a paradigm shift in our business model to ensure we attract capital and sustain the flow of investment outside traditional government funding.
“We adopted a synergetic and collaborative approach to doing business going forward such as emplacing cost reduction and cost-saving measures to ensure that we stay profitable and in business, reduction of contracting cycle-times, resource pooling, facility-sharing for clustered assets as well as standardisation of the operating framework.”
On gas production and distribution, the NNPC boss said: “In terms of gas production, the domestic demand for gas in Nigeria is unprecedented, with a current daily realistic gas demand of 4,000mmscfd which is expected to grow exponentially to about 7,500mmscfd in the next five years. “Within the next three years, with our Joint Venture partners, we are committed to increasing natural gas availability from the current 1.5 billion Standard Cubic Feet per day, to about five billion standard cubic feet per day in 2020.
“Consequently, the government will supply enough gas to generate up to 15 gigawatts, GW, of electricity to the power sector by 2020 and stimulate gas-based industrialization.
“We have been able to increase gas supply to power plants and industries in the country, through repairs of critical infrastructures and reactivation of shut down gas plants; all these have resulted in doubling domestic gas supply from an average of 700mmscfd in June 2016 to 1,500mmscfd currently.
“We have completed and commissioned almost 600km of new gas pipelines thereby connecting all existing power plants to permanent gas supply pipelines.”
“On the gas export market, part of our strategic aspiration for gas is to strengthen our footprint in high-value gas export through Liquefied Natural Gas, LNG, and aim to secure about 10 per cent of the global market share of traded LNG.
Commenting on this year’s target for NLNG Train 7 deadline, the NNPC boss said that “On the expansion of our existing 22 metric tonnes per annum (MTPA) NLNG plant, we are on the verge of taking Final Investment Decision (FID) this year for additional eight MTPA NLNG Train 7 Plant.”
Continuing, he said, “Internally, for NNPC’s upstream subsidiary – The Nigerian Petroleum Development Company (NPDC), the plan is to grow its production to 500,000 bopd of oil and 1.5Bscfd of gas by 2020.
“Furthermore, in terms of frontier exploration, we are optimistic that in the Benue trough, we will drill an appraisal well in Q3 2018 to test the extent of the Kolmani Structure in the Benue Trough. Recall that Kolmani river-1 exploration well drilled by Shell in 1998 encountered 238ft net hydrocarbon interval.
“In NNPC we believe that the downstream sector holds the future. The plan to become a net exporter of refined products by year-end 2019 is on course. Based on this timeline, the revamping of our four refineries are our topmost priorities in NNPC for the midstream segment. Alongside this, we are also progressing with the revamping and rehabilitation of all our pumping stations, pipelines, and depots across the country.”