The opposition Action Congress of Nigeria (ACN) on Sunday raised the alarm that Nigeria is broke and pointed at an impending collapse of the economy, unless the Federal Government cuts the astronomical cost of running a bloated government and takes urgent measures to diversify the economy and shore up the production of oil, which remains the mainstay of the country's economy.
In a statement in Lagos on Sunday by its spokesperson, Lai Mohammed, the party warned that if urgent measures were not taken, the government might not be able to pay its bills, including workers' salaries, within the next few years.
"Contrary to what the FG may say, this warning is not about crying wolf but is actually borne out of a patriotic fervour devoid of politicking, which is the usual refrain of this government when alerted to its shortcomings," the party said. "We will like to be proven wrong, but this will depend on uncommon and monumental effort, rather than on the basis of the usual canned response from the government."
The ACN said it was issuing the red alert based on four empirical evidence: The cost of oil production which has skyrocketed from 4 dollars per barrel in 2002 to 35 dollars presently; the massive corruption in the oil sector, with oil theft and sabotage leading to lost production and costing Nigeria some 6 billion dollars annually in crude theft; the sharp fall in the discovery of new oil and gas reserves due to the low investment in the sector, and the most serious of all, the challenge posed by alternative sources of global supply of oil and gas.
The party said the cost of oil production rose from only 4 dollars per barrel in 2002 to 7 dollars per barrel in 2005 and, from the 12 dollars per barrel at the onset of the Yar'Adua/ Jonathan Administration in 2012 to 35 dollars per barrel in 2012, according to the just-concluded Nigeria Oil and Gas Conference in Abuja, where the mind-boggling cost hike was attributed to the cost of security in the Niger Delta (put at 16 dollars per barrel), it said.
"In other words, the gains recorded from ending militancy in the Niger Delta due to the Amnesty Programme have been wiped off by the cost of maintaining the 'peace'. Here is how Shell Nigeria MD Mutiu Sunmonu described the situation: 'Operating in the Nigerian oil and gas environment can be long and tortuous with costs at the high end of the global scale. There are a multitude of security related issues that have to be dealt with on a daily basis.
"In the recent past, militancy has simply been replaced by INDUSTRIAL SCALE oil theft and sabotage(emphas is ours). We, and others, have had to shut-in significant production; spend huge amounts on replacing and repairing hardware and deploying massive resources to clean up spills'."
On the discovery of new oil and gas reserves, the ACN said the disastrously-lo w level of exploration activity in Nigeria is supported by the statistics released by the US Department of Energy for deepwater discoveries from 2009 to 2011 in which Brazil alone contributed some 40 new discoveries or 20 percent of the global total, US and Australia contributed 10% each, countries like Ghana making nine new discoveries or 5% of the global total, while Nigeria had only 4 discoveries or 2% of the global total during this period.
This paltry discovery of new oil and gas reserves is due to the low investment in the sector, which needs to attract 15 billion dollars annually in capital investment, up from the present 3 billion dollars, in order to remain a significant global oil supplier and a respected player in OPEC, the party said.
It said, however, that all those challenges pale into little significance when placed against the challenge posed by alternative sources of global supply of oil and gas seriously - that is Shale oil and Shale gas!
"Here are the facts: The US has more than doubled its estimates of recoverable domestic Shale-gas resources to some 827 trillion cu. ft. (23 trillion cum), more than 34 times the amount of gas the US uses in a year.
Together with supplies from conventional gas sources, the US may now have enough gas to last a century at current consumption rates.
"Last month, the agency released a similar announcement in respect of Shale oil to the effect that California's valleys alone hold as much as 15.4 billion barrels of Shale oil, which companies were hitherto unable to reach because the oil exists in pockets of rock that were expensive to reach before the present advancements in fracking technology. Similar announcements are being made in Europe and parts of Asia.
"For the first time in nearly a decade, the US has regained the position of being the world's largest producer of natural gas and soon also oil. Thus, in less than five years, the US has gone from seeking new sources of oil and gas overseas to being self-sufficient . Industry experts believe that Shale oil and Shale gas will revolutionize the industry--and change the world--in the coming decades. It will prevent the rise of any new cartels and alter oil geopolitics.
"The announced objective of the US Government is to drive down oil prices from the current 100 dollars per barrel to 50 dollars per barrel within 2 years. If this happens, which is very likely in view of the alternative sources, Nigeria, with a cost of production of 35 dollars per barrel, would immediately go out of business, with dire consequences for an economy that thrives largely (if not solely) on oil," the party said.
It said the signs of imminent trouble are already visible for those who are willing to see: The Brass LNG Project is unable to take Final Investment Decision (FID) because of the collapse in the US LNG market and rising costs; and a similar situation faces the Olokola LNG Project.
The party therefore called on the Federal Government to put on its thinking cap in order to rise to the challenges listed above and save Nigeria's economy from collapse, adding that any delay could mean that those in charge of the country's affairs would not have enough time to change course as the ship of state heads for the rocks.