Nigeria to restore oil output and grow in gasMay 27, 2022
Nigerian Minister of State for Petroleum Resources H.E. Chief Timipre Marlin Sylva talks to The Energy Year about plans to restore Nigeria’s status as a leading oil producer in Africa, its progress in building local capacity in the oil and gas sector, and prerogatives for boosting natural gas output and utilisation.
How would you assess the resilience of the Nigerian energy industry as it emerges from the pandemic?
During the pandemic, OPEC asked us to bring down production because oil prices were at a historical low. Unfortunately, Nigerian reservoirs react in a particular way, and when you want to shut down 100,000 bopd, you end up shutting down 300,000 bopd to achieve the desired 100,000 bopd. As a consequence, the drop has been drastic.
Now, we’ve moved from the Covid crisis to a conflict. The Ukraine and Russia crisis has increased the volatility of the global energy ecosystem. However, as a country, we are not taking full advantage of the high prices because our production is not meeting our expectations. We are now in a very disturbing situation where we cannot meet our OPEC quota, but we are working assiduously on this by looking at all the relevant issues. For example, we are tackling the problem of crude oil theft, which has seriously affected our production.
Which are the most pressing priorities when it comes to the implementation of the Petroleum Industry Act (PIA)?
The PIA has already been operationalised. The former DPR [Department of Petroleum Resources] has been replaced by the two new regulatory bodies: the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
However, specific regulations are not yet in place, and we are conducting stakeholders’ forums to discuss these. It is critically important to involve oil producers, services companies and communities because this will enable us to implement a PIA supported by the majority. As of today, the PIA has been passed, the institutions are in place and the drafting of these regulations is quite advanced.
How would you evaluate local content development in Nigeria?
We have made significant progress: in 10 years, we grew local participation in the oil and gas sector from 3% to 35%. And we will not stop here as we have set a target of 70% for the near future. These efforts were stepped up during the pandemic, as the departure of many expatriates highlighted our dependence on them to run the industry properly.
The 2020 marginal field bidding round will bring local companies into the production space by allowing them to learn how to operate with smaller fields. This will prepare them to take over any assets divested by IOCs. Shell has worked in Nigeria since the 1930s, and they have become a solid part of the Nigerian landscape. However, if they decide to divest from bigger fields, our local players will be fully ready to take over thanks to the experience they have built in marginal fields.
What are the prerogatives for Nigeria to boost its natural gas production and utilisation?
We are creating a roadmap for the country’s Decade of Gas, along with NLNG, to have measurable milestones and timelines that will guide our energy transition. It will be out by Q4 2022. The most considerable thrust for gas utilisation is the autogas programme. We are enabling the construction of filling stations to boost the production of gas-based vehicles. The federal government has already allocated NGN 250 billion [USD 602.5 million] to support the programme in its entirety, and people are starting to understand the advantages of switching to gas-based engines.
The main gas utilisation projects are on track. NLNG Train 7 is fully onstream, and we are already in discussions for Train 8. The NLNG consortium is targeting an end goal of 12 trains. Train 7 alone will increase our yearly LNG production from 22 million tonnes to 30 million tonnes. There is a significant interest in gas-based industries such as fertiliser and LNG plants. Greenville is also discussing building a bigger LNG plant to take advantage of the rising gas markets.
We need to utilise our enormous reservoirs of stranded gas, and backbone infrastructures play a crucial role here. The AKK and OB3 pipeline projects are ongoing, and we are satisfied with them. We are expecting a lot of investments to inject previously stranded gas into these infrastructures.
Due to the current situation in Ukraine, Europe is looking at the African continent as an alternative gas supplier. We focused on this market long before the Ukrainian crisis, and the development of the Trans-Saharan Gas Pipeline is a clear demonstration of our commitment. It will enable us to send our gas to Europe through Algeria, which is critical. We are also extending the West African Gas Pipeline to Morocco, representing an additional route to Europe.
Nigeria is positioning itself to become a leading exporter of gas to Europe and a major gas player globally.
How are you planning to restore Nigeria as a leading oil producer on the continent?
Our biggest problem is the insecurity of our pipelines. There is a lot of pollution due to oil theft and pipeline vandalism, which has placed us in a precarious situation. It is one of the biggest reasons why IOCs leave Nigeria: they feel that our industry is becoming too volatile and a significant polluter. The criminals who rupture our pipelines to set up illegal refineries which are not regulated are seriously damaging our environment.
It is our duty to ensure that we can tackle this issue, which is mainly a question of law and order rather than production. Once solved, all the production that has been lost will get to our tanks, while restoring investors’ confidence in Nigeria. Our goal is to restore Nigeria as the leading crude oil producer in Africa. If we tackle security and technical issues, we should be able to ramp our production up to 2.6 million bopd, and in the long run, we can boost it to 3 million bopd.
What are the main challenges holding back the advancement of the Nigerian downstream sector?
The fuel subsidies are the biggest impediment to the growth of the downstream sector. Nobody wants to invest in an industry where you cannot even recover your cost of production. We are working to ensure the deregulation of the industry to support its growth.
The Dangote Refinery will come on stream by the end of the year. A significant number of modular refineries are also coming on line, and the rehabilitations of NNPC’s refineries are ongoing. Once the subsidies are removed and these projects are operational, a golden period for the Nigerian downstream sector will begin.