Prominent players in the global oil and gas industry, including the Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Dr. Sanusi Barkindo, and the Minister of State for Petroleum Resources, Chief Timipre Sylva, yesterday assessed the state of the sector, agreeing that urgent decisions must be taken to ensure its survival.
Speaking during the virtual 19th Nigeria Oil and Gas Conference, Barkindo, who chaired the occasion, recalled the catastrophe visited on the global oil and gas industry by the COVID-19 pandemic and oversupply of inventory from April this year, noting that Nigeria’s exports plunged by 77 per cent in just three months.
Also in attendance at the event tagged, “Fortifying the Nigerian Oil & Gas Industry for Economic Stability & Growth” were the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari; Director of the Department of Petroleum Resources (DPR), Mr. Sarki Auwalu, Managing Director, Nigeria LNG, Mr. Tony Attah and the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr. Simbi Wabote.
Barkindo, noted, however, that in the last couple of months, the oil and gas industry in Nigeria has rebounded by over 116 per cent due to the robust decisions taken by key stakeholders, including President Muhammadu Buhari, who he said played a pivotal role in the OPEC Declaration of Cooperation (DoC) document.
He said: “Nigerian crude oil export earnings plunged by 77 per cent within three months between January and April 2020, but since then they have gradually improved and rebounded by 116 per cent in November compared to April 2020 levels.
“The government should be applauded for its quick and robust actions. From the perspective of OPEC, I would also wish to express our deep gratitude to President Buhari, who has long been an advocate of OPEC in its overarching commitment to market stability.
“All of us in the OPEC family know the enormous debt of the gratitude we owe President Buhari for the pivotal role he has played in the Declaration of Cooperation (DoC) process between OPEC and non-OPEC producing countries.
“Including, in particular, his interventions at the highest level to secure the decisions at the 10th (extraordinary) OPEC and non-OPEC ministerial meeting in April 2020.”
According to him, the government’s proactive response with economic stimulus packages helped to protect the economy from a more severe contraction.
He added that Nigeria is now regarded as one of the most admired and respected members of OPEC, particularly in the realm of consensus building.
Describing the impact of COVID-19 on the global oil and gas market as unprecedented, the OPEC boss stated that today, the world faces a new wave of infections and renewed lockdowns in many regions.
He stated that with the latest estimations for 2020, overall oil demand will contract by 9.8 mb/d to average 90 mb/d, an overall loss of about 10 per cent.
Barkindo said as part of efforts to revamp the market, last Thursday, OPEC member countries and participants in the DoC decided to reconfirm the existing commitment of the DoC decision from April 12, amended in June and September 2020, and to gradually return 2 mb/d to the market, with effect from January 1, 2021.
“Starting in January 2021, participating countries will adjust production by 500,000 tb/d from 7.7 mb/d to 7.2 mb/d. Additionally, the meeting decided to hold monthly OPEC and non-OPEC ministerial meetings starting in January 2021 to assess market conditions.
“It will also determine further production adjustments on a month-by-month basis while the compensation period for overproduction by DoC participating countries was also extended until the end of March 2021 to ensure full compensation,” he added.
According to him, between May and October, participating OPEC and non-OPEC countries contributed to reducing the global supply by approximately 1.6 billion barrels, including voluntary adjustments, which has been key to market rebalancing.
Drawing from the World Oil Outlook (WOO) 2020, he explained that after a large drop in 2020, global primary energy demand is forecast to continue growing in the long term, increasing by 25 per cent in the period to 2045.
According to him, “The key drivers of this demand are the more than doubling of GDP from $121 trillion in 2019 to more than $258 trillion in 2045 and the addition of around 1.7 billion people worldwide by 2045 to a level of close to 9.5 billion.
“We expect oil to retain the largest share of the energy mix throughout the forecast period, providing nearly 28 per cent of global requirements in 2045, followed by gas at around 25 per cent and coal at around 20 per cent.
“However, there will be long-term scars from this most recent downturn, including in investment. Our current assessments show that upstream capital expenditure could fall by more than 30 per cent this year, beyond the 23 per cent losses experienced in both 2015 and 2016.”
In his remarks, Sylva stated that Buhari is focused on cost-cutting measures to enable growth and development of the economy.
“For us in the Ministry of Petroleum, we are looking at the National Gas Expansion Programme (NGEP), which will boost the use of natural gas in the short and medium terms.
“It is also part of the plan by the federal government to shift from crude oil to gas. We have initiated efforts to improve gas accessibility and availability and boosting gas-based industrialisation and promoting economic diversification.
“With a proven gas reserve of over 200tcf, Nigeria has huge potential on the path to become an industrialised nation with the right policies. The federal government is committed to these programmes which will develop genuine partnerships,” he said.
Sylva added that deregulation will save Nigeria N1 trillion yearly while market forces will continue to determine fuel prices.
Kyari, in his contribution, projected that the demand in the oil and gas industry will remain suppressed substantially till the end of 2020.
But he noted that despite all the forecasts, oil will continue to play a significant role in the energy mix till 2050.
“So, it doesn’t mean oil will vanish. What it means is that in terms of its significance, in terms of the volumes of contribution, it will reduce as the years go by.
“It is also true that many countries have made significant business decisions in the use of fossil fuel, including the United Kingdom, which has said that no car will run on fossil fuel in the next 10 years.
“This portends a huge change in the way we consume fuel and as we progress, many countries may follow. If they do and it has an impact on our production, it means that only companies and businesses that are cost-efficient and are quick to get to the market will benefit from this environment.
“That’s why we are bringing down the cost of production so that we will become competitive and we are able to get to market earlier and remain in this game,” he stated.
Also, Auwalu noted that the department is no longer just a regulator, but an opportunity provider and business enabler.
“There’s no gainsaying that oil and gas is pivotal to our economy because it accounts for 10 per cent of GDP, 65 per cent to 70 per cent in government revenues and over 80 per cent foreign exchange earnings,” he said.
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