Nigeria Requires 45 Rigs, drilling 426 Wells in Two Years, to Return to ‘Normal’ Production - Africa’s premier report on the oil, gas and energy landscape.

Nigeria Requires 45 Rigs, drilling 426 Wells in Two Years, to Return to ‘Normal’ Production

Panel says:

  • Lack of midline compression on ELPS is a disincentive to gas development
  • IOC Divestment of Assets to Local Indies Requires Improved Regulatory Oversight

The hand over of large, producing acreages from international oil and gas majors to local companies is a transition that determines how quickly Nigeria can ramp up and sustain production of more than two million barrels of oil per day, an industry panel has advised.

Divestments of assets by the majors, including Chevron, ENI, ExxonMobil, Shell and TOTAL, will continue in the country in the next five years, the panel, speaking at an industry pre-conference workshop, emphasized.

The upstream regulator’s response to this trend will determine, more than anything else, the inflow of investment into the country’s oil sector, going forward, the group argued.

Jide Agbabiaka, retired Executive Director ExxonMobil Nigeria, moderated the conversation which featured Ebi Omatsola, Africa’s leading exploration thinker and founding Managing Director Conoil Producing; George Osahon, former Director of the Department of Petroleum Resources (DPR) and Jim Orife, former General Manager of all of NNPC’s JVs in the 1980s.  They were joined by Austin Avuru, founding Chief Executive of Seplat Energy and James Makinde, General Manager, Gas Business at Seplat Energy.

With the exception of Makinde, the panelists were all former presidents of the Nigerian Association of Petroleum Explorationists (NAPE), the largest grouping of earth science technical professionals in Africa. Makinde was also the only core engineer and non-geoscientist in the group.

Responding to Mr. Avuru keynote address, entitled: “Unlocking Nigeria’s Remaining Energy potential to fuel Economic growth and Diversification: Opportunities and Challenges”, Mr. Orife noted that there was little or no strategy for implementing any energy plan that Nigerian policy makers had drawn up in the last 10 years. “We have remained on the same spot, if you ask me”, he declared. “We are not unlocking anything”. Orife, a foundation staff of the NNPC in 1977, asked the audience: “Where is the Energy Commission? What does it do”?

Avuru had argued in his address that the industry “has an outflow of companies leaving Nigeria because the assets are, largely, mature, but we also have an incoming set of entrants who have been refused entry”.

Avuru noted that investment in upstream oil and gas had been muted for too long, illustrating his case with a chart that indicated a downward slope in investment from $22.1Billion in 2014 to $6Billion in 2021.

This trend is what, in his view, has forced down the crude oil and condensate output to less than 1.45Million Barrels per day on average.

“To arrest natural decline and add 800,000Barrels per day  over two years will require ….

* 426 wells (including 106 exploration and appraisal wells as well as 320 development wells).

*For this, 45 Rigs must be on duty, so the country needs investment of  $7.6Billion in well costs alone

A similar set of figures will be required over a further two years to take the country  to Three Million barrels per day by 2027, the keynoter argued. “An additional 20% of these figures will be required for dedicated gas development”, Avuru explained, adding: “and we must add, to these requirements, significant facilities and infrastructure costs”.

George Osahon, who has worked at the highest levels in Policy (as GGM NAPIMS), Operations (as Managing Director NPDC, now NNPC E&P Ltd) and latterly Regulatory (as Director of DPR), urged the panel not to see the way out of the current crisis as a chunky, wholesale package requiring tens of billions of dollars to plunk in at a go. “We could solve the problem by doing the right things bit by bit.”

If a policy is not working, he declared, “just change it. The 2018 Energy policy has gone nowhere”.

Most of the big wins of the Nigerian oil industry in the last 45 years were not delivered through legislation, Osahon argued, “but by well targeted policy enunciations and implementation”.

Nigeria’s ongoing, largely stalled, gas monetization campaign, of which the state owned firm NNPC has described seven critical gas development gas projects as key, should be the country’s fuel for economic growth and development. This means that the state should incentivize domestic gas market over export, the panel also urged.

“The gas produced should, as a matter of priority, help increase the generation to 25,000MW of electricity”, Avuru advanced.

Some of the major disincentives to the country’s gas development which were repeatedly pointed out by the panel included the absence of a midline compression facility on the 439Kilometre Escravos-Lagos gas pipeline system as well as the non-completion of the 127kilometre long, 48 inch Oben to Obiafu -Obrikom (OB3) line. “You can’t get the optimum gas flow out of the ELPS without a midline facility and it has been like that for over 20 years”, the panel pointed out.

“Gas can be fuel for economic growth”, the panel suggested and this should enable Nigeria to be

  • Net exporter of Cement
  • Net exporter of Fertilizer
  • Exporter of Petrochemicals
  • Harvester of Improved domestic Manufacturing
  • Owner of 1.2 – 1.5MMBOPD Refining capacity

Nigeria, the panel urged, should be able to dominate the supply of Gas, Power and Petroleum products to West and Central Africa.

“Then the country will achieve . . .

  • Domestic and Regional Energy Security
  • Value – driven Energy Transition Program
  • Oil & Gas as economic enabler, not just forex earner
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