How to cushion pangs of sliding crude oil prices, by stakeholders
The pangs of oil prices are still assailing various economies, especially those that are oil dependent.
For Nigeria, a significant proportion of its total yearly revenue comes from the oil sector and remains the major foreign exchange earner.
To cushion the effects on the Nigerian economy, stakeholders, at the Oloibiri Lectures Series and Energy Forum held recently in Abuja, emphased the need to embrace technology, adequate regulation and funding in the country’s oil and gas sector.
Group Executive Director, Exploration and Production, Nigerian National Petroleum Corporation (NNPC), Maikanti Baru, who spoke on the “Regulatory and Competitive Policies required attracting investment in the current global low oil price regime” at the forum, said that there is no gainsaying the fact that the exploration and production industry requires novel, cost-effective front-end exploration technology in this period of declining crude oil prices.
He added that the sector is also in need of efficient drilling technology that ultimately minimizes the cost of finding hydrocarbons and optimizes their rate of production.
Baru noted that at the current low crude oil prices, which are a far cry from the peak of $147 per barrel recorded in mid-2008, have elicited the need to look inwards and make appropriate internal reforms and economic adjustments to attract the right investments into our industry.
He said that while low oil prices may not be good for producing countries, in the long run, it might also not be good for consuming nations. “Low oil prices lead to increased dependence and consumption whilst also choking off the will to investigate other alternative sources of energy. This has the tendency to promote wastage and also increase the level of environmental pollution”, he added.
To cushion the effects of crude oil prices on Nigeria’s national oil company, Baru disclosed that NNPC is placing more emphasis on gas commercialization, processing of gas into high value products for both domestic and export.
He added that the corporation is also utilizing effective use of new technologies, rig less operations and new crude oil enhancement methods to increase production.
“We are focusing on low cost high –yield production and development and seeking alternative funding for them to relieve cash call burden on the Federal Government. Recently, we concluded the $1.2 billion NNPC-CNL JV accelerated upstream financing programme which is intended to add an incremental 41kbopd and 127MMscfd of gas over three years.
“There is also an aggressive cost reduction in both CAPEX and OPEX through negotiation, re-negotiation and rigorous bench marking. We are diversifying our business by venturing into downstream gas-based business, thermal power generation as well as renewable energy. NNPC Power Limited has recently been incorporated. Incorporation of the Joint Ventures starting with divested assets to allow the venture secure funding for its growth. The corporation is also synergising in joint development of assets and joint utilization of both crude oil and gas pipelines and terminals”.
Chairman SPE Nigeria Council, George Kalu, disclosed that this year’s theme focuses on “Technological Advances in Hydrocarbon Exploration and Exploitation: Solutions to Global Oil Price Stability” in a low oil price scenario; thus provides Nigeria with the unique opportunity of maximizing benefits from adoption of low cost technology in asset management as well as industry collaboration between buyers, suppliers and vendor with operators in the oil and gas Industry.
Kalu stated that with an all-time high crude oil inventory by Organisation for Economic Co-operation and Development (OECD), the oil prices dip this time around is different from previous cyclical scenarios. “This was partly occasioned by the demand-supply landscape in the global oil market and need to hedge against supply shortfall to the OECD. The emergence of oil supplies from the US shale areas plus the decline in oil demand from Europe and North America has contributed to a large extent. Simple innovative technology deployed such as water shut-off, short radius horizontal sidetrack in existing assets will ensure low cost oil production”, he added.
Speaker of the House of Representative, Yakubu Dogara, said that the National Assembly shall consider and expedite the passage of legislation of Petroleum Industry Bill (PIB) to enable the restructuring and deregulation of the downstream sector.
; thus, allow for competition in all segments including open access to the pipeline as well as providing a robust tariff mechanism for all players.
He stated: “A strong local refining and petrochemical industry provides the catalyst, which ensures the Country’s growth and sustainable development through diversifying the country’s revenue stream and growth in other sectors”.
Director of the Department of Petroleum Resources (DPR), Mordecai Ladan, speaking on “Regulatory & Competitive Policies for Investment in the Current Global Low Price Regime”, said that the effects of price downturn is dire due to wholesale reliance on trading unprocessed crude
He believed that revising strategies to optimize the hydrocarbon value chain and riding out of the raw material dilemma, would be key to getting out of perennial slough of price slides.