Nigerian oil & gas investment in the face of current global crisis osten olorunsola Chairman Energy Institute Nigeria 202005
Life is meaningless without energy and economy Hence, Energy = Life Livelihood = Health + Energy + Economy Further reinforced by COVID-19 pandemic 2
COVID- 19 ……..mother of all crisis delved unprecedented consequences on global health, energy & economy • Demand • Supply shock reduction & destruction COVID-19 Health • Price collapse • Demand Emergency destruction • Oil & gas glut Caused by • • Economic Price war SARS CoV-2 collapse • Market • Economic damage recession Was like watching a slow motion of a crashing car 3
Oil supply and demand collapsed to 2012 levels Demand projection 2020 was 101 MMb/d expected to decline by 9.3MMb/d to 2012 levels, and possibly improving to 97MMb/d 4
For 6-8 weeks 5
Global petroleum expected to rebound in 12-18 months World liquid fuels production World liquid fuels consumption million barrels per day million barrels per day 120 120 forecast forecast 100 100 non-OECD non-OPEC 80 80 60 60 Organization for 40 40 Economic Cooperation and Development (OECD ) Organization of the Petroleum Exporting 20 Countries (OPEC) 20 0 0 2018 2019 2020 2021 2018 2019 2020 2021 • Discipline by OPEC+; US-China geopolitics; sensible policies by govts • Low price will accelerate demand recovery and growth • Source: Short-Term Energy Outlook, May 2020 More private cars; lesser pooled transportation 6 • Less new cars mean continued use of less efficient old ones
But we must keep two eyes on global energy transition 7
Two immediate focus of the MoPR …….PIB + MFs Marginal Fields 2020 Bid Round Industry Reforms + PIB Delivery in 6 months Delivery in 3 months 8
Petroleum Industry Reforms (+PIB) • Executive bill • Making good progress • Repackaged into two volumes • Ready for FEC clearance + • Presidential approval • Transmission to NASS (2-3 weeks) • NASS getting ready to take bills through fast-tracked legislative process • NASS technical advisory team to be inaugurated 29/5 • Bill expected to be passed and returned to the Presidency before summer vacation period 9
Marginal fields 2020……broad driver & objectives • MPR priorities 2020 US$ 520 mln • Grow production capacity Signature bonuses • Increase oil & gas reserves in and data fees particular, deeper hydrocarbon plays + • Provide opportunity for portfolio rationalization • Further promote indigenous N1bln Application participation and processing fees • Provide opportunity to gainfully There will be no engage competent Nigerians • Promote common usage of formal promotion assets/facilities process 10
Marginal fields 2020……timing: - is this the right time? The best time was 10 years ago, the next best time is ……now • The start-off of the marginal fields programme was 2003/4 • Production life span of the fields was not expected to be more than 10-12yrs • By now, where successful, they would have dried up or at serious declines leading to gross utilization of installed and procured capacities • In view of COVID-19, participants will likely be only the bold and truly professional – only eagles fly in raging wildfires 11
Marginal fields 2020……will they be attractiveness? • Proof of concept is over We now know how • We have seen globally competitive viable marginal fields players • Fields for 2020 will be:- can be and how • better defined strategic they can • have more complete field data contribute to the • independently verified volumes • more bankable development of the • low cost short term + strategic LT industry and Nigeria, in • will not be constrained by Opec particular investments cuts expected to end mid 2021, long before first oil directed at the demand • Big producers declining naturally; no sides of the value chain major developments in the horizon 12
Marginal fields 2020……require new business models Good governance Urgency; smart, strategic, Strategic cooperation and professionalism efficiency, sophistication & collaboration Look beyond the Diversification/catalyst; petroleum industrialization Resourcing & supply chains; upstream Management of LTO In country value retention 13 Time for easy money seems gone
Supply glut will be short term; must also invest in demand • There is still so much 110 Crude oil MMb/d oil availability 105 • Therefore upstream 100 will be relatively slow 95 for some time 90 • Will be wise to 85 additionally invest in the demand domains 80 Available 2020 Demand 2020 (mid & downstreams) NFA New 14
Marginal fields 2020……are there risks or landmines? Partnerships Financing Technical capacity Fiscal stability Commercial viability Litigation Community friendliness Security Cost control 15
Marginal fields 2020……conclusion • Marginal fields are low cost high value opportunities worth pursuing • The planned 2020 bid round is timely and will be very successful • Collaboration, sense of urgency and new business models required • Despite the damage by COVID-19, petroleum is still expected to dominate the energy space; and hopefully, the world would have learnt the hard lessons of market rascality and misbehaviours 16
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