"Oil theft spooks operators, deepens underinvestment"

" \n Oil theft spooks operators, deepens underinvestment \n \n\n \n The number of idle big-ticket oil and gas projects in Nigeria looks set to rise as massive crude theft that is defying the government\u2019s efforts to curb it has left more operators spooked. \n \n\n \n Nigeria sits atop 36 billion barrels of crude oil reserves and 206 trillion cubic feet of proven gas reserve but has seen a steep decline in investments in the vital oil sector in recent years. \n \n\n \n Oil receipts fund the country\u2019s budget, but many oil and gas projects lie idle, threatening the target set over a decade ago to raise reserves to 40 billion barrels. \n \n\n \n Experts surveyed by BusinessDay say Nigeria\u2019s path to economic prosperity may lie in optimising idle assets, a development that will require disciplined planning, economic reforms and consistent government policies that can inspire investors\u2019 confidence. \n \n\n \n \u201cThe cases of oil theft are glaring, but there is an unprecedented level of underinvestment in Nigeria\u2019s oil and gas sector; oil majors are ignoring Nigeria\u2019s attractive assets and moving forward with spending capital expenditure in Libya, Ivory Coast, Kazakhstan, Guyana, Brazil, Singapore, among others,\u201d a senior chief financial officer familiar with the matter told BusinessDay on condition of anonymity. \n \n\n \n In a period when oil majors are reaping billions of dollars from the oil price rally, big-ticket projects such as the 120,000-barrels-per-day (bpd) Zabazaba-Etan project, 140,000bpd Bosi project, 80,000bpd Satellite Field development phase two, 110,000bpd Uge project and 110,000bpd Nsiko deepwater project, and 1 billion barrel Owowo field development are still awaiting final investment decisions. \n \n\n \n BusinessDay analysis shows these projects are estimated to boost the nation\u2019s production by as high as 1.4 million bpd and the nation\u2019s revenue by about $150 million-$200m daily, using 2022 oil prices. \n \n\n \n \u201cNigeria\u2019s oil assets are no longer attractive enough to command global attention,\u201d an industry source said. \n \n\n \n Nigeria\u2019s oil sector, which makes up some 10 percent of GDP and 40 percent of government revenues, has shrunk by 26 percent since 2018 alone, according to data by Afrinvest West Africa. \n \n\n \n Data from the National Bureau of Statistics revealed that foreign capital inflow into the sector accounts for 0.04 percent of fresh foreign investments into the Nigerian economy in the first quarter of 2022, compared to the banking and production sectors that contributed 52 percent and 14 percent respectively. \n \n\n \n The government data showed foreign investment into Nigeria\u2019s oil and gas sector is still at its lowest ebb as inflow hit a low of $61 million in the first quarter of 2022, 56 percent lower than the $139.72 million inflow recorded in Q2 2019, and 69 percent lower than the $200.39 million inflow recorded in Q2 2019. \n \n\n \n \u201cThere is crude theft (it is there) but the main reason for our 1.3 million barrels production today (shortfall of 600,000 barrels per day) is the decline in investment,\u201d Austin Avuru, executive chairman and founder of AA Holdings Limited, said at this year\u2019s Nigeria Annual International Conference in Lagos. \n \n\n \n Also, the audited report of National Petroleum Investment Management Services showed there are at least 24 non-producing PSC oil blocs in Africa\u2019s biggest oil-producing country. \n \n\n \n \u201cTo some extent, the under-investment theme is consistent with other hydrocarbon provinces (in both emerging and developed markets), due to oil and gas financing drying up globally and societal pressures towards decarbonisation driving the investment budgets of the majors and E&Ps alike,\u201d global investment banking firm Renaissance Capital (RenCap) said in a 2022 report. \n \n\n \n Concerning Nigeria\u2019s environment, RenCap said the combination of punitive fiscal terms and fiscal uncertainty deterred investment in both upstream development and exploration, especially in onshore and shallow offshore terrains. \n \n\n \n Critics say Nigeria\u2019s energy sector focuses solely on revenue generation and does not look at domesticating the value chain of by-products that are needed to boost productivity and more revenue in the long run, and a lot of investments have been discouraged in the process. \n \n\n \n This means Nigeria is not maximising additional oil revenue associated with the surge in crude oil prices in the international market since Russia\u2019s invasion of Ukraine, according to the Monetary Policy Committee (MPC) of the Central Bank of Nigeria. \n \n\n \n \u201cFirst, oil production is far below Nigeria\u2019s full capacity and the OPEC\u2019s quota; and secondly, the higher crude oil price leaks into higher cost of imported PMS leading to higher PMS subsidy. So long as fuel subsidy is in place, it will continue to erode the revenue gains associated with higher oil price,\u201d Salisu Mohammed Adaya, an MPC member, said. \n \n\n \n In the first half of 2022, the Nigerian National Petroleum Company Limited recorded N2.39 trillion as gross revenue from oil and gas sales receipts, while subsidy claims amounted to N2.6 trillion. \n \n\n \n As oil investments dry up in Nigeria, BusinessDay\u2019s findings show oil majors are seeing green light in other smaller oil-producing countries, although capital discipline and higher returns to shareholders remained top priorities. \n \n\n \n In their capex plan for 2022, five oil majors \u2013 British Petroleum, Chevron, ExxonMobil, Shell, and TotalEnergies \u2013 ignored Nigeria and moved forward with spending capital expenditure in Libya, Ivory Coast, Kazakhstan, Guyana, Brazil, Singapore, among others. \n \n\n \n In its 2022 outlook, Chevron overlooked Nigeria by allocating $3 billion for projects already underway, out of which some $2 billion has been dedicated to the Tengiz field in Kazakhstan \u2013 the only large capital project the company is committed to following the completion of Australian LNG projects. \n \n\n \n In a corporate strategy update, TotalEnergies set a capital spending target of $13 billion-$15 billion a year in the 2022-25 period, down from a previous target range of $13 billion-$16 billion given a year ago. \n \n\n \n TotalEnergies said it is committed to spending $3 billion\/year or nearly 25 percent of its investments on power and renewables, from a previous range of $2-$3 billion\/year. \n \n\n \n The French company is making plans to invest $2 billion into Libya\u2019s Waha oil project, which will boost Libya\u2019s production by around 100,000 barrels a day. \n \n\n \n The fresh investment is also expected to raise output at Libya\u2019s Mabruk field and help build 500 megawatts of solar power to feed the local grid. \n \n\n \n Eni, one of Africa\u2019s biggest foreign oil and gas producers, is also moving fast to commercialise its huge Baleine oil and gas discovery offshore the Ivory Coast by investing $11 billion on the deep-water project. \n "

"Oil theft spooks operators, deepens underinvestment"

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