Uncertainties created by the delay in the passage of the Petroleum Industry Bill (PIB) is stalling a planned investment by Shell Petroleum Development Company of Nigeria Limited (SPDC) worth about $30 billion, the managing director of SPDC, Mr. Mutiu Sunmonu, disclosed yesterday.
Sunmonu was speaking on Day 2 of the ongoing 2013 Nigeria Oil and Gas (NOG) conference and exhibition in Abuja.
He stated that the delay in passage of the PIB was amongst several other uncertainties holding back the oil giant's planned investment in two offshore deepwater projects in Nigeria.
Although he did not disclose the planned projects, he however said that SPDC would rather wait for stable and right conditions before it would commit finances to the projects.
He said, "In Shell, we have two big projects, costing us about $30 billion, we will like to do as soon as we are sure that the environment and the conditions are right and I am sure it is the same with the other IOCs because each of us has projects in the pipeline, but we are all waiting for the almighty PIB to be able to make these decisions."
He noted that the potentials for growth and improvement in Nigeria's oil and gas sector were enormous but maintained that turning those potentials to reality requires a lot of hard work, creative thinking and genuine value creation.
Sunmonu, who regretted Nigeria's loss of revenue and investments from uncertainties such as awaiting PIB passage, crude oil theft and bunkering as well as insecurity amongst others, warned that Nigeria's oil and gas industry may be slipping into the era which took Mexico about 50 years to recover from when it faced similar challenges in its oil industry.
"I recall the Mexican story; it took them 50 years to recover from that loss in oil production and my worries are that we are slipping into that.Even today if we produce a modest allowance of three million barrels per day (bpd) and just assume a modest decline rate of 10 per cent that leaves us with 2.7 million bpd.
"What this means is that for us to maintain that level of three million bpd, we must produce additional 300,000bpd. It means that we need at least two deepwater projects every year," he said, and then you are talking about additional $30 billion investment every blessed year for us to remain at that level, but that is not going to be easy," he said.
According to him, Nigeria's onshore production is presently nowhere near the capacity it has, noting that much of what we have today comes from deep offshore operations while there is a lot more that could be gotten out of onshore were it not for the serious financing challenges occassioned by theft.
While commending President Goodluck Jonathan for his fight against crude oil theft, Sunmonu said, "we have talked about it before that crude oil theft continues to be a menace. If our country is losing 100,000bpd to 150,000bpd that is huge, some of the countries that are parading themselves as crude oil production countries today cannot even boast of 80,000bpd and if we are filtering away that much, then it calls for urgent action."
He added that the country must also make sure that the contractors who come to work in Nigeria have a level of stable operating environment in terms of the uncertainties around their contracts and to make sure that they get paid.
He said funding was key and called on financial institutions to begin to see how they can provide funding that would further the growth of the sector.