Nigeria’s Oil Production Could Fall 35% in Next Decade
By Adedapo Adesanya
Nigeria’s oil production could drop by 35 percent in the next 10 years as regulatory uncertainty and costs may delay companies’ investments in key oilfields across the country.
This was disclosed in a research carried out by consultancy company, Wood Mackenzie, recently where it warned that three deep offshore fields, which would generate $2.7 billion per year for the government at peak production, will likely be delayed.
According to Mr Lennert Koch, the principal analyst of sub-Saharan Africa upstream with Wood Mackenzie cited by Reuters, in the face of this, it was necessary for the country to develop additional fields.
“Nigeria is going to enter quite a steep decline in production. In order to keep its revenue up, it needs to develop additional fields,” he recommended.
The three deepwater projects offshore fields operated by oil majors Exxon, Shell, and Total, could see their start-up dates delayed by two to four years to the late 2020s.
Bonga Southwest Aparo, operated by Shell, and Preowei, operated by Total, could be delayed to 2027 and 2025 respectively, and for ExxonMobil’s Owowo by four years to 2029, the research stated.
Wood Mackenzie also cited changes to tax and royalty laws and uncertainty over oil reform as the main reasons for delays.
It also believes that the deepwater fields, which hold an estimated 1.5 billion barrels of oil, could add 300,000 barrels per day of oil to the country quota and considering the current oil prices at $58 a barrel is not profitable to investors who are willing to put their money in regions with better and clearer terms.
“These are still world class resources,” Mr Koch said. “What makes some of the other regions more attractive is just higher returns (from) lower costs and less regulatory uncertainty,” the agency said.
Last year, Nigeria boosted its share of deepwater oil revenues in an effort to add $1.5 billion to fund its budget in two years and kickstarted a finance bill increasing the Value Added Tax (VAT) rate from 5 percent to 7.5 percent and with this telling on investors, production would drop 35 percent within a decade.
Meanwhile, at the recently concluded Nigeria International Petroleum Summit (NIPS) in Abuja, President Muhammadu Buhari promised foreign oil investors that the country was open to business that can guarantee them high returns on investments.
While the country’s oil company, Nigeria National Petroleum Corporation (NNPC) said that the recent amendment to the Deep Offshore Act will improve financial stability and investor confidence.