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Nigeria’s new year starts in a glow of hope
The new year has started well for Nigeria — reserves are now estimated at 37 billion barrels while the Nigerian secretary general of Opec last month announced exemption from oil output quota cuts.
Producers may use this window to ramp up output and, with pipeline sabotage much reduced over the past year, allow the government of President Muhammadu Buhari a fighting chance to persuade militants of his commitment to partner communities in development.
UK consultant BMI Research suggests the rebounding Brent crude price will bolster determination to restore E&P investment across the Niger Delta, where ExxonMobil’s recent discovery of the billion-barrel Owowo field has boosted confidence all round.
Growth in oil production will be evident through 2020, perhaps nudging 3 million barrels per day, but BMI predicts output sinking back below 2 million bpd by 2022 if majors lose heart and move to lower cost, lower risk ventures outside Nigeria. Social and political grievances among the neglected communities of the oil creeks remain unaddressed, and no- one is pretending the militant threat is nearing resolution.
Armed groups continue to starve power stations of feedstock, unravelling earlier success in driving domestic gas-to-power development and jeopardising environmental gains won by producing 2.5 billion cubic feet per day of gas.
Proven gas reserves of 200 trillion cubic feet and an upside in excess of 600 Tcf constitute a potential peace dividend that investors keen on fashioning an African renaissance have long had their eye on, but the dream requires a stable Nigeria.
Resistant to reform, Buhari is nonetheless pressing ahead with upstream policy overhaul, splitting up the Nigeria Gas Company and streamlining the Gas Master Plan to reflect the smaller-scale ambitions of mid-tier private sector players.
Already, the joint venture cash call has been eliminated from Nigeria’s budget template, possibly saving $1 billion a month as activity picks up – and it’s now up to the majors to find the cash to expand.
Will this new realism hold as the year unfolds?
Let us hope it does.