ANALYSIS: Nigeria's oil output may fall by 40% by 2020
Lagos (Platts)--20Dec2012/552 am EST/1052 GMT
Nigeria's oil production may fall by 40% by 2020 without new investment
in its key oil and gas industry, analysts and industry officials say.
The government's failure to introduce wide-ranging reforms in the
industry has put millions of dollars of investment on hold.
Oil industry officials say Nigeria's bid to increase oil production and
reserves is now at risk due to the lack of investment.
"Nigeria's crude oil and gas production risks a decline of 40% over the
next 10 years in if the government fails to provide a conducive investment a
senior official of ExxonMobil's Nigerian producing unit said in Lagos this
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Nigeria is Africa's largest oil producer, exporting around 2.5 million
b/d, and aims to raise production to 4 million b/d.
The proposed 223-page Petroleum Industry Bill, which is currently before
parliament, seeks to introduce new fiscal terms for oil exploration offshore
Nigeria and restructure the state-owned Nigeria National Petroleum
But industry officials said the current fiscal terms are too harsh and
would stifle investment in deepwater fields which offer the brightest
prospects of Nigeria achieving its production targets.
Nigeria's oil minister Diezani Alison-Madueke last week said the
government was continuing talks with multinationals on the fiscal regime in
the draft bill, which she said were fair to the government and oil companies.
France's Total in November sold its 20% interest in Nigeria's deepwater
oil block OML 138 to China's Sinopec for $2.5 billion cash, a move that
caused concern among local industry officials.
OML 138 contains the Usan field, which started production in February.
Usan, discovered in 2002, has the capacity to produce 180,000 b/d.
Although Total said that because Usan accounted for less than 10% of its
equity production in Nigeria it would to focus resources on other assets,
analysts say the divestment might be fallout from the delay to the passage of
"If Total could sell such a prized asset in Nigeria, then it foretells
what is in stock in the future," an official with the state industry
regulator department of petroleum resources said.
The PIB also proposes penalties for pollution by oil companies and
provide funds for communities in the oil-rich but restive Niger Delta.
More worryingly, there has been a resurgence in protests by communities
in the Niger Delta against oil companies, sparking fresh fears of disruption
to production and exports.
Niger Delta youths have in the last two weeks seized facilities owned by
Chevron, Shell and Eni to press demands for more jobs and social amenities.
"Chevron has called for both parties to respect the rule of law and
resort to dialog to resolve the dispute amicably. We are currently engaging
all stakeholders, including the state government, to ensure a swift
resolution," Chevron spokesman Deji Haastrup said.
Unrest in the Niger Delta by communities demanding control of the oil
resources there between 2006 and 2009 disrupted oil production and exports.
A government amnesty in October 2009 helped end the violence and
restored Nigeria's production.
Analysts said President Goodluck Jonathan's promise to tackle corruption
and introduce transparency in the largely opaque oil sector continues to fade
in the absence of reform.
A parliamentary investigation put the cost of fraud in the fuel subsidy
program at $6.8 billion between 2009 and 2011. Some fuel importers have been
charged but, so far, no one has been convicted.
Nigeria imports the vast majority of its fuel because for many years
governments have failed to invest in local refineries. The government buys
the fuel and then sells it to the public at a subsidized price.
The government's only response to the sleaze has been to delay payment
of subsidy to private importers until it verifies all claims.
--Edited by Jonathan Dart, firstname.lastname@example.org