Moving Nigeria’s oil, gas industry to the next level

The oil and gas industry in the last three of the 53 years of Nigeria’s independence has had its ups and downs. In the last three years a few positive developments worth mentioning have taken place. Many more positive things may have been achieved if the Petroleum industry bill (PIB) which is to serve as catalyst for the industry development has not been politicised at the national assembly.

The politicking notwithstanding, Diezani Alison -Madueke, the minister of petroleum, has assured that the bill would be passed into law by the National Assembly.

The Nigerian oil and gas industry cannot be insulated from the current happenings either locally and internationally, be it drop in the price of crude oil or insecurity and even community disturbance of operations. But in spite of these challenges, it has achieved some measure of progress in the industry in the last few years.

Despite heightened insecurity issues, government has always desired that the production level is increased. Because of this stakeholders were mobilised through the Ministry of Petroleum Resources to address the issue.

This was why the joint security outfits have been stationed in some strategic areas to stem the rate of bunkering and oil theft which has created panic in our national life. Even though the activities of these thieves is still on, reasonable efforts have been made to reduce the level of oil theft.

During the period under review a number of other salient activities have been recorded. In 2012 alone a total of 600 million barrels of reserves were added representing 70 percent replacement. And in line with government strategy of growing Nigeria Petroleum Development company’s reserve through asset transfer, its reserve base has grown to 1.7billion barrels through strategic divestment.

This period also witnessed some significant upstream activities which helped in the improvement of overall industry performance. Usan FPSO, the new deep offshore PSC field which is currently producing at about 103,000barrels per day was brought into the country. The next major project in Nigeria’s deepwater is Egina project which has been awarded and is expected to cost about $15 billion and add 180,000 barrels per day.

Shell, Agip and other multinational oil companies have provided an opportunity for the participation by Nigerian players with divestment of eight blocks, (8) blocks namely OMLs 4, 26, 34, 38, 40, 41 and 42 during this period.

NNPC/MPN JV completed Itut/Abang Satelite Fied Development Project (SFDP) with Abang and Itut platform fabricated by Nigerdock in Nigeria.

After extensive negotiations, expired leases such as the Oil Mining Lease (OML) 67,68 and 70 of the NNPC/MPN JV were renewed.

Active participation of indigenous companies has resulted in the new projects coming on-stream like the Ebok Terminal which was established by an indigenous company with current daily crude oil production of 7,000b/d and a plateau production of 50,000 b/d at full capacity.

As part of improving accountability with regards to Nigeria’s oil production, the Ministry of Petroleum Resources has concluded a pilot scheme for real time crude oil production monitoring. The programme which is referred to as National Production Monitoring System (NPMS) is a role monitoring system put in place not only to monitor real time production, but also other field parameters needed for effective management and administration.

The government desired recapitalising the national oil company through the asset transfer programme and ensure that government’s equity interest in assets divested by the IOCs are transferred to Nigerian Petroleum Development Company(NPDC).

The assignment of Federal Government interest to NPDC has served two purpose namely; it has reduced the cash-call requirement for annual appropriation in respect of these assets since NPDC is a self-funding subsidiary of NNPC and secondly, the transfer of such assets are not free but on the basis of a consideration to be paid by NNPC to the federation.

Alison-Madueke has often said that beyond this, the strategic implication is that going forward, NNPC’s upstream business will be endowed with quality assets to be a viable, vertically integrated national oil company. These assets assignment will make NPDC a medium-sized independent E and P company, with future potential production in excess of 300kbopd.

NPDC currently supplies approximately 425mmscfd of natural gas into the domestic market to fulfil its domestic gas obligation to the federation. The company plans to provide additional 100mmscfd of gas from Oredo this year using POOC spare capacity. NPDC is now the largest gas supplier to the domestic market.

Also, as regards upstream gas supply for the domestic market, government as also targeted increased domestic supply of gas to all sectors of the economy.

Historically, about 25% of gas was flared; 27% used in upstream for pressure maintenance; 40% exported and less than 10% was utilised for power and other industry users. The total average gas production increased from 7.7bscfd to 8.24bscfd representing 7% increase compare to 2011 levels.

Upstream gas supply generation, industrial and household use has increased significantly during the period under review following government prioritisation of gas supply to the domestic market. Specifically, there was an increase in domestic gas supply to support the power sector with over 250mmscfd of gas as part of the emergency gas supply programme.

In addition, gas supply development is being advanced with domestic supply at an all-time peak of 1500mmcf/d currently, most of which is dedicated to the power sector. There is sufficient gas currently and projected by year end to support over 5GW of generating capacity, with a view to increasing to almost 10GW by 2015/2016.