Ebi Omatsola sees a dramatic surge in crude oil prices unlikely in the short term and has cautioned, for the second time in three months, thatthe ceiling will be capped at $55 by 2020.
“Crude oil price floor will not go below $25 but the ceiling is unlikely to rise above $45 in 2016”, declares the 73 year old geoscientist, widely regarded as Africa’s leading exploration thinker.
“This is the time for exploration work. It’s time to get the prospects and development candidates ready for the real upturn, which is coming some years down the line”, the former Chief Geologist of Shell Nigeria said at a gathering of the Nigerian Association of Petroleum Explorationists (NAPE), the largest grouping of hydrocarbon explorers on the continent.
Omatsola has significant following among petroleum geologists in Africa, who hang on his every word. He has a handle on the petroleum system of every basin on the continent. The escalator regression model, which he co-authored with Gideon Knox (1987), is still the dominant theory comprehensively describing the broad architecture of the Niger Delta, Africa’s largest producing oil basin.
Omatsola’s premises of crude oil price forecast include “the return of Iran to full technical allowable, Iraq coming full back on stream, the Libyan crises resolved by 2017, the Global economic growth still facing headwinds, increasing Global reserves and production as well as global oversupply and reducing demand”.
The recently retired Managing Director of Conoil Producing first gave the cautionary note about crude oil prices at the year-end dinner of the Petroleum Club in December 2015. He reiterated his position at the NAPE gathering in February 2016.
Price for natural gas, “which is now being traded as a commodity”, he argues, “will be in the range of between $2.5 -$5.0/BTU during the period for international trading”.
“People keep saying that there’s no money for exploration and they are reducing exploration budget”, he told about 250 earth scientists at the banquet hall of the Eko Hotel, overlooking a lagoonal neck of the south Atlantic in Lagos. “There will never be enough money, but there’s far much more oil onshore and offshore Nigeria than has ever been found and this is the time to look for it”.
He is concerned that inadequate investment scenario in the country, the largest economy on the continent, in the last 10 years “has led to a missed opportunity of an estimated $220Billion Additional Gross Revenue and a Gross Reserve Addition of 16Bboe”.
Omatsola’s prescriptions for the structural turnaround of the Nigerian oil industry are published in the monthly edition of the Africa Oil+Gas Report and available to the magazine’s premium subscribers.