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Production targets: FG, operators differ on feasibility

Clara Nwachukwu

Oil and gas industry operators have warned against the futility of achieving new production targets set by the Federal Government within two years.

Government in its wisdom set 2012, as the new datelin

Sanusi

e for achieving 40billion barrels reserves and 4 million barrels per day production targets.However, operators have expressed little faith in the strategies being adopted by government to realise this objective.

Indeed, it was a battle of wits between government, as represented by the Presidential Adviser on Petroleum, Dr. Emmanuel Egbogah, and the international oil companies, notably, Shell, Mobil and Total s the issue was discussed at a luncheon sponsored by Total in Abuja last week.

A Shell representative, which started the argument wondered how feasible it is for operators and government to realize the new production targets, which was originally billed for 2005, later moved five years ahead, would now be achieved within the stipulated timeline.

In the back and forth arguments that ensued, Egbogah argued that the target was very feasible because, apart from recent breakthroughs, government also intends to apply to increase Nigeria’s quota allocation from the Organisation of the Petroleum Exporting Countries, OPEC, which allocates production quota to its member countries.

Nigeria’s OPEC quota according to Platts is about 1.704million bpd, where the Department of Petroleum Resources, DPR, the industry regulator put at 1.673million bpd as at June, but still well below above its September production levels of 2.12million bpd, as calculated by Platts.

Besides, the presidential adviser added that government has put in place strategies to boost investments in the sector for resultant increases in reserves and production levels.

To underscore the difficulties, a Mobil representative insisted that they could not see any preparations on ground towards achieving the targets, and Egbogah retorted, “I can see it happen. If the recount does not show that by now, by January or February he will see the recount and parameters.”

But other respondents noted that because of the nature of the Nigerian environment in terms of slow pace of projects approval, the fiscal regime, inadequate funding especially the inability of government and the Nigerian National Petroleum Corporation, NNPC, to meet its counterpart obligations and other regulatory issues, achieving these reserves and production targets may not be feasible.

However, in defence of the NNPC, its Group Executive Director, Exploration and Production, Mr Phil Chukwu, argued that “the NNPC does not stall investments, the budget for PSC is over $18bn and the money was appropriated either directly or indirectly, through cash alls or through modified carry arrangements, so there is no issue of not funding the projects.

According to him, the industry has experienced significant progress in achieving these targets since 2005, and actually came close to it prior to militancy activities three years ago.

He admitted, “Unfortunately, in the past few years, there is some reluctance on the part of operators to invest,” adding that things are however, changing with recent discoveries by the majors, notably, Shell, Exxon, Chevron and Total.

“A number of re_tenders and tenders are awaiting approvals, so we believe the targets are achievable. The debate now is how do we attain it because it is possible, do we have the will, are there issues militating against investments?

Furthermore, Chukwu insisted that inadequate funding is no longer an issue, in view of the fact that “we have gone ahead to do things differently through the alternative funding when government’s funding is inadequate, which later became the Modified Carry Arrangement, MCA, and we also have the sole risk, where if one party is unable to raise funds, the other an go ahead with the exploration if it is beneficial.


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