Nigerian oil & gas investment in the face of current global crisis - osten olorunsola Chairman Energy Institute Nigeria
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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
COVID-19 reduction & destruction
Health • Demand • Price collapse
Emergency destruction • Oil & gas glut
Caused by • Price war • Economic
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
80
non-OPEC 80
60 60
Organization for
40 40
Economic Cooperation
Organization of the and Development (OECD)
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
Industry Reforms + PIB Marginal Fields 2020 Bid Round
Delivery in 3 months Delivery in 6 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
engage competent Nigerians There will be no
• Promote common usage of formal promotion
assets/facilities process 10Marginal 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
can be and how • Fields for 2020 will be:-
• better defined
strategic they can • have more complete field data
contribute to the • independently verified volumes
development of the • more bankable
• low cost short term + strategic LT
industry and Nigeria, in • will not be constrained by Opec
particular investments cuts expected to end mid 2021,
directed at the demand long before first oil
• Big producers declining naturally; no
sides of the value chain major developments in the horizon 12Marginal fields 2020……require new business models
Strategic cooperation Good governance Urgency; smart, strategic,
& collaboration and professionalism efficiency, sophistication
Look beyond the Diversification/catalyst; Resourcing & supply chains;
upstream petroleum industrialization Management of LTO
In country value
retention
13
Time for easy money seems goneSupply glut will be short term; must also invest in demand
110
• There is still so much 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
14Marginal fields 2020……are there risks or landmines?
Partnerships Financing Technical capacity
Commercial viability Litigation Fiscal stability
Security Cost control Community friendliness
15Marginal 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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