Wednesday, February 24, 2010

Shell Raises Alarm Over Nigeria's Dwindling Oil Production

Shell raises alarm over Nigeria’s dwindling oil production

Wednesday, 24 February 2010 01:28
Sola Bello & Ameto Akpe

Nigeria’s oil and gas production has dropped by over 30 percent since 2005 and may continue to decline in coming years. And concerned by the development, Shell Petroleum Development Company, the dominant oil producer in Nigeria, has sounded the alarm bell that the government may be unable to deliver on the provision of infrastructure to its citizens.

“Nigeria’s share of global oil production is shrinking — it has fallen over 30 percent since 2005. Investment in the industry has stalled. Final Investment Decisions are not being taken in deepwater and unlike Australia, no new LNG projects have been approved onshore. As a result, other countries are catching up with Nigeria fast”, said Shell’s Ann Pickard.

Pickard, Shell’s outgoing regional executive vice president, exploration and production for Africa, spoke on “Nigeria’s position as a key player in global oil and gas markets,” at the Nigeria Oil and Gas 2010 exhibition in Abuja on Wednesday.

She blamed the lack luster performance of the Nigerian oil industry on the inability of government to translate all the positives in the industry into coherent policies and actions. She noted that Angola had eclipsed Nigeria in performance over the last decade drilling more exploration wells than Nigeria every year since 1999 except one.

“In 2009 alone, the industry invested $8 billion in Angolan deepwater - double the amount invested here. As a result, by 2020 Angolan offshore production is likely to be at least double that of Nigeria. New players are entering the market that will increase competition still further. Nigeria’s position in global oil and gas markets cannot be taken for granted,” Pickard said.

Taking a swipe at the Petroleum Industry Bill hailed by Nigerian authorities as critical to the success of the nation’s energy reforms, Pickard said: “The simple, passionately stated priorities of government have been completely lost in a cumbersome document that lacks insight into the very basics of our industry. When I hear comments like ‘we won’t fiscalise criminality’ and ‘we are better of leaving oil in the ground,’ I shudder. The PIB threatens to make the present bad situation worse. If passed in the form currently proposed its mistakes will take years to correct.”

She stressed “Nigerians will have to wait longer for the electricity they need to light their homes at night. They will have to wait longer for jobs they need to put food on the family table. The government will have to face difficult choices to balance the budget with less money available for the social services that people need,” she added.

Reacting to Shell’s presentation, Livi Ajuonuma, NNPC’ spokesman, said the PIB would make the industry better. “What Shell wants us to do is to keep subsidising the production of gas which they end up exporting to their home countries to guarantee their national energy security. As I speak, Nigeria is still subsidising gas for export because the cost of producing it is recovered from oil revenue.

“There is no country in the world that does not get value for its natural resources. But we are getting negative value from gas in Nigeria. The big question is if Nigerians are willing to forego subsidy on petroleum products which they consume, why should Shell or any other international oil company operating in this country expect Nigeria to keep subsidising the gas that they export to other countries? That and many more abnormalities are what the PIB is seeking to correct,” Ajuonuma said.

Pickard, however, said that despite everything, she remained optimistic because the International Monetary Fund had been commissioned by government to provide an independent objective analysis of the PIB. Pickard said it was not too late for Nigeria to put before the President for assent, a simple, efficient legislative framework that delivers national priorities and heralds a new era for Nigeria.

In an earlier presentation, Mohammed Barkindo, group managing director, Nigerian National Petroleum Corporation (NNPC) said the corporation was working with its joint venture partners to initiate more gas projects that would put out flares in the oil fields.

Barkindo said government had shifted its tactics of putting out the flares from the oil fields from giving deadlines to facilitating projects that would put out the flares, adding that government was committed to ensuring that the peace in the Niger Delta was sustained through the development of the region.

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