Nigeria loses $21bn Oil investment, faces stiff competition

The Nigerian oil and gas industry, which saw a decline of about $21bn in capital investment in 2015, needs to be repositioned to be able to compete globally for shrinking investment occasioned by the sharp drop in oil prices.

Industry operators stated this in Lagos while discussing the issue of low oil prices, the challenges and opportunities.

They stressed the need to improve the country’s investment climate by addressing challenges such as insecurity, contract approval processes, and fiscal terms, among others.

The Managing Director and Chief Executive Officer, Chevron Nigeria Limited, Mr. Clay Neff, who spoke at the 13th Aret Adams Annual Lecture Series, said the global oil and gas industry had seen a sharp decline in capital investment in response to the low oil prices.

He said, “We have seen capital investment drop by 20 to 25 per cent globally year on year, 2014 to 2015. Even as things start to improve, and they will improve over time, the places that are going to have an attractive investment environment are the areas that will attract the capital investment.

“There is going to be global competition for the investment. In terms of Nigeria, what we saw for 2014 and 2015 is a drop of around $21bn. That is about 20 per cent drop.”

Cleff said capital investment dropped from $660bn globally in 2014 to around $500bn in 2015.

“We have seen additional capital come out of the system right now. Everybody is really buckling down and trying to manage the cash flow. Investment is going to come down.

“So what is that going to do? Some of the projects that are in the queue are being slowed down or stopped because the economies just don’t justify moving forward,” he said, adding that development drilling and rig count have also dropped.”

The Chevron CEO said liquids production globally improved from around 85 million barrels per day to around 95 million bpd in the last 10 years, while Nigeria’s liquids production dropped from around 2.6 million bpd to 2.1 million bpd.

He said, “So, I think this is something to consider as we go forward: what we need to do to restore that market share, which I think would be a great opportunity to all stakeholders.

“Going forward, Nigeria has an opportunity to improve its competitive position in the global oil and gas industry so that it can achieve its full potential. And I think capital, for the short term, whether it is from investment banks, international oil companies or other sources of funding, will be scarce.

“So, I think it is going to be important, working together with all stakeholders that we continue to improve the competitive position of the industry and restore investor confidence.”

On how to attract investment, Cleff said, “The first thing is that security of people and assets is going to be key. I know that is a key objective of the new government and there is a lot of work done in that area.

He highlighted the need to ensure contract stability; simplify approval processes; provide globally competitive fiscal terms; solve joint venture funding challenges and pay arrears to the IOCs and indigenous companies.

Also speaking, the Managing Director and Chief Executive Officer, Seplat Petroleum Development Company Plc, a major Nigerian independent oil and gas firm, Mr. Austin Avuru, said, “If there is anything that makes an operator nervous, it is the security issue,” adding that the shutdown of the Trans Forcados pipeline was affecting the company’s operations.

On the impact of the low oil price, he said exploration investments had almost dried up, adding that the implications would become evident later as addition to reserves would flatten out.

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