20 February 2013

Nigeria: Country Falling Back in Oil Production - Shell MD

Managing Director of Shell Petroleum Development Company of Nigeria Ltd Mutiu Sunmonu has warned that Nigeria is on the verge of losing its monopoly as Africa's major oil and gas producer as more sub-Saharan African countries join the oil club.

He pointed out that more countries - Ghana, Niger, Chad, Kenya and Mozambique - are already oil and gas producers in addition to heightened oil/gas activity in United States.

Speaking at the Nigeria Oil and Gas Conference 2013 in Abuja, Mr. Sunmonu said although Nigeria still produces over half of the sub Saharan oil and gas, the question is how to sustain the trend in view of the adverse production challenges and emerging competition elsewhere.

He also drew attention to a potential challenge on the horizon: "The US Geological Survey estimates that over 250 trillion cubic feet of natural gas may lie off Kenya, Tanzania and Mozambique. To put that in perspective that is enough to power a city of one million people for 5000 years."

He added that the largest discoveries in sub Saharan Africa in recent years have been made by independent explorers. "According to Wood Mac, it is these independents, not International Oil Companies (IOC) who are leading the industry's exploration campaign and opening key new players across the continent".

Mr. Sunmonu said these are the evolving oil and gas industry in Africa, which in addition to many other global trends will impact on Nigeria.

He suggested that for the country to maintain its global stand in oil and gas production, government must provide a conducive operation environment and the fiscal terms must be in such a way that will provide competitive and attractive rate of return to the investors.

"Nigeria is a challenging operating environment, costs are at the high end of the global scale, contracting and licensing can be long and tortuous processes, and onshore, there are a multitude of security related issues that have to be dealt with on a daily basis.", said Sunmonu.

"I must acknowledge the federal government efforts in addressing these challenges but there is need to do more," he said.

On the PIB, Sunmonu said the legislation has to address long standing issues such as JVs funding, and having a strong national oil company.

The Minister of Petroleum Resources Mrs Diezani Alison Madueke said the proposed PIB will consider the input of all concerned stakeholders in the country adding that on insecurity and vandalism, President Goodluck Jonathan has reached out to world leaders for assistance.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Andrew Yakubu said despite the challenges facing Nigeria's oil industry, the country still is the biggest Foreign Direct Investment earner in the continent.

Most of the international oil companies who spoke at the conference expressed fears over the outcome of the PIB.

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