H.E. Chief Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, provided insights into the latest across the country’s oil and gas sector during an exclusive roundtable interview organized and hosted by the African Energy Chamber on June 24, 2022.
Oil production in Nigeria has been on the decline recently. What are the main constraints causing this and what strategies are currently being implemented by the ministry to address these declines in 2022?
The current decline is due to a junction of many things. We had COVID-19 and just after coming out of the pandemic we have the Russian-Ukraine war which coincides with the upcoming election in Nigeria, complicating things for the country’s oil sector. We are trying to give the country’s oil sector a makeover. We had outdated laws since 1969 which could not support the industry further and it took us a long time to change those laws. However, with the passing the Petroleum Industry Act (PIA), we believe that we are ready for investors. Unfortunately, now that we are ready, many things including the energy transition are dwindling interest in the oil industry. However, with regulatory institutions enabled by the PIA now in place, we are seeing interest from investors in Nigeria and international firms including Shell, Chevron and ExxonMobil who have committed to making additional investments in the offshore sector as some of these firms move away from onshore operations.
In early June, OPEC agreed to increase production through August. What is going to happen beyond August and what is Nigeria’s position in particular with OPEC?
At this moment the prices are fair and we do not expect to see any surprises beyond the regular price which we have agreed on. In terms of production, OPEC is being expected to pump more but there is very little additional capacity that can be brought to the market. Nigeria is at a low point, and we are not been able to meet our own OPEC level, which is our biggest headache right now. Our main focus at the moment is to address oil theft and we have given ourselves a month to address this. Due to COVID-19, there was also a shortage in wells, so we want to bring more of these wells online and ensure that by end of August, we are able to produce what is required by us by OPEC.
Europe is looking for other sources of gas and Nigeria has been pushing for the Trans-Saharan gas pipeline to be a major supplier. How realistic is it to get off the ground especially with regards to funding?
We are quite ready for the project especially with Europe also ready for our gas. We have already constructed 614 km of the pipeline within Nigeria. Algeria also started construction. It is between the end of Nigeria in the north through Niger to Algeria that we need to connect. We are doing a feasibility study at the moment. Regarding funding, we have been meeting with a lot of European firms and countries and we will get funding for the project from Europe. We had a meeting with Algeria and Niger in Abuja to discuss gas supply and with the demand for gas increasing and the energy transition intensifying, we are eager to develop to meet our timeline.
Where do you see the most capital constraints considering this has been a pressing issue across the globe due to tightening of financing as a result of the energy transition?
Capital is our main constrain in Nigeria’s oil and gas sector. We have problems with investment from everywhere because the world is moving fast to renewables. But now, everyone is coming to terms with the fact that we need to stick with fossil fuels. Europe for instance, is considering gas as clean energy along with nuclear. As a result, the funding constraints will ease in due course. Africa is not ready to move away from oil and gas because we have a huge amount of people without access to energy and hydrocarbons will enable us to meet SDG 7 goals of providing access to reliable energy. We have decided that Africa-based financial institutions such as the African Energy Bank which the African Petroleum Producers Association is working towards will be the ones to fund African energy developments. International oil companies are increasing their interest in offshore investment because fiscal terms are attractive. If we keep fiscal terms attractive, we will get more funding from international parties.
What is the status of Bonga South West projects? Has there be any movement?
There is a little bit of slow down. Shell thinks that it is easier to develop the north than south. The energy major wants to focus on Bonga north first and we have been having increased discussions with them on that as well as on gas.
What is the role of deepwater gas in Nigeria? Are there any incentives for firms wanting to produce?
Equinor discussed this and wanted the terms stated in the PIA. We will address this on a case-by-case basis, and we are happy to give favorable terms to them and other firms willing. We did this with Shell and worked with them on good terms.
The demand for hydrocarbons continues to increase and there is focus to increase energy access using gas in Africa. What are your plans to use gas to do that?
Africa will need to utilize hydrocarbons to generate power. Gas is our choice to produce and increase electricity access. One of the projects we are deploying in Nigeria is a major gas turbine in Abuja, which was previously unthinkable because there was no gas supply. In the north, we have a firm seeking to invest in an energy island. The project will transport gas virtually from the south via the Ajaokuta–Kaduna–Kano (AKK) Natural Gas Pipeline. A lot of industries which had shutdown are now coming back into operation owing to access to gas from the AKK and with gas we will be able to resolve our energy problems. We are trying to build more gas turbines, gas grids and pipelines from Nigeria south to Lagos and we are taking these pipelines outside Nigeria. For instance, between Nigeria and Togo, we have a pipeline which we will extend to Morocco to support electricity production. We cannot move quickly to renewables: we are not ready, and we are happy that the world is redefining gas as a clean fuel. Fiscals in the PIA are enabling more gas production and with more exploration activities, we expect to increase our gas reserves from 200 trillion cubic feet (tcf) of reserves to 600 tcf. We have reserves to support investments and we want to discuss with investors who are willing to bring back projects such as the Lokola liquefied natural gas project online.