-By Fred Ojiegbe
Over the past decade, the global oil industry has seen the heights of bullish optimism and seemingly limitless investments during the years of the $100 per barrel crude price beginning from 2011 to mid-2014, and the lows of the price crash and extended oil downturn, from mid-2014 to 2017.
As the industry prepares to settle down in 2020, analysts forecast that neither extreme seems in the cards for an imminent return as the industry has learned valuable lessons from both episodes, but uncertainties are clearly still a challenge to performance and investment.
According to audit firm, Deloitte in its 2020 oil, gas, and chemical industry outlook, wider macroeconomic and business environmental risks, which should be a concern to the global industry, and which seem to be gaining strength include weakening economic growth, in the United States, Europe and China; ongoing, perhaps intensifying, trade tensions, which can create uncertainty, dampen growth, and lead to modifications in long-established supply chains; and the many political risks, including the US election cycle, the outcome of the Brexit process in Europe, and tensions in the Middle East.
Deloitte said in the report titled “Walking the tightrope—vigilance required to keep moving forward in 2020,” that the above factors could cause fundamental changes in the long-term business environment in 2020.
According to the Deloitte report, crude oil production in Nigeria is estimated to witness a decline of approximately 7.93% during the forecast period of 2018 – 2025.
For Nigeria, the oil and gas sector remains one of the most important sectors of the country’s economy, accounting for more than 90% of its exports and 80% of revenue.
But oil and gas production had been hampered in Nigeria in the past few years, due to the attack on oil and gas infrastructure by militants. Further, oil theft has been one of the major issues faced by the oil & gas market in Nigeria, which resulted in huge losses to operating companies in the country.
That trend is estimated to continue although it could be curtailed if greater efforts are made by the companies and the government to intensify the use of technology and other human-related strategies.
Despite the challenges, oil and condensate production recovered in 2017, and is estimated to remain within 2 million barrel/day in 2020 notwithstanding the OPEC restrictions.
Drilling activity in the country is ramping up, and is expected to continue on account of current and upcoming projects and production is expected to ramp up in the coming years.
According to a report by Mordor Intelligence on Nigeria Oil & Gas Market – Growth, Trends, and Forecast (2019 – 2024), development of ultra-deepwater Egina oilfield by Total is one of the key projects, which started production in the first week of 2019. The Egina field may significantly boost the production and cash flow, in 2020, and continue onward.
Further, NNPC has signed an agreement for seven Critical Gas Development Projects, to deliver around 3.4 bcf of gas per day, in order to bridge the medium-term supply gap, by 2020, on an accelerated basis.
Mechanical completion of Dangote refinery
Africa’s largest oil refinery, the 650,000 barrels per day Dangote refinery in Lagos, is expected to be finished by the end of 2020.
Nigeria is looking to the Dangote refinery to help address fuel imports occasioned by its underutilised refineries.
The company expects fuel production within two months of completion of the refinery, which could transform Africa’s biggest crude producer from a fuel importer into a net exporter, upending global trade patterns.
Dangote had previously said the refinery’s mechanical completion was delayed until 2020, though fuel output was unlikely before 2022.
PIB Passage
No doubt one of the toughest task before the industry in 2020 is how to address the non-passage of the Petroleum Industry Bill (PIB)
Nigeria has since the return to democratic rule in 1999 been on a perpetual voyage with the Petroleum Industry Bill (PIB). The journey which began 19 years ago came very close to materialising in 2015 with the 8th Senate which unbundled the PIB into different parts.
The first part termed the Petroleum Industry Governance Bill (PIGB) was passed by the National Assembly in 2018 but was however denied assent by President Buhari. Time is already running out on the bill as nothing has been heard about the remaining aspects or even the signing into law of the PIGB.
The country loses investments as much as $15bn yearly due to the delay in the passage of the PIB. For years, the federal government has not been able to significantly boost crude oil production even as it targets 3 million barrels per day by 2020.
Full rehab of Nigeria’s refineries
The full rehabilitation of Nigeria’s four refineries in Port Harcourt, Warri and Kaduna will commence early this year, going by the announcement of the Group Managing Director of the NNPC Mele Kyari in September 2019 adding that the corporation is determined to ensure the refineries achieve optimum refining capacity by 2022.
The abysmal state of the refineries was a major concern for President Buhari when he took office.
Despite several interventions to revamp the existing plants and incentivize modular and Greenfield (brand new) refineries, the refineries in Port Harcourt, Warri and Kaduna are still not in the shape as promised.
The consequence of their poor performance meant that the country continued to import most of its refined petroleum products recording huge under recovery or subsidy on petrol.
The Buhari government has promised to fix and get the refineries to work up to 90 per cent of their installed capacity.
Oil search in the North to deepen
The turn of the decade has seen renewed interest in oil exploration by government through NNPC in a bid to increase the country’s oil and gas reserves, add value to the hydrocarbon potentials of the inland basin, provide investment opportunities, boost the economy as well as create millions of new jobs.
The President Muhammadu Buhari led administration has been the most dogged about it so far. In 2016, seismic data acquisition activities at Chad Basin and Benue Trough, resumed and progressed before it was interrupted at the Chad Basin by insurgency in the northeast.
Drilling activity which commenced at the Gongola Basin in Bauchi has progressed tremendously with the discovery of crude oil and gas in the area.
NNPC may resume crude oil search in the Chad basin later this year after it gets clearance from security agencies.
In summary, the industry this year expects to witness the implementation of a 9-point agenda set by the Minister of State for Petroleum Resources Chief Timipre Sylva.
The priority areas include:
Implementation of the reduction of Federal Government’s equity stakes in Joint Venture (JV) participation to 40 per cent; curbing petroleum products cross border leakages, completion of gas flare commercialisation, increasing crude oil production to 3million barrels per day and effecting reduction in cost of crude oil production by at least 5 per cent.
Other priority areas include:
Aggressive promotion of passage of the Petroleum Industry Bill (PIB); Promotion of inland basin exploration activities; promotion of deep offshore exploration activities; collaboration with private sector to aggressively increase domestic refining capacity and working assiduously to support Mr. President in his poise to achieving his target of raising millions of Nigerians out of poverty via job creation.