There were two news reports recently in Nigeria. One was cheering Seplat’s successful listings on the Nigeria Stock Exchange (NSE) and London Stock Exchange (LSE). The other was disturbing and it said that Nigeria’s crude oil reserves had dropped to 35 billion barrels from the 37 billion barrels it stood in the last two years, and the reasons were linked to the lull in hydrocarbon exploration activities to replace depleted ones. This sorry situation was further confirmed with the recent rebasing of Nigeria’s Gross Domestic Product (GDP), showing that the share of crude oil and natural gas to the nominal GDP has declined to 17.52 percent, 15.89 percent and 14.40 percent for 2011, 2012 and 2013 respectively, indicating an obvious decline in the contribution of the oil and gas industry to the country’s economy.
Sadly, this piece of critical news which emanated from the Department of Petroleum Resources, Nigerians regulatory agency for the oil and gas industry, went largely un-discussed, the reasons understandably being that the country, is at present, immersed in several wars which takes the front burner of national discourse, among them, a war of words by delegates at the ongoing national conference, and from that conference also comes the never ending war between the South and the North, and dissenting voices between Christians and Muslims. But I doubt, as it concerns dwindling oil reserves, if there is any Nigerian who would not pause to think twice and reflect more on that news considering the harm that depleting reserves could do to Nigeria’s economy even in the immediate future, given that sales of crude oil accounts for more than 90 per cent of the nation’s source of revenue.
Even the sustenance of the ongoing conference, and the quest to win the various fights earlier listed, depends directly or indirectly on the availability of crude oil in such commercial volumes for the international market. The question most people ask is, ‘what really is responsible for the dearth in the exploration and production of crude oil in Nigeria’? In attempting to answer this question, as someone who for the past two decades has been a major stakeholder in the industry, I will say that majorly, it is the inability to pass the proposed Petroleum Industry Bill (PIB) into law, an action that has created a lull in both existing and prospective investors in Nigeria’s hydrocarbon exploration. Who really wants to invest in a climate of uncertain fiscal regime, the very contentious issue, in which the PIB is premised upon? Certainly no one! So until the PIB becomes law, Nigeria should continue to expect this investment lull.
But again, there is another issue which must be speedily addressed. And that has to do with the challenges that serious exploration and production firms partnering with state-owned firms like the Nigerian National Petroleum Corporation (NNPC) and the Nigerian Petroleum Development Company (NPDC) are facing in the quest to jointly bring on-stream projects that would boost both Nigeria’s crude oil reserves and production capacity. And that brings me to the latter story, which bothers on Seplat Petroleum Development Company Plc, listing its shares on the Nigerian Stock Exchange (NSE) on 14 April 2014. By listing its shares on the NSE, Seplat has, according to FutureView MD, Elizabeth Ebi, ‘opened a new vista of opportunity – dividend earnings, as well as capital appreciation opportunities – that was formally unavailable to local investors in the Nigeria capital market’.
With the exception of Seplat, all the other indigenous firms have had to at some point (and will continue to) swallow the bitter pill called NPDC if the situation is not reversed quickly. Like the PIB, which has stalled further investments in crude oil exploration, the situation is not different to what happens when oil firms engaged in crude oil exploration activities are unable to bring their work programmes into reality. In fact, all forms of delays due to government bureaucracy on oil and gas projects are not suited tothe dynamics of the oil and gas industry whose end products is usuallysold in the international market. It is one factor that has dampened indigenous companies’ ability to fund and develop the oil and gas sector, and to build a promising indigenous upstream industry. And I must add that one of the reasons why local banks are refusing to fund any project where NPDC is the operator is because of the inconsistency in government policy and bureaucratic delays and undue government interferences.
Seplat has enjoyed an astronomical growth and success since it began operations because, unlike other companies who do not have the operatorship, is not bogged down by procedural constraints (one of the major challenges of a state owned company like NPDC). These constraints do cause unnecessary delays. They do not add value nor do they increase production that the country desperately desires. Delays stifle investments; are inimical to efforts to create jobs and curb rising unemployment; it diminishes the opportunity for human capital development and training opportunities for Nigerians; provides less or fewer contracts opportunities for local contractors, and thus contributing to militancy in the oil communities.
By more than 90 per cent, it is the crisis created by the government in keeping its own terms on any Joint Venture oil project that had resulted in the failure of the partnering oil firms to meet the demands of its host communities in time, thus resulting in community backlash against joint venture partners, and sometimes the attendant delayed oil spill cleanup rate. So to nip the impending danger to the economy on Nigeria’s falling reserves and production demands, both the government and oil firms acknowledging the inherent danger posed by the delay in the passage of the PIB as well as the government bureaucracy which stalls technical and fiscal provisions of oil and gas projects.
Chinedu Gregory wrote in from Lagos.