Africa's hydrocarbon industry and Nigeria PDF Print E-mail

Best is yet to Come By Lawrence Agboti


Despite grand steps taken by Nigeria’s oil and gas industry in recent years, there is still adequate room  for improvement and consolidation under the new administration. 


Good things are happening in Africa's hydrocarbon industry and Nigeria, as Africa's leading producer of crude oil, is enjoying a lion's share. Investment in Africa's oil and gas industry is enjoying a significant increase and it is expected to rise even higher in the coming years with growing global energy demand serving as a catalyst for the high investment drive. According to the Energy Information Administration (EIA), the world would, between 2003 and 2030, increase its energy use by 71 per cent. This expected high demand is forcing intensified search for oil globally and Nigeria, Africa's leading oil producer, is benefiting from intense exploration activities.


Across the continent, investment figures for the hydrocarbon sector are gratifying. Specifically, Nigeria, an influential member of the Organisation of Petroleum Exporting Countries (OPEC) and eighth largest producer of crude oil in the world, has witnessed new investments in its hydrocarbon industry. Asia's economic powerhouse, China, through its China National Offshore Oil Corporation, invested $2.6 billion in Nigeria in 2006. The Capitol learnt new investments worth more than $67 billion have been projected for the period 2005 to 2010. Oil majors operating in the country will invest over $30 billion in onshore and offshore exploration and production in the Gulf of Guinea (G of G) in the next five years with much of it going into deepwater production offshore from Nigeria. On the whole, Nigeria's average spending in oil and gas exploration is expected to rise from the present $8 billion to $12 billion a year over the next four years. Add to these American oil giant, Chevron, which earmarked $17 billion for investment activities in Africa for 2006-2011 with Nigeria pencilled down for a substantial part of the investment grant.


Yet more investment calls are still going out. Nigeria needs an additional $75 billion (about N9.4 trillion) in new investments to explore and exploit new discoveries, said a senior government official recently at an international oil and gas forum in Washington D.C, United States. The new discoveries are located in the Niger Delta Basin and the G of G region. The G of G, of which Nigeria is the undisputed leader, has been identified as one of the three leading deepwater exploration sites in the world. Finds are also encouraging. Shell's Bonga deepwater field, which is the first major field to come on stream under the production sharing contracts (PSC) agreement, has come on stream. Mobil's Erha field and other independent producers and marginal field operators are also adding their own quota to the country's production level.


In calling for more investments, Nigeria is dangling available oil blocs to would-be investors to develop. Nigeria currently produces about 2.5 million barrels per day (bpd) but has aspirations of reaching the 3 million bpd mark. With recent discoveries estimated at 180 billion barrels, Nigeria has been identified as one of the fastest-developing oil states in the world. Even without the call, investments would have increased exponentially as investors continue to plough billions of dollars into the country's untapped oil and gas reserves. According to energy forecasts, West African crude oil production capacity is projected to increase from its present 5.2 million bpd to 8.2 million bpd by 2010 and Nigeria will account for the lion's share of this projected growth. 

However, oil is not the only Nigerian hydrocarbon commodity that is in the global limelight. Gas, of which Nigeria is fast turning into a world leader, is also taking its place on the global energy stage.


Global events are making the country's liquefied natural gas, LNG, more attractive to the international market. Findings from a recent research say “global demand for LNG is rising” as prices of petrol become “uncertain”. Key findings in the report, Future Outlook for Global LNG Market 2010, indicate that Europe is becoming a huge consumer of natural gas from Africa as old suppliers, notably Russia, play politics with European gas supply. Recent multi-million dollar agreements with French oil giant, Total, and British Gas Group point to the interest Nigerian gas is receiving internationally. Total's agreement for the supply of 1.375 million metric tonnes of LNG is worth $5 billion while BG Group's agreement for the supply of 45 million metric tonnes is worth $7.5 billion. Both agreements are for a period of 20 years. 


Nigeria's LNG project is on course. Five trains are already in operation with Train 6 expected to commerce operations at the end of 2007. Train 7 expansion project, with an 8.4 Metric Tonnes Per Annum (MTPA) capacity, is making Nigeria's LNG a world leader in the LNG market globally. Nigeria's gas reserve is estimated to be in excess of 185 trillion cubic feet. Olusegun Obasanjo, Nigeria's immediate past president, laid the groundwork for the Olokola and Brass gas projects just before handing over power to Umaru Yar'Adua on May 29, 2007.

During his eight-year administration, Obasanjo laid a solid foundation for Nigeria's oil and gas industry. And energy experts have called the petroleum master plan “impressive”. The plan dwells extensively on gas which hitherto was flared, costing government $2.5 billion a year in lost economic benefits. Flaring has since reduced by as much as 50 per cent with government directing all oil companies to further reduce flaring by as much as 70 per cent by 2008.


Nigeria's plan is to make gas economical rather than a waste to the country. According to Edmund Daukoru, Nigeria's former energy minister, “the federal government has made some far-reaching pronouncements to stem gas wastage and reorient the industry from a predominantly oil economy to an oil and gas one where gas would rank in equal importance if not surpass the former in revenue earnings by 2010”. Part of government's plans for gas includes the provision of regional free gas transmission and integration of the gas and power industries with the former providing feedstock for the latter. The West African Gasline Project (WAGP) will take 185 cubic feet of gas daily to three countries on the West African region  Ghana, Togo and Senegal  as part of the grand plans to utilise the country's huge gas reserves. The overall thrust is to make gas earn revenue for the country rather than waste it.


The new Yar'Adua administration is expected to build on the impressive master plan to take Nigeria's oil industry to greater heights. Nigeria, in the very near future, would be in an enviable position on the global energy supply scene. It has been estimated that, by 2010, the bulk of Africa's oil would come from two sources, Nigeria and Angola. While oil prices may not be high, as during the Obasanjo years, Yar'Adua's administration would, undoubtedly, preside over a growth in the hydrocarbon sector as new investments, sustained international interest in Nigeria's gas, continued exploration of the G of G will contribute to the growth during the Yar'Adua years. 2004 to 2006 was particularly rosy for Nigeria with oil prices hovering over the $60 a barrel mark. It later crossed the historic $70 per barrel. In 2005 alone, excluding petroleum profit tax, Nigeria earned about $22 billion from crude oil. The overall picture looks promising for Nigeria if global markets remain tight.


No doubt, Nigeria is reaping bountifully from the global attention its hydrocarbon industry is receiving, which a favourable political and economic climate is greatly assisting. On the economic front, Nigeria's economy is witnessing substantial growth, while on the political front, a level of stability has been created  the country has had eight years of uninterrupted democratic rule. In spite of noticeable flaws, it has also recently achieved a landmark feat: it has successfully concluded the first-ever civilian-to-civilian transition in its 46-year history. Energy analysts say should the favourable political and economic climate continues, Nigeria would experience more investment and, by extension, growth in its oil sector, a sector that contributes about 90 per cent to its foreign exchange earnings. For Nigeria and the new administration of Yar'Adua, the best is yet to come.




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