Nigeria’s Oil Reserve to Dry in 2040

By Economic Confidential

February 2010

The oil reserves in the Niger Delta currently at 31 billion barrels will dry and disappear by the year 2040. Activities of militant groups in the region, ineptitude leadership and rapid depletion of ore, a major component for the exploration are contributory factors that may see the end of Nigeria’s oil. Regulatory and monitoring organs in the country including the Nigeria National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR) and the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) are concerned about the development. A very reliable source in one of the agencies meanwhile confirms this development to the Economic Confidential. Some of the agencies especially NNPC and RMAFC have undertaken visitations and mounted various campaigns on need for the diversification of the economy to other sectors and on the necessity for passage of Petroleum Industry Bill (PIB) into law. The RMAFC had toured some states to verify existing and abandoned oil wells and other prospective areas for exploration. It also provided each state in the federation with lists of abundant mineral and natural resources in its location which could be tapped for more revenue to their Internally Generated Revenue and the Federation Accounts. The Economic Confidential gathered that minerals and hydrocarbon deposits have life-span and can be negatively affected if there are fewer activities to extend the life indices through intensive exploration to augment the resource base. Members of the Federal Account Allocation Committee (FAAC), which comprises commissioners of finance, accountants general of states, NNPC, Customs and Federal Inland Revenue Service are being told on the need for new investment and diversifications of the economy because the would soon run out of oil for export and local consumption. The campaigns have also gone to Governors and federal legislators on the need for early passage of PIB because the future of Nigeria’s oil, according to the campaigners, depends largely on new oil bill that would promote continued investment in new oils and security of facilities in the Niger Delta region. At another forum in Abuja recently, a General Manager, Planning, National Petroleum Investment Management Services (NAPIMS) Victor Briggs stated that that Nigeria is not investing in new oil discoveries whereby all the revenues from oil goes to the Federation Account directly without reinvesting into oil fields. The situation is worsen by the fact that Nigeria’s oil production continued to fall due to inadequate explorations and the crises in the Niger Delta region which produces the bulk of crude oil the country exports. A statistics has shown that while the nation was producing 2.3million barrels of crude oil per day in 2005, it went down to as low as 1.1 million barrels a day in 2009. The needless attacks by the militants also pushed up the cost of repairs and replacements of damages facilities from an average of $2.2 million in 1999 to about $400 million last year in 2009. The crisis is not only affecting the quantum of revenue to the national purse but also what oil producing states that usually received huge allocations from the Federation Account due to the derivations principle. Some non-oil producing states are even receiving more in the monthly allocation than those in the Niger Delta. In the disbursement figures made in January 2010 from the Federation Account, exclusively obtained by the Economic Confidential showed that while Bayelsa and Edo States received the sum of N4.29billion and N3.48billion respectively the non-oil states of Lagos and Kano States received N9.16billion and N6.49billion respectively. Going by reported discovery of oil in commercial quantities, in African countries, including Ghana, the government is not only looking towards diversification strategies, it is exploring potentials of Public Private Partnership (PPP) to explore the possibility of oil reserves in each geopolitical zone without its direct involvement. This is to avoid the mistakes of the past when the NNPC undertook oil exploration in the North in the 80s, especially in Bauchi, Borno and Gombe states before it stopped in 1999 for what a source blamed on political exigencies. Few years ago a northern conglomerate, New Nigerian Development Company (NNDC), bid for and won licences for four oil blocks in Northern region's sedimentary basins which comprises the Lake Chad Basin and the Benue Trough.  The company had contacted oil giants in Russia and Australia on the prospect of exploring the large quantity of gas reserve in the areas to power an independent power project (IPP) and fertilize plants. The only Yoruba land that presently has oil wells and a beneficiary of Derivation Fund is Ondo State. Apart from being in contentions with Delta State over 250 oil wells granted to it during Obasanjo’s period, it has substantial oil reserves in Ilaje reverine community. Also in Igbolands a Chinese owned multinational oil company has discovered oil in substantially commercial quantity onshore in Awo Omamma, Oru East local government area of Imo State.  The state also has some abandoned oil wells in Ohaji-Egbema and Oguta councils. The crude in the state has remained untapped as a result of kidnapping and criminal activities of some youths similar to the experience in the Niger Delta. Abia State is another Igboland that has gas deposits and oil wells some of them are sources of disputes with neighbouring Rivers State. There is an official report undertaken which will soon be submitted to the Federal Government by a constitutional body mandated to authenticate and verify claims of gas deposits and oil wells. While other oil countries are harnessing and investing their revenues into other sectors within and across their boundaries, the future of Nigeria after its oil might have disappeared, depend on its partnership with a tiny neighbouring country, São Tomé and Principe having signed an agreement to explore and produce oil in the waters between the two countries.  The area known as the Joint Development Zone (JDZ) contains over 15 billion barrels of oil that are yet to be tapped and which would be administered by their established Joint Development Authority (JDA).

 

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