Pushing for More Oil Exploration - THISDAY
Stakeholders have called for concerted effort to ensure that the country embarks on oil exploration to grow its reserve, writes Peter Uzoho
The Nigerian Association of Petroleum Explorationists (NAPE) recently alerted the nation about the risk of low exploration activities in the petroleum industry as well as the continuous depletion of the country’s crude reserve.
NAPE had then warned that the reduction in hydrocarbon exploration and steady depletion of the oil reserves could drive Nigeria into the risk of long-term disruption to oil and gas supplies, power generation, collapse of industries and significant loss of revenue.
The association had also declared that with Nigeria being a mono-economy and largely dependent on the proceeds of crude oil for its sustenance, such inactivity in the exploration business will have dire consequences for the country.
NAPE’s outgoing President and a staff of Agip, Mr. Ajibola Oyebamiji, in a pre-annual conference meeting with energy correspondents in Lagos, stated that the nation’s oil and gas business was being hampered by several factors, including long procurement and contracting cycles, insecurity, oil theft and illegal refining, saying, the later even poses bigger threat to the sector than the fall in oil price.
According to him, “Nigeria is at risk of long-term disruption to oil and gas supplies, power generation, a collapse of industries and significant loss of revenue due to continue reduction in hydrocarbon exploration activities. Reduction in hydrocarbon exploration and exploitation has dire consequences for a country like Nigeria with a mono-economy hinged on crude oil.
“Procurement and contracting cycles in the Nigerian oil and gas industry is about 36 months, making it the longest and most inefficient in the world.
“The long contracting cycle results in high level of uncertainties in costing and planning, thereby creating a sluggish business climate.
“Insecurity, oil theft and illegal refining are bigger threats to the oil and gas industry in Nigeria than the declining price of oil. The current low oil price is rather a reflection of an over-supply of oil in the world market.
“In Nigeria, the low oil price regime has led to dwindling national wealth, more burdens on foreign reserves, pressure on infrastructure and social services, inability to meet commitments to institutional lenders, and the list of untoward outcomes is long.”
Oyebamiji, however, admitted that technology was the heart of all significant achievements in the oil and gas industry, adding that the way hydrocarbon was discovered, developed and produced has been impacted by evolutionary technologies that have emerged since the Drake well of 1859.
While noting that the challenge for Nigeria in this era of technology-driven oil and gas sector was how far the country had embraced the new trend, Oyebamiji stressed that with the new era of disruption blowing across virtually all industries, the time had come for the country to embrace new technology, as sustained low oil prices are driving the adoption of digitalisation across the oil and gas industry.
Speaking at NAPE’s 37th annual international conference and exhibition, with the theme, ”Enabling Nigeria’s Petroleum Landscape: Digitalisation, Innovation & Emerging Technologies,” held recently Lagos, Oyebamiji said the oil and gas industry had witnessed rapid technology advancement in recent years.
Among those that attended the conference were the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari; Lagos State Commissioner for Energy and Natural Resources, Lere Odusote; Managing Director, Shell Petroleum Development Company (SPDC)/Country Chair, Shell in Nigeria, Mr. Osagie Okunbor; and Managing Director, Total, Mr. Sangster, amongst others.
Furthermore, Oyebamiji said, “With the era of cheap -to-discover oil and gas gradually coming to an end, new digital technologies are coming on board aiding the imaging and discovery of new oil and gas fields that were hitherto undiscoverable while reservoirs at deeper depths concealed under thick layers of shakes that were previously undrillable due to high temperatures and pressures have become accessible through improved drilling technologies in complex structural and stratigraphic traps.
“Technological changes, in turn, are the main driver of the global trend in oil and gas industry and is of particular importance for government, policymakers and all stakeholders to have the necessary knowledge of how such technological changes can be deployed and sustained in developing countries (Nigeria inclusive)”
According to him, the development of relevant technologies suited to the Nigerian market should be a key driver in guaranteeing energy security and diversification thereby boosting Nigeria’s industrial development.
The NAPE boss added that a tailored and efficient technological growth strategy will play a major role in the further development of the oil and gas industry and spur future economic growth.
In his keynote address, Mele Kyari, also decried the continuous decline in exploration activities in the country, saying in the last ten years, not much has been done in exploration activities.
He attributed the situation to lack of clarity in fiscal terms, pointing out that investors would want to know the basis of their investment in exploration before they can go back to exploration.
Kyari said: ”We know clearly that there is decline in exploration and production in our Industry today. In the last ten years not much has gone into exploration due to two reasons.
“One is that there is some level of clarity that is required for oil and gas investment. We know that our attempt to put the appropriate legislation in place since 1999; has not worked. Till date we have not been able to achieve much in that regard.
”And I believe that, as an investor, what will be the basis of our investment? Will I recover my money? Can I recover my costs? And also what margin am I going to make? What stability do I have around what margin of investment I am going to make from this business?
“And of course, that automatically means that you maintain status quo. Exploration means banking on oil. That we find oil and make sure we produce them and make some money from it.
“If you are not sure that you will make money from it, it will likely mean you will back out of the business, and I can understand that that is one of the reasons why exploration investments low is because of lack of fiscal clarity.
“The second reason is, apart from the spike in crude oil prices that we had in 2012 and there about, we know that crude oil prices have not been at the level that we all want it to be. Of course it is not necessarily going to be fair to everybody but obviously not at the level we are seeing it today.
Everybody will like to see a plus $70 crude oil price. And our average for this year is definitely below $70 per barrel.”
Kyari also said that the third reason why there has been low exploration activities was apathy in the industry and competition from other sources, particularly, renewable energy.
According to him, “the optics around renewable have made it very difficult for oil companies to look more critically with exploration activities. And I know there are some jurisdiction today that are considering banning exploration activities in oil and gas for. And that of course, affects our mood and our decisions to go back into exploration activities.
“But that is the situation. We are unable to increase our reserves. From the level that we know, we have been counting 37 billion barrels and that 37 billion has remained at 37 billion. If we fail to increase our reserves definitely what we will see is massive depletion in the available resources.
“Our target is beneath 40 billion barrels of reserve. Unless we go back to exploration we can’t achieve that because the production is ongoing, the additions are not matching with production and therefore, what ultimately we will see in the short term, probably is a decline in the reserve that we have”.
He reiterated his position that oil would still be relevant by 2040, contrary to perception by some persons and organisations, saying, there could still be oil consumption in the region of 100 million barrels per day globally, even by 2040 due to population increase and increase in needs
Kyari also called on the members of NAPE to assist the corporation with their expertise, skill and knowledge of emerging technology to achieve its goal of ensuring energy security for the country.
He added: “And as we worry about the situation in our country, we are also proud as a national oil company that we have found oil particularly, in the Cretaceous regions. Today I can confirm to you that we have made significant find. And that has opened a new frontier for us and as an industry in general.
“Of course we cannot achieve any success without collaboration across the industry, between partners, we as national oil company, our Joint Venture partners, our Production Sharing partners and the independents
“We, the NNPC, are poised to ensure that this industry progresses. We will support every process that will bring clarity to our fiscal terrain by supporting the necessary industry legislation”.
Delivering the sponsor’s remark at the pre-conference workshop the previous day, the Deputy Managing Director, Deep Offshore District, Total Exploration and Production Nig. Limited, Mr. Ahmadu Kida-Musa, said there were still billions of barrels of oil and trillions cubic feet of gas yet to be discovered in Nigeria.
Kida-Musa added that Nigeria had not fully explored its oil fields even in the so called matured areas, not to mention the frontier areas yet to be explored.
While stressing the need to embrace new technologies in the nation’s oil and gas activities, he explained: “The dependence on conventional technologies that have been used in the past will surely not be the only solution to harness the Yet-To-Find (YTF) oil and gas potential, especially in Nigeria.
“Those technologies were good then, they worked well in the past and we are all happy with the results. However, the days of easy oil and gas discoveries are gone.
“We need innovations in order to continue and come back to the era of more frequent giant discoveries as was obtained before 2012.”
According to Kida-Musa, Nigeria needs to embrace the use of emerging and innovative technologies on safe exploration to Health, Safety and Environment (HSE) compliant exploitation of the discovered resources.
Kida-Musa noted that there was an evident decline in giant exploration discoveries since the country was now dealing with more complex traps that need to be properly understood before drilling of exploration wells.
He stated that conventional technologies in most cases had reached their limit in terms of subsurface imaging and interpretation given the complexities of YTF prospects.
He added: “It is expected that by 2035, the deep offshore oil and gas production which currently stands at less than 14Mboe/d worldwide should attain the level of about 32Mboe/d.
“For the last 15 – 20 years, exploration activities have been conducted in the deep offshore in water depths of around 2,000 meters and most current developments are generally at a maximum depth of around 2,000 meters.”
Also contributing, Country Manager, Google Nigeria, Mrs Juliet Ehimyan-Chiazor, said the use of digital application could increase the country’s oil production by more than eight percent annually.