Nigeria’s Minister of State for Petroleum Resources Timipre Sylva has said IOCs were leaving Nigeria because the environment was becoming too volatile for their operations.
In an interview with The Energy Year, a market intelligence organisation, Sylva stated that Nigeria’s situation had become, “precarious” because of the multitude of challenges besetting the oil sector.
The minister noted that while Nigeria was tackling the challenges, the damage being done by vandals was eroding investors’ confidence in the oil and gas industry.
“Our biggest problem is the insecurity of our pipelines. There is a lot of pollution due to oil theft and pipeline vandalism, which has placed us in a precarious situation. It is one of the biggest reasons why IOCs leave Nigeria.
“They (IOCs) feel that our industry is becoming too volatile and a significant polluter. The criminals who rupture our pipelines to set up illegal refineries which are not regulated are seriously damaging our environment.
“It is our duty to ensure that we can tackle this issue, which is mainly a question of law and order rather than production. Once solved, all the production that has been lost will get to our tanks, while restoring investors’ confidence in Nigeria,” he said.
According to the minister, while the goal was to restore Nigeria as the leading crude oil producer in Africa, if the country could tackle security and technical issues, it should be able to ramp up production to 2.6 million bpd, and in the long run, boost it to three million bpd.
Describing fuel subsidies as, “the biggest impediment to the growth of the downstream sector,” Sylva stated that nobody wants to invest in an industry where they cannot even recover their cost of production.
On the projections for growth, Sylva noted that the Dangote Refinery would come on stream by the end of the year plus a significant number of modular refineries which are also coming on line as well as the rehabilitations of the refineries which are expected to boost local refining.
“Once the subsidies are removed and these projects are operational, a golden period for the Nigerian downstream sector will begin,” he maintained.
He reiterated that Nigeria has not been able to meet its production quota because it was finding it difficult to restart oil wells it shut down in the heat of the Covid-19 pandemic.
“During the pandemic, OPEC asked us to bring down production because oil prices were at a historical low. Unfortunately, Nigerian reservoirs react in a particular way, and when you want to shut down 100,000 bpd, you end up shutting down 300,000 bpd to achieve the desired 100,000 bpd. As a consequence, the drop has been drastic,” he explained.
He added that as a country, Nigeria was not taking full advantage of the high oil prices because production is not meeting expectations.
“We are now in a very disturbing situation where we cannot meet our OPEC quota, but we are working assiduously on this by looking at all the relevant issues. For example, we are tackling the problem of crude oil theft, which has seriously affected our production,” he said.
On local content, he pointed out that Nigeria has made significant progress in 10 years, growing local participation in the oil and gas sector from 3 per cent to 35 per cent, saying that a target of 70 per cent has been set for the near future.
He added that the concluded 2020 marginal field bid round will bring local companies into the production space by allowing them to learn how to operate with smaller fields and prepare them to take over any assets divested by IOCs.
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