Unless the Federal Government and investors in the nation’s oil and gas sector invest about $29 billion (about N5.7 trillion) between now and 2019, the country’s crude oil production may decline from its present state of two million to 300,000 barrels per day.
A new report on the country’s petroleum sector, showing the challenges and opportunities, which The Guardian obtained from one of the International Oil Companies (IOCs) in Nigeria, revealed that the government has not been able to maintain its cash calls obligations, which has hit $6.6 billion as at January, this year.
It noted that the Federal Government has not also been able to meet the $1.1 billion to the indigenous oil and gas operators in the country.
The report stated that the sector is still being bedevilled by declining crude oil production and revenue; decreasing investment and financial exposure; and increased risk and social disorder.
It raised alarm over the declining joint venture production, which it said has dropped from two million barrels per day since 2014 to one million barrels per day in 2016.
The report also lamented the delay in the release of the yearly budget, which it said, has contributed to the shortfall in JV production output.
The report also regretted that the JVs have continued to get less than expected from the Federal Government yearly.
Stressing the need for the Federal Government to take the funding of JVs seriously despite the low oil prices, the report explained: “There is no business in Nigeria right now that is better that the crude oil business. The cost of producing a barrel of crude oil remained $18 a barrel during the high and low crude oil prices. Between 2005 and 2014, the government received $7 for every $1 investment. The government has made $147 billion from the investment of $19 billion while the IOCs invested $22 billion and made $25 billion”.
The report noted that the fiscal policies in the Petroleum Industry Bill (PIB) would reduce the profits that go to the IOCs to nothing if it eventually passed into law in its current state.
Dwelling on the way out, it called for the need for the Federal Government to address the issue of pipeline vandalism.
It also urged the government to divest stake-holding to Nigerian investors; make fiscal risk reflective and globally competitive; focus on regulation, revenue optimisation and economic multiplier effects.
The report also wants the government to exert efficiencies, strengthen competitive advantage and maintain relationship.
Managing Director of Seplat Petroleum Development Company Plc, Austin Avuru, explained that if challenges, which include long contracting cycle, cash call arrears and Joint Venture (JV) funding are not urgently addressed, the country’s oil and gas production would nosedive further.