During the Second Quarter Dinner of the Petroleum Club in Lagos themed “Funding Our Way out of the Crisis: Looking up to the Oil and Gas Sector”, Minister of State for Petroleum Resources, Heineken Lokpobiri, delivered a keynote speech addressing critical issues facing the oil and gas sector.
Among other things, he revealed a staggering loss of $34 billion over the last two and a half years due to declining oil production from assets being divested by ExxonMobil to Seplat Energy.
Lokpobiri disclosed that output from these assets plummeted from 600,000 barrels per day (bpd) to a mere 120,000bpd, resulting in a significant shortfall of 480,000bpd. At a conservative estimate of $80 per barrel, this translated to a monumental loss of $34 billion, highlighting the magnitude of the challenge facing Nigeria’s oil industry.
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“My own opinion is that, look, we are in short of 480,000 barrels a day from that ExxonMobil-Seplat transaction,” he said.
“For the past two and a half years, oil has been moving around $80 a barrel. Four hundred and eighty thousand barrels a day, multiply it by two and a half years, and it will give you about $34 billion.
“When I was at this table, I was doing rough mathematics and I guess you have your phones. So, you can do the calculation. If one asset was doing about 600,000 barrels, because of certain problems, which we’re trying to resolve, production declined to 120,000 barrels, which means we’ve lost about 480,000 barrels a day.
“Multiply it by $80 a barrel. Every day, you’ll get about $34 million. Multiply it by two and a half years, you’re talking about over $30 billion. If $30 billion is injected into our economy today, I guess you guys will have to sell more of your dollars because dollar will naturally drop. This exchange rate is sometimes a question of demand and supply.”
Against this backdrop, which has been described as the major contributor to the naira’s woeful performance in the FX market, Lokpobiri expressed confidence in the country’s ability to ramp up oil production to five million barrels per day within the next 12 to 18 months. He attributed the decline in production to a lack of investment in the sector over the past decade and underscored the urgency of addressing this issue.
“If from only that Seplat-ExxonMobil transaction, we have lost about $35 billion, imagine if that money was in Nigeria. Imagine if NNPC has about 70 per cent of that money. If they have that money to expand their investment, I believe that Nigeria will be in a better place,” he added.
The Minister said the quickest way to the redemption of the Nigerian economic problems is through the oil and gas sector. No oil and gas-producing country fails to prioritize investment in the sector.
He further outlined the potential for restoring production levels by resolving the divestment process and making minimal investments in the affected assets. He stressed that resolving the bottlenecks hindering the divestment process was paramount to unlocking Nigeria’s oil production potential.
According to him, one of the first problems that confronted him was the ExxonMobil-Seplat transaction, and said for the past two years, they’ve been struggling to resolve the problem.
“When I came, what I did was to bring Seplat and NNPC to the table to say, ‘Look, we must lock up ourselves in this room. We must find a solution to this problem.’
“What is the problem? They can attest to the fact that we are able to get some agreements. And I believe that in no distant time, we’ll be able to resolve that problem,” he said.
Lokpobiri’s calculations revealed the staggering economic impact of the production decline, with implications for the country’s revenue and overall economic stability. He reiterated the government’s commitment to prioritizing investment in the oil and gas sector to drive economic growth and deliver on its promises to the Nigerian people.
“That is my mandate. That is the mandate given to me by Mr. President. And I can assure you that this present administration is committed to ensuring that that happens.”
In addition to addressing the divestment challenges, Lokpobiri highlighted the government’s efforts to attract investment and remove bottlenecks in the industry. He emphasized the importance of collaboration with industry stakeholders and expressed optimism about resolving the issues hindering investment in the sector.
“We are willing to remove all bottlenecks in the industry because every country that has oil prioritizes investment in the oil and gas sector,” he said.
Furthermore, the Minister outlined plans for hosting the African Energy Bank (AEB), highlighting the potential economic benefits for Nigeria. He noted the government’s determination to leverage all available resources to attract investment and maximize the country’s oil and gas potential.
“But the summary of what I want to say today is that, as a government, our own policy is to ensure that we do everything that is globally possible that other countries don’t have and that other countries are doing to attract investment, so that we can attract the desired investment,” he said.
An increase in oil output has been touted as a sure way to lift Nigeria from its present economic predicament – which has unleashed an unprecedented 40.1 percent food inflation as the naira falters.
Lokpobiri’s remarks are seen as an admission of how critical the situation has become and the importance of addressing the challenges – mainly, oil theft and infrastructure vandalism. Also, experts note that by resolving divestment issues, attracting investment, and fostering collaboration with industry stakeholders, Nigeria can unlock its oil production potential and pave the way for sustainable economic growth.