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Market Digest Nigeria

Economy

The current 37 billion barrels in reserves will dry up in 30 years, without New Oil Finds – NNPC

 The Nigerian National Petroleum Corporation (NNPC) has said that without the discovery of fresh hydrocarbons in some parts of the country, the current 37 billion barrels in reserves will dry up in 30 years, given a projection of 2.3 million barrels per day by 2023.

The corporation which recently set a target of a three billion increase, which will take the reserves to 40 billion barrels, noted that it will continue to dig for more crude oil, noting that at 2019 production levels, the current deposits will likely dry up in an extended period of 40 years.

Speaking during the NNPC/IDSL asset management and operational excellence webinar series tagged: ‘Developing Strategic Organisational Framework to Improve Asset Management Efficiency’, Group General Manager, National Petroleum Investment Services (NAPIMS), Mr. Bala Wunti, also stressed that the 10 per cent gas being flared can provide a lot of power for the country.

He said: “Today, we are sitting on top of about 37 billion barrels of crude oil reserves, which if you take the 2019 average of production number which is 2.1 million barrels per day, it, therefore, means that if we don’t do anything today, we will produce everything we have in about 40 years.

“For some of us who are just 30 years, it means, potentially, they can see a Nigeria without oil and if we need to extend this, we need to do something and bring in more reserves to produce more.

“This is even more given that the target given to the NNPC is to produce 2.3 million barrels in 2023. If we don’t do anything about our reserves, at 3 million barrels, you can imagine the volume we can produce which will be in the region of 30 years.

“So, in three decades, we will see a Nigeria without oil and potentially we all hope to spend the next 30 years alive. That’s why we need to do something,” he stated.

He called for more attention to be paid to gas production but stressed that if the current 10 per cent gas being flared and re-injected is properly utilised, it could power the entire country.

“Globally, gas has become a destination fuel. We have a significant quantity of over 203 TCF. If we maintain our current production, we can keep producing gas in the next 65 years. We flare about 10 per cent of this and for re-injection and that’s about 800 million gone.

“If converted, this can generate five gigawatts of electricity, given what we flare today. We also re-inject about 2.5 bcf of gas across the industry. If you convert this to gas, it can generate another 15 gigawatts of electricity.

“So, between flaring and re-injection, we can easily get about 20 gigawatts of electricity. If we are to convert 8 bcf just for power, we can generate 48 gigawatts of electricity and we can double our gas anytime we want,” Wunti noted.

Earlier in his keynote address, the Group Managing Director, NNPC, Mallam Mele Kyari, highlighted the challenges that the industry has witnessed, particularly in the last one year because of the COVID-19 pandemic

He said that despite the problems in the sector, the corporation was on course to achieving its $10 unit cost of production per barrel of crude oil in the coming months.

“We cannot achieve much unless we work efficiently, work smart and in a way that cost of production is at such levels that you are competitive.

“So, the countries and companies that will survive in the next 30 to 40 years in the fossil fuel business are those that have been able to reduce prices, provide efficient fuel, and work efficiently.

“Today, there are countries that can’t produce coal anymore and we are one of them. In the next 30 years, there will be countries with significant oil but that can’t produce. The only way to avoid this is to start today.

“This is what we saw and decided that we must bring our unit operating cost to $10 or below and that’s very practical. There are territories that unit cost is from 3 to 4 dollars. So, nothing difficult to do because it’s possible.

“We are taking significant steps and making sure that those assets produce and it’s already paying off. We are doing it with our partners and within, particularly the NPDC operations.

“We have seen a significant decline in the cost of production and the net effect is that we must be more efficient such that cost becomes the drive and not the business. Then ultimately we are able to produce low-cost fuel and transit into the new environment,” he said.

On the current market situation, the NNPC boss said that the search for renewables has made it even more difficult for producers of fossil fuels to survive in the industry.

He said: “Shortly before the coming of COVID-19, we were already seeing the dwindling of fortunes in the oil industry because many things were happening.

“Demand was going down, transitions are happening, people are looking for other choices and nations have made the decision not to make further investment in fossil fuels.

“The combination of that was what we were seeing before COVID-19, despite that economic activities were going on all over the world.

“As we speak now, we still haven’t recovered demand and it’s unlikely that we recover this demand to pre-COVID levels, not to talk of making improvement and even when they do, the revenue that will come from there will be challenged even into 2021 and beyond.”

While harping on the need to deepen gas penetration, domestically and for export, he stated that the NLNG train 7 would make a tremendous impact, especially given that Nigeria made more money from gas during the pandemic.

“We need to focus on technology, focusing on gas, reducing upstream cost is everything and also reducing production costs. All these will not happen if we don’t have the right fiscal environment.

“There’s enormous work going on to ensure the PIB comes on the table. The end result will be clarity around our fiscal environment and to know where we are going in 30 years because we will have a stable fiscal environment, more opportunities, and become more competitive.

“By the half of next year, I believe we will be able to deliver on the PIB and ultimately, the cost will become an issue because, with more competition, there will be more reward for production and more investment,” he stated.

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