Nigeria sets ambitious oil targets, sceptics abound

Nigeria plans to produce 3 million barrels per day (bpd) of crude oil by 2015 and build three new refineries adding 445,000 bpd of capacity, the oil minister said on Wednesday, ambitious plans which have been promised before.

Analysts and oil executives doubt the plans are achievable.

Africa’s largest energy industry is struggling because a far reaching Petroleum Industry Bill (PIB) has been locked in dispute for four years, depriving it of billions of dollars in lost foreign investment, oil and government officials say.

“Our aspiration is to increase crude oil reserves to at least 40 billion barrels and production of 3 million barrels per day respectively by 2015,” Diezani Alison-Madueke told reporters at an investor conference in Lagos.

“Our current crude oil production is approximately 2.5 million bpd; current gas production is 8 million cubic feet per day.” Nigeria is a member of oil producing group OPEC, which sets output limits to monitor global supplies and prices.

Africa’s most populous nation has a crude oil OPEC output quota of 1.67 million bpd, which it seems happy to far exceed given a healthy oil price above $110 a barrel. Should oil prices decline, Alison-Madueke may have to explain plans to boost output to fellow OPEC countries.

She said the PIB may have to be presented back to the national assembly through the presidency to ensure the correct version is used. The main brake on the reforms is powerful vested interest but there are also several different versions of the proposal, which is slowing down lawmakers.

SCEPTICAL

“While the stated intent to increase oil production and increase reserves is positive, market participants will justifiably question how much progress is actually likely,” said Razia Khan, Head of Africa Research at Standard Chartered.

“The fact is, the longer the regulatory uncertainty of a PIB in equally uncertain form hovers over the industry, the greater the likelihood that crucial investment – even to sustain Nigeria’s current production – is delayed,” Khan added.

Despite holding the world’s seventh-largest gas reserves and pumping over 2 million barrels per day of crude oil Nigeria only produces enough electricity to power a medium-sized European city and has to import almost all of its refined fuel needs.

The West African nation’s four current refineries have a theoretical combined capacity of 445,000 bpd, which have been working at minimum levels for years, except for one which is at around 60 percent capacity, industry sources have said.

Dozens of maintenance contracts have been handed out to fix the refineries and several memorandums of understandings to build new ones signed in the last decade with no progress made.

Foreign investors cite corruption as the biggest barrier to investing in Nigeria and the country’s national oil company NNPC often comes in for the biggest criticism. One international watchdog said it was the world’s least transparent oil company.

“I’m afraid that any pledges about refineries, reserves or the PIB fall on deaf ears now because we have heard them over and over again through the oil minister’s years in office,” said an executive at a oil company operating in Nigeria, asking not to be named.

Reuters