Nigeria is facing a substantial challenge in its oil production industry, with the need for a massive investment of approximately $7.6 billion to boost its current oil output from 1.3 million barrels per day (bpd) to a target of 2.1 million bpd by 2025. This pressing issue was brought to the forefront by Dr. Austin Avuru, Chairman of AA Holdings, who sees this investment as a critical step towards revitalizing the country’s oil production capabilities.
The plan outlined by Dr. Avuru involves drilling a total of 426 wells and deploying 45 drilling rigs to reinvigorate the oil production sector in Nigeria. This ambitious endeavor is not just about increasing the quantity of oil produced; it’s about ensuring the sustainability and growth of the Nigerian economy while also reinforcing the nation’s standing in the global oil market.
Dr. Avuru emphasized the pivotal importance of this investment during his presentation at the 41st Nigeria Association of Petroleum Explorationists (NAPE) yearly international Conference and Exhibitions (AICE) Pre-conference. The theme of the event, ‘Unlocking Nigeria’s remaining energy potential to fuel economic growth and diversification: opportunities and challenges,’ underscored the significance of such investments in shaping the nation’s energy future.
One of the key questions raised by Dr. Avuru is whether Nigeria possesses the execution capacity to make this ambitious plan a reality. It’s not just about having the financial resources; it’s also about efficiently mobilizing an additional 23 drilling rigs to meet the objectives. This is a significant logistical challenge that requires careful planning and coordination.
Furthermore, Dr. Avuru discussed the evolving energy landscape in Nigeria, where the proportion of hydrocarbons in the energy mix is expected to decrease significantly. In the most drastic scenario, it could drop from 82 percent to only around 20 percent. In a more likely and probable scenario, hydrocarbons might still constitute around 40 percent of the energy mix, with renewables gaining ground and accounting for approximately 60 percent by 2060. This transition highlights the need for adaptability and diversification in the energy sector.
The Chairman of AA Holdings also highlighted the issue of consumption, where extreme scenarios could see a substantial drop in oil demand, from the current 103 million barrels per day to as low as 30 million barrels a day by 2050. In a more likely scenario, the demand might decrease to approximately 55 million barrels a day. This underscores the importance of striking a balance between supply and demand, which is increasingly challenging due to the rapid decline in existing production.
Dr. Avuru pointed out that a combination of reduced investments in the sector and hesitance from banks and traditional funding sources to invest in the oil and gas industry further complicates the situation. Additionally, despite global efforts to shift towards renewable energy sources, renewables are not yet delivering the same quantum of energy that is being taken out of the fossil fuel mix. These factors contribute to a tightening in the energy sector, which needs to be addressed strategically.
In the context of the gas sector, James Makinde, General Manager of Gas Business at Seplat Energy PLC, presented a separate set of challenges and opportunities. He noted that if Nigeria continues on its current trajectory, there could be a deficit of 3.1 billion cubic feet per day in gas supply to the market by 2030, spanning a significant 70-year period. To counter this, Nigeria has initiated the Decade of Gas initiative.
Makinde emphasized that securing the success of the Decade of Gas initiative requires three priority interventions: ensuring attractive returns for investors, facilitating investments through essential infrastructure development, and enhancing investor confidence. He highlighted the potential of two to three projects to significantly increase the supply of gas to the domestic power sector by 2026.
Conclusion: Nigeria
According to the OPTS/IPPG study report, the initial 10 projects identified for the Decade of Gas initiative have the potential to yield substantial benefits for Nigeria, including $14 billion in Foreign Direct Investment (FDI), $12 billion in Federal Government of Nigeria revenue from gas royalties and taxes, and the creation of two million new jobs across the gas value chain.
Makinde stressed that investing in gas infrastructure development is not just about meeting energy demand; it’s about providing energy that is both more affordable and reliable. Importantly, he highlighted that the government alone cannot accomplish this task. It necessitates active involvement from the private sector, which brings with it the need for a conducive environment, incentives, and the effective implementation of the Petroleum Industry Act (PIA).
