The Oil & Gas Year Nigeria 2016
With the transition to a newly elected administration juxtaposed with the dramatic drop in oil prices, Nigeria’s oil industry has undergone quite a bit of change in the downstream sector, while the upstream has all but screeched to a halt.
The Nigerian National Petroleum Corporation (NNPC), established in 1977, was taken over by Minister of Petroleum Resources Dr. Emmanuel Ibe Kachikwu in November 2015. He served as the general managing director of the NNPC from November 2015 until July 2016, when M.K. Baru was appointed to take over as and Minister Kachikwu was relegated to the position of chairman. During Kachikwu’s time as general managing director, the NNPC released its first audit in a decade, reorganised into seven main departments and helped to avert a fuel supply crisis, which was getting worse by the day, by pushing for the deregulation of the downstream sector. NNPC’s inability to pay cashcalls to its upstream JV partners has continued, however Kachikwu and now Baru have pledged to make swift changes to the business model of the NNPC to make it more commercially viable and successful in the coming years.
The fall in oil prices has highlighted the country’s need to diversify its source of revenue away from oil. This diversification is going to take some time as the Nigerian economy has slipped into a recession as of July 2016. Nigeria’s sovereign wealth fund was at around a paltry USD 2 billion when the oil prices began to crash. Nigeria’s small hedge and dwindling foreign currency reserves, accompanied by attacks on oil and gas facilities in the Niger Delta from a new group of militants called the Niger Delta Avengers as of February 2016, have slowed down if not halted the vast majority of upstream projects and investments such as Shell’s Bonga SW. One exception has been Total’s Egina project, which is still going ahead full steam with its FPSO to be completed at the Ladol yard off of Nigeria’s coast. There have been other small investments with some local and multinational players scooping up the low-hanging fruits of blocks that are being divested either by IOCs or by those who bought their oil blocks at a time when oil was USD 100 a barrel and can no longer afford to explore or build the necessary infrastructure to see their blocks to production.
Accompanied by the drop in oil prices has been a shift in focus to gas. Nigeria boasts the largest proven natural gas reserves on the continent at more than 5.28 tcm (187 tcf) but only produces 39.7 mcm (1.4 bcf) per day. According to the Ministry of Petroleum Resources and NNPC, Nigeria needs to produce 56.6 mcm (2 bcf) daily to create liquidity in the market. The shift towards creating this liquidity by boosting production comes with the shift of investment and focus on boosting the amount of power on Nigeria’s grid. The Ministry of Power, run by former Lagos Governor Babatunde Fashola, has established a plan that involves a mixed bag of energy solutions with a focus on gas. The ministry’s long-term goals are to go from incremental power to sustained power to uninterrupted power. Attention has been focused on the front runner Azura Independent Power Project, which is expected to deliver 450 MW upon completion in 2018 along with 16 current projects for the rehabilitation of transmission lines, the rehabilitation of hydropower plants, 14 solar power projects and 2,000 rural projects.
The Oil & Gas Year Nigeria 2016 deciphers the implications of the changing landscape of hydrocarbons and power industries amidst the backdrop of the sweeping changes of a new administration under President Buhari and an economic recession. The top insiders were interviewed for the book including newly elected President Muhammadu Buhari; Minister of Petroleum Resources Dr. Emmanuel Ibe Kachikwu; Minister of Power Babatunde Fashola; the director of the Department of Petroleum Resources,
Mordecai Ladan; the executive secretary of the Nigerian Content Development and Monitoring Board, Daziba Patrick Obah; and all the top decision makers from upstream to downstream operating in the country.
Extensive analysis is backed with meticulously researched maps, illustrations and graphs to create a market guide indispensable for players seeking to make a move in Nigeria.