Economic Confidential, April 2007

OIL AND GAS

Investments in Oil to hit $29.4bn per annum

…As FG earns $2bn from oil Blocks

By Cosmos Aley

From all indications investments in Nigeria's Oil and Gas industry may hit $29.4 billion (about N3.76 trillion) annually over the next five years. It is also disclosed that Federal Government earned the sum of $2.187 billion as signature bonus from the sale of 152 oil blocks awarded between 1990 and 2006. The information came from two separate occasions addressed by Dr. Funsho Kupolokun, NNPC Group Managing Director (GMD) and Tony Chukwueke, the Director of Department of Petroleum Resources (DPR).

At the opening of the 2007 Offshore West Africa international conference and exhibition in Abuja, it was disclosed that Nigeria's Oil and Gas industry may hit $29.4 billion (about N3.76 trillion) annually over the next five years, with the Nigerian National Petroleum Corporation (NNPC) accounting for $11 billion (about N1.4 trillion). Dr. Funsho Kupolokun, NNPC Group Managing Director made the disclosure in his paper entitled “Harnessing the opportunities in Nigeria’s oil and gas industry.”

The GMD said the anticipated growth in the industry expenditure portended funding challenges, adding that arrangements were in place to mitigate these challenges through alternative means. He added that said a new funding model had been worked out and would soon be signed by the operating partners. This, according to him, is besides the Joint Venture and Production sharing scheme already in place in the upstream sector.

Dr. Kupolokun added that reserves had experienced steady growth over time, while production capacity had reached the three million barrels per day mark, indicating a four per cent growth per annum in the last three years. According to him “In the last one year, we have added about 800,000 barrels per day capacity and we feel confident that we would meet the four million barrels per day capacity by 2010.”  

He said there were several gas utilisation projects lined up to come on stream, including: seven new power stations in the Niger Delta, six fertilizer plants, two cement plants, three liquefied natural gas plants, the West African Gas Pipeline project, expansion of the existing LNG facility on Bonny Island, a study of the Trans-Saharan gas pipeline project and a gas-to-liquid plant.

Meanwhile, Mr. Tony Chukwueke, the Director of Department of Petroleum Resources (DPR) has said that the Federal Government earned the sum of $2.187 billion as signature bonus from the sale of 152 oil blocks awarded between 1990 and 2006. He made the disclosure while presenting a paper titled “Acreage Licensing rounds In Nigeria- The Journey so far” at a stakeholder forum in Lagos.

While pointing out that the Federal Government will continue to woo investors into the country with a view to boosting the downstream sector, he however, regretted the recent capture of expatriates by Niger Delta militants saying that the nation loses over 800000 barrel of crude oil due to the recent upheaval in the nation’s oil rich region.

“According to him, Shell Petroleum Development Company (SPDC) incurred about 500000bpd of the entire loss occasioned by the attack… we are experiencing one of the most difficult periods in the history of Nigeria’s oil and gas industry. As I am talking to you, Nigeria is losing over 800000bpd. So this is a trying period for the Federal Government despite its drive to ensure that sanity reigns in the sector.” He further warned that if the incessant spate of the attacks is not arrested, it may jerk up the price of crude oil in the international market to an abysmal level.

In terms of oil and gas industry investment level, Nigeria is said to rank tops among members of the Organisation of the Petroleum Exporting Countries (OPEC), closely followed by Saudi Arabia.