Nigeria: Oil Exploration - Investment Dips As Nigeria Suffers Major Setback

3 August 2021

There are indications that limited investment has impacted negatively on exploration, as Nigeria's rig count, fell by 61.5 per cent, year-on-year, YoY, to 35 in the first half of 2021, H1'21, from 91, recorded in the corresponding period of 2020.

The rig count, a major index for measuring level of activities in the upstream oil sector, was obtained from the reports of the Organisation of Petroleum Exporting Countries, OPEC.

The data showed that the rig count fell by 67.2 per cent, quarter-on-quarter, QoQ, to 19 in the first quarter of 2021, Q1'21, from 58 in Q1'20. Similarly, it also fell by 13.6 per cent, QoQ, to 19 in Q1'21, from 22 in Q'4, 20.

African nations

However, the rig count of other African oil and gas producing countries, such as Algeria, Libya, Angola, and Equatorial Guinea, examined in the study, also dwindled during the period under review. Specifically, the rig deployment in Algeria fell to 146 in H1, 21 from 202 recorded in H1'20, showing a drop of 27.7 per cent.

Also, the rig count of Libya fell to 71 in H1'21 from 76 in H1'20, showing a decrease of 6.6 per cent, while Angola's rig deployment fell to 24, from 25 in H1'20, indicating a decrease of 12.5 per cent.

However, Equatorial Guinea, which deployed 10 rigs in H2'20, had its rig count dropped to 0 in H'21, indicating a decline of 100 per cent.

Factors

In its reports, OPEC severally identified the prolonged Coronavirus pandemic, as a major factor, constraining investment in many countries, including Nigeria.

But investigation by Energy Vanguard, weekend, partly attributed the situation to other factors, especially low investment, which was mainly due to the delay in passing the Petroleum Industry Bill, PIB, into law.

Experts

Commenting on the development, the National President, Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mr. Colman Obasi, said: "The dwindling rig count clearly showed that the nation is not investing enough in the upstream sector. It also illustrated that we might not likely meet set targets, especially the attainment of 40 billion barrels reserves target by 2025.

"Besides, it also showed that Nigeria's current 37 billion barrel reserves might be depleted much faster than expected, if the nation does not invest much in exploration, required to make new finds and increase reserves.

"More than that, it showed further that the emerging oil and gas countries in Africa, and other continents could overtake Nigeria in medium and long term."

Similarly, Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management, Institute for Oil and Gas Studies, University of Cape Coast, Ghana, Prof. Omowumi Iledare, said: "The current rig count is small, considering that the nation is a major producer with about 37 billion barrels reserves and over 200 trillion standard cubic feet of gas.

"We all hope the PIB becomes an Act, it would attract additional investments into the industry."

Furthermore, in a recent interview with Energy Vanguard, Victoria Ibezim-Ohaeri, Executive Director, Spaces for Change, had said: "Nigeria needs to pass the Petroleum Industry Bill (PIB) as soon as possible to ensure the country gets the maximum benefits from its petroleum resources.

"Crude oil dominates Nigeria's economy, accounting for around 80 per cent of export earnings.

"Nigeria has the largest oil and gas reserves in sub-Saharan Africa with an estimated 37 billion barrels of oil and 188 trillion cubic feet of gas.

"Yet for decades, the virtually ungovernable industry has been plagued by poor leadership, eye-watering corruption, and environmental degradation. Nigerian administrations since the 1960s have - with varying degrees of effort - failed at reform.

"In the last 20 years, multiple governments have attempted to pass an all-encompassing Petroleum Industry Bill (PIB), the scope and complexity of which has ensured repeated failure.

"The extant regulatory framework of the oil and gas sector, which includes the Ministry of Petroleum Resources, NNPC Act 1997, the Petroleum Act 1969, the Oil and Pipelines Act 1990, the Petroleum Profit Tax Act 1959, the Petroleum Products Pricing Regulatory Act 2003 amongst others have had a more ruinous effect on the oil and the gas sector, as they have not promoted a culture of transparency in the oil and gas sector."

She added: "The Petroleum Industry Bill (PIB) seeks to increase government revenue from oil, and as well lay down a strengthened legal and regulatory framework for the Nigerian oil industry, set up structures for the establishment of commercially driven petroleum entities; and promote transparency in the administration of Nigerian petroleum resources.

"Succinctly put, the bill seeks to address the problem of administering petroleum resources in line with global best practices, and to provide for efficient and independent sector regulation."

New investments

However, in an interview with Energy Vanguard, weekend, Lead promoter, EnergyHub Nigeria, Dr. Felix Amieyeofori, called on the International Oil Companies, IOCs, indigenous companies, and the Federal Government to work toward increasing the rig count and by extension investments in the upstream sector.

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