Without Reforms, Nigeria’s Oil Output Could Decline By 35%

Cost increases and uncertainty in Nigeria’s crucial energy sector could lead to a 35per cent decline in oil output over 10 years as companies delay investments in key oilfields, consultancy Wood Mackenzie said in a new research due to be published on Friday.

According to Reuters, the company warned that three deep offshore fields, which would generate more than $2 billion a year for the government at peak production, are likely to be delayed as companies put their money in regions with better and clearer terms.

“Nigeria is going to enter quite a steep decline in production. In order to keep its revenue up…it needs to develop additional fields,” Principal analyst of sub-Saharan Africa upstream with Wood Mackenzie, said Lennert Koch.

Without the three fields, Koch said Nigerian production would drop 35per cent within a decade.

Nigeria is Africa’s largest oil exporter, with output close to two million barrels per day (bpd), but it needs continual investment to maintain output as fields naturally decline. Oil accounts for 90per cent of Nigeria’s foreign currency earnings.

Wood Mackenzie delayed its projected startups for the deepwater projects Bonga Southwest Aparo, operated by Shell, and Preowei, operated by Total, by two years to 2027 and 2025 respectively, and for ExxonMobil’s Owowo by four years to 2029.

Total said Preowei is under study with a final investment decision (FID) scheduled for 2020 or a year later. Shell’s Nigerian unit said they are in discussions with government and venture partners on “options to ensure the attractiveness of Nigerian deep offshore investments.”