Indigenous oil service companies have urged the new administration of the federal government to take advantage of the low price cycle in the petroleum industry in driving activities that will arrest the declining fortunes of the country oil and gas sector.
Chairman of the Petroleum Technology Association of Nigerian (PETAN), Mr. Emeka Ene, declared in Lagos yesterday that Nigeria faces the risk of acute decline in both crude oil reserves and production capacity in the next 10 years if exploration activities are not rekindled now.
Mr. Ene who is the erstwhile President of the Nigerian Council of Society of Petroleum Engineers (SPE) was reacting to the trending prediction by an international rating agency, Moodys, that Nigeria’s oil and gas production would fall by 15 percent in the next two years.
A top official of Moody’s had stated that Nigeria’s oil output could drop by as much as 15 percent by 2017 unless the government attracts more investment and resolves cash shortages at state oil firms. Nigeria produces about 2.1 million barrels per day of oil with foreign and local companies through production sharing contracts and joint ventures. But projects have been held up because Nigerian National Petroleum Corporation (NNPC) lacks financial autonomy.
Late cash call response by NNPC and acute shortfalls in its budget funding have remained a huge burden on the industry where the corporation holds overriding stakes in production agreements and joint ventures operated by private oil companies.
Also disputes over the controversial Petroleum Industry Bill (PIB) had also compelled private firms to freeze exploration investments in the last decade while waiting for a clearer view of the fiscal environment. Senior Analytical Adviser, Africa, at Moody’s, Aurelien Mali, stated: “By 2017, if there’s no more investments oil production will drop by 15 percent affecting jointly the government revenues.”