The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu on Thursday told Vice President Yemi Osibanjo that the federal government is expecting over $40billion investments in the oil and gas sector in the next five years, but it actually needs about $100billion to revive the sector for its contribution to the nation.
He called on the government to quickly make and take some policies decisions to review the issue of cost of production, address Niger Delta and security issues.
He disclosed that one or two of the International Oil Companies (IOCs) have been able to attain a production cost of $15 per barrel, stressing that โwe need to get everybody else to buy into that model.โ
Three of the modular refineries, he said, are beginning to crystallize and they will hit 10 this year and by the end of next year real time delivery on refining will be in place to reduce the foreign exchange rate.
He spoke at the closing ceremony and the media session of the first Nigerian International Petroleum Summit in Abuja.
Responding, Osibanjo many countries in Asia and other continents are developing alternatives to oil when some African countries are just joining the league of producers.
He noted that the volatility of the market is a challenge that requires synergies among the oil producing countries, adding that โfor us in Africa, we have to make out the best to overcome these new resources before it is too late. Together, we can sum- mount our hurdles faster than if we want to do it individually.โ
The Vice President assured the participants that the Nigerian experiences can be useful to African countries that have just joined the league of oil producers.
He told the stakeholders that the summit provides opportunities for corroboration among Africans for the encouragement of local content development in the sector.
Kachikwu however explained that the $100billion should have flown into the sector from gas infrastructure, gas flare-out investment and replacement of existing dilapidated pipelines. But what the country is looking forward to raking in in the next five years included the โthree very key projects Engina 200,000barrel per day, contributing $15billion, the Bonga about $10billion, the Zabazaba about $12billion. We have investments that are coming into the downstream refineries which is $2.5 and $3billion. We have the AK pipeline that is about $3billion. If you add up all of that it is in excess of $40billion.
โMy point is that $40billion wasnโt enough. We need to be targeting about a $100billion investments in the sector to revive it for its maximum contribution. That target is mostly from gas plant, infrastructure, gas flare out recycle investment which take a lot of money and the replacement of existing dilapidated pipelines.โ
He said that there will be a cause for concern as soon as oil production hits $2.5million per day, stressing that the situation is still bearable now that Nigeria produces a total of 2.2million barrel per day of crude and condensate.
The minister said that the advantage of low oil prices is that it compels oil companies to review their projects, stressing that the cost of production is now $22 per barrel but โeverybody has to work to achieve $15 cost.โ
The minister, who was commenting on the impact of the cap of the Organization of Petroleum Exporting Company (OPEC) on Nigeria said โWe have a current advice sealing of 1.8mbd. They have given us the latitude and we are still under exception. But the expectation is looking at our number is that we should do 1.8mbd.
โThat covers crude it does not cover condensate. A combination of what we are producing today which is in excess of 1.75 or 1.75 and the condensate which is about 400 and something barrel which take us to 2.2 or slightly below that. The challenge will come when you hit 2.5mbdโฆyou will begin to struggle about what to do with those volumes.โ
He however pointed of that in the course to reduce the cost of production, there will be incentives for oil firms that have been able to reduce theirs and punishment will be meted out to those that are not ready to adopt the new technology to trim down their cost.
According to him, technology is already helping to reduce cost factors and all the firms are coming to term with reality and a lot of the measures of the federal government are going to be based on policies to push the envelopes and make sure that the oil companies are monitored and complied.
He said that there is a necessary incentive for those who accept regulatory measures and penalties for those who are stubborn about the process.
He however accepted that there are local issues that are propelling cost such as the Niger Delta crisis, stoppage of production, delay of project approval and others.
Kachikwu said that if the Shale oil threat remains, Nigeria will go to the draw board to see the possibilities of processing its own oil, adding that โexporting crude is like exporting raw materials of agricultural products. I like to see a policy where all oil companies will begin to refine heavily, process heavily and take out the finished products. I am hoping that by the time we are getting to those doing local production, local processing and refining would have improved to a level when the price can no longer be a problem. โ
Asked whether the petrol scarcity in Abuja will return owning to the conclusion of the summit, he said that the summit could not hold forever.
He noted that there was no hope that the fuel scarcity situation would change completely, although the Nigerian National Petroleum Corporation (NNPC) has been working hard to cushion the situation apart form the directive he gave it to flood Abuja with product during the summit.
The minister putting the question whether the scarcity has gone for good to himself, he replied โI donโt think so. I donโt think so because there are some importation that are taking goalie there and there are reserves that are being rebuild, . But I think what they have done is to manage some logistic angle somewhere there.โ
Kachikwu however expressed hope that as March approaches products are going to become cheaper because of the summer issue. Some marketers who have efficiency issue might begin to bring in new cargoes to supplement.
He added that perhaps before them some of the resolutions reached with Mr. President would have been approved to give NNPC the leeway in terms of addressing issues. I am hoping that it is not going to come back.โ
He said that the marginal field policy is still subsisting but there is need for approval from Petroleum Minister, who is to sign it up. Mr. President. He submitted that โI do not have the authority to jump into marginal crude.โ
He said that new tranches of cash call arrears arose because NNPC did not finished the exiting process in February but December last year and the cash call policy continued while government was working out the exiting process which added more arrears.
On modular refineries, he said if the refiners chose to pay in local currency they will pay at the prevailing exchange rate.
Kachikwu noted that although the oil belongs to the federal government, but the federal government does not have the right to change to the price.
He said that since they are producing new the source of crude, it means a reduction in the cost of transportation which is a huge cost in the production value chain.
According to him, some Nigerians are still of the belief that the sector is still having transparency issues, adding that confidence will impact on the sector once it is completely transparent.
