By Babajide Okeowo
The Nigeria Association of Petroleum Explorationists, NAPE has raised an alarm that due to a heavy drop in investments for many years, over $30 billion projects are still awaiting Final Investment Decisions (FIDs) to take off.
This revelation was part of observations brought to the fore in a communique by oil and gas industry professionals and stakeholders at the recent 27th Pre-Conference Workshop of the NAPE.
Themed: “Levers for Optimal Cost Reduction in Nigeria’s Oil and Gas Production: Positioning for the New Normal”, the conference held virtually.
According to a communique from the session which was jointly signed by the newly inaugurated President of NAPE, Mrs. Patricia Ochogbu and her immediate predecessor, Mr. Alex Tarka, the current slide since the price crash of 2015 has seen investment drop almost 18 percent year-on-year to date.
They blamed the non-passage of the Petroleum Industry Bill (PIB) for the massive drop in investments and stalled projects in the petroleum sector because of the uncertainty it had heightened among operators and prospective investors.
The participants observed that the average production cost in Nigeria was among the highest in the world, with various estimates placing the country in at least the 70th percentile for high overall production costs in all terrains.
They also argued that there had been a significant tax burden associated with operating in Nigeria.
According to them, the many years since the PIB was first mooted in 2000 and the various iterations it had undergone without being passed, have impacted negatively on investors’ confidence in Nigeria.
“It should be noted that even at the height of the oil price boom from 2008-2014, CAPEX (capital expenditure) investment in the sector actually fell due to the uncertainty of the passage of the bill.
The current slide since the price crash of 2015 has seen investment drop almost 18 percent year on year to date. As a result, over $30 billion of projects are still awaiting FID.
The break-even price and payback time for projects in Nigeria for new projects are one of the highest in the world. There is a capital cost premium ranging from 35-100 percent for project costs in Nigeria,” the communique stated.