Nigeria’s exploration potentialAugust 20, 2021
Patricia Idunoba Ochogbu, president of the Nigerian Association of Petroleum Explorationists (NAPE), discusses Nigeria’s improving exploration environment and challenges that must be overcome to grow the country’s oil and gas reserves. NAPE promotes the continued success of Nigeria’s oil and gas industry through conferences and training.
With Nigeria’s extensive proven oil and gas reserves, the nation has the potential to be the leading oil and gas investment destination in the coming years. Nigeria’s oil and gas market was expected to grow at a cumulative average growth rate of 5% from 2020 to 2025. The Covid-19 pandemic has altered these projections slightly, but with global oil prices on the increase, there is a ray of hope that the industry will return, albeit slowly, to glorious times.
The “poor” exploration performance which had been attributed to community-related disruptions and investor perceptions of unfriendly operational fiscal terms is improving. The nation’s forays into deep offshore and frontier basin exploration are also giving additional impetus to the drive to increase production.
In addition, the drive to grow and solidify Nigeria’s petroleum reserve base by finding oil and gas in new basins offers a diversity of opportunities to meet the strategic objective of growing the country’s reserves base and surpassing the 40-billion-barrel target.
CHALLENGES TO OVERCOME: However, there are key challenges. The average production cost in Nigeria is among the highest in the world, as a matter of fact, various estimates place Nigeria in at least the 70th percentile for high overall cost of production. Thankfully the federal government has made it a priority to reduce costs in order to make Nigeria a more attractive investment destination with a mandate for USD 10 per barrel for operating cost.
Another key challenge is the long contracting cycles and approval processes most companies have to undergo as well as a significant tax burden associated with operating in Nigeria. These among other factors have made the breakeven price and payback time for projects in Nigeria for new projects one of the highest in the world.
And then we have the elephant in the room, the Petroleum Industry Bill (PIB). The many years since the PIB was first mooted in 2000 and the various iterations it has undergone without being passed have impacted negatively on investors’ confidence in Nigeria. Now that it has finally been passed, we all hope it will have the desired impact.
It is expedient to state that a significant portion of the operating costs in Nigeria are composed of human, crude handling and logistics elements, which are a direct fallout from the various challenges thrown up by operating in the physical environment of Nigeria. Examples of these challenges are the need for increased security due to kidnapping and the vandalisation of crude pipelines, ageing infrastructure due to the low level of investment, and the low level of standardisation across the industry since most of the companies started with a go-it-alone approach in the earlier days of their production history.
However, these challenges are not insurmountable. There must be concerted efforts to continually add to known reserves through a deliberate exploration programme in the frontier basins, as a lot of the easy oilfields in the Niger Delta region are already discovered. An example of this are recent discoveries in the Benue Trough which are said to include relatively shallow hydrocarbon-bearing units.
NEW ALTERNATIVES: Players in the industry must focus a lot of investment on gas, which is not necessarily following the same cycle as oil prices and can act as a hedge. To that effect, the government will also need to incentivise investment in the sector through the new measures in the PIB.
Technology is key in the oil and gas business, and it is critical that relatively less expensive, high-impact technology is harnessed to target and develop these resources as well as unlock cost savings, production optimisation, operational efficiency and regulatory approvals.
The oil and gas business being highly capital intensive and specialised, government should explore the option of setting up an energy bank which can provide low-interest loans for players in the oil and gas space. Finally, oil and gas companies must seek to establish strategic partnerships and collaborations and sharing facilities where possible. This can be in the form of increased utilisation of equipment and infrastructure.
NAPE’S ROLE: NAPE has played and continues to play a pivotal role in the Nigerian oil and gas landscape. Established in 1975 to integrate social and technical interaction among professionals. NAPE is the largest professional association of petroleum geologists and related disciplines in Nigeria and Africa. Members include geologists, geophysicists, CEOs, managers, consultants, students and academicians.
In 2015, due to growing concerns in the oil and gas industry that Nigeria’s average reserve replacement ratio (RRR) was in the negative due to the apparent lack of robust government policies to encourage exploration for oil and gas, NAPE cautioned that the federal government’s aspiration to increase crude oil reserves to 40 million barrels by 2020 may be unattainable if the cutback in exploration activities in the country and the other local challenges facing the industry were not addressed.
As if that was not dire enough, the local challenges were complicated by the intense competition from other African countries for the finite global exploration budget. NAPE not only raised the alarm but went ahead to put together a workshop which produced a communique that comprehensively addressed the challenges.
NAPE has over the years identified with and supported the programmes and policies of the federal government. First is its aspiration to grow the country’s crude oil reserves to 40 billion barrels and its crude production to 3 million bopd by 2025. Second is the federal government’s Nigerian Economic Sustainability Plan (NESP). And third is diversification of the Nigerian economy from an oil-based economy to a gas-based economy by developing gas infrastructure, commercialising flare gas and maximising the use of gas to power economic development.
I must also state that since 1999, no fewer than four editions of our annual international conferences have focused attention on expanding the frontiers of deepwater exploration, marginal fields development, as well as frontier basins exploration and the ensuing communiques have been game changers in the oil and gas space. The Marginal Fields Operations (Fiscal Regime) Regulations Act 2005 and the Gas Master Plan are examples.
In terms of NAPE’s drive to enhance the study and practice of the geosciences, NAPE’s mission is to promote the study and practice of the geosciences for the benefit of its members and other stakeholders. The association, which started 45-plus years ago with 10 members, now has over 9,000 individual and about 100 supporting corporate members
Without sounding immodest, NAPE boasts of a membership of perhaps the finest and brightest minds in the oil and gas industry, academia and the profession. And we have made significant contributions to the advancement of the study and practice of the geosciences as well as the development of the national and global energy landscape. Many of our members have served in various capacities across the globe with distinction.
We are audaciously pursuing the maintenance and advancement of academic excellence across the various demographics, institutions and subsectors of the economy.
We took advantage of the Covid-19, pandemic lockdown to commence online geosciences lectures for tertiary institutions across the nation and the excitement is palpable.
At the secondary school level, NAPE is partnering with the Women in Geosciences & Engineering (WiGE) to host the “Exciting World of Geology’’ to expose secondary school students to the study of geology and the career opportunities available.
We have also started implementing the robust strategies we drew to reposition our University Assistance Programme (UAP) and make it more compact to deliver on its mandate.
NAPE is currently discussing partnerships with PTDF and TETFUND to develop ways to enhance the much-desired academia-industry linkages.