Indigenous producers decry zero crude oil output, zero revenue

Following incessant attacks on oil installations in the Niger Delta region by the Niger Delta Avengers and other militants, crude oil producers, especially the indigenous operators, have decried zero output, zero revenue they are faced with.

Speaking at the annual conference by the Society of Petroleum Engineers (SPE) Nigeria Council, the Managing Director/Chief Executive Officer, Seplat Petroleum Development Company Plc, Mr Austin Avuru stated that operators are no longer bothered by drop in crude oil price because when there is nothing to produce, there will be nothing to export for sale.

According to him, “These are pretty difficult times for our industry, and for our country. Today, over 70 per cent of production from the traditional terrain in the onshore and the shallow water is locked in. A year ago, we were faced with drop in oil prices, but today we are battling with zero production, zero revenue for up to five six month now.

“Some of us no longer check the oil price, because it is only relevant when you produce. This industry was undergoing a major transformation. Few years ago, we said this industry must move away from just being a primary revenue generation for the government to becoming an enabler for economic development.

“We had said that this industry will move away from domestic consumption of less than 300 billion standard cubic feet (scuf) of gas per day to consumption of over 3 billion scuf per day. And in the process transforming the economy. In the process it, energizses company like Dangote so we can become net exporter of cement and fertilizer, delivering over 300GW of electricity.”

That was the journey the industry had started three years ago, Avuru stated.

“That journey unfortunately today is being interrupted by forces that we are afraid of combating. The crisis in the Niger Delta has taken a new turn that must worry all of us because when we don’t produce, our companies are destroyed, jobs are destroyed the economy is destroyed and this whole transformation that I was describing is being interrupted rudely. Unfortunately, I do not know if there is real solution in the horizon as we speak.

“But still, we are hoping that by 2020, somehow that journey will get us to where we intend. Which means, our production of natural gas will fire this economy. We should be refining about half of our products in country by 2020. Domestic refining capacity of 1.2 million barrels per day is realistic by 2020. And as i said, 3.2-3.5bscuf of natural gas and all the multiplier effects are realistic,” he said.

However, he argued that despite the challenges, “this is the vision that we in Seplat are seeing, which is why from the gas processing of 60 million scuf per day in 2010 to today where we are delivering 300 million scuf into the domestic production. At the end of this year, we will have a processing capacity of 500 million scuf per day and all of this into the domestic market. By 2020, our aspiration is to be delivering 1bscuf of gas per day. Even though today everywhere looks bleak.

“Last week, I published our half year result and for the first time ever since we started, thus, business six years ago, we made a half year loss from bountiful profit in the last six years. As bleak as the situation looks, we see hope by 2020,” he said.

In his welcome address, the Chairman of SPE Nigeria Council, Mr George Kalu argued that lack of gas gathering and supply infrastructure is hampering the country’s  ability to maximize the benefits of sales of gas in the domestic market which is currently more attractive than that of international market.

He said the delay in the passage of the Petroleum Industry Bill (PIB) has constrained further investment into the sector to the extent that exploration activities are at its lowest ebb.

“The level of crude oil and gas reserves addition do not match the rate of production, with rig count declining steadily in Nigeria between 2013 and 2016 resulting in minimal expectation and new development activities when compared to other producing countries,” he said.

He argued  that the theme of the conference “Transparency in the oil and gas business: An imperative for Energy security and stability’’ is rather timely given that oil prices are hovering around $43 barrel per day in recent time with significant challenges to the Nigerian oil and gas environment.

The challenges include funding constraints rising from cash call arrears, exchange rate differential in a cyclical oil price regime, high operational costs due to long contracting cycle time and severely delayed payment to vndors, as well as high cost of borrowing is affecting the much anticipated boom in the industry.

“The Nigerian oil and gas industry has also experienced massive capital flights due to bureaucratic bottlenecks in releasing information and prospects, fiscal regime, extant laws and feedback on performance of contractors. This resulted in significant delays in permits approval while providing a breeding and enabling environment for sharp practices.

“The recent challenges of vandalism and outright destruction of oil and gas facilities has further curtailed Nigeria’s oil and gas production, power generation ability, reduced the inflow of revenue, escalated the cost of environmental remedies and provision of secondary health care facilities as well as increased security surveillance and facility replacement cost,” he said