Paper presented at the 2014 NMGS International Conference ... · Policy Options for the Oil and Gas...

Paper presented at the 2014 NMGS

International Conference, Benin City

George Osahon, fnape

Director, Petroleum Resources

07/05/2014

1

Policy Options for the Oil and Gas Industry

1. Definition

2. Hallmarks of a Robust Policy

3. Developing Robust Energy Policies for

Nigeria, the Past, the Present and the

Future

4. Policy Implementation Strategy

5. The Ultimate Goal and Policy formulation

Key Challenges & Strategic Intervention

6. Going Forward

7. Conclusion

2

OUTLINE

DEPARTMENT OF PETROLEUM RESOURCES

Policy:

– a set of conditions indicating how a process should be carried out;

– a definite course or method of action,

embracing the general goals and acceptable

procedures from among alternatives in the

light of given conditions to guide and

determine present and future decisions … within the provisions of the law

DEFINITION

3

Policy Options for the Oil and Gas Industry Department of Petroleum Resources

A good

policy must:

– Be objective and progressive

– Promote growth in the industry

– Ensure a competitive operating environment

– Guarantee transparency and accountability

– Ensure sustainable community inclusion

– Promote application of best industry practice

– Implementable for the entire value chain

A good policy:

– Cannot be a set of static prescriptions and precepts that

must be rigidly followed at all

times without consideration for unforeseen situations

Rather, it must be flexible, scalable and adaptable to situations by:

– Recognising the past

– Taking care of the present and

– Anticipating and making provision for the future

HALLMARKS OF A PROGRESSIVE POLICY


5

1965 1975

1985 1995

PROGRESSION OF EXPLORATION ACTIVITIES

IN NIGERIA (1965 – 1995)


INCIDENCE OF EXPLORATION SUCCESS IN THE NIGER DELTA AND THE

CONCEPT OF PROLIFIC BELT (EJEDAWE & Co, c.1985)

6


7

EVOLUTION OF NIGERIA’S OIL AND GAS RESERVES (1958 – 2012)

Until recently, Nigeria’s oil and gas reserves have been on the incline

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

0

50,000

100,000

150,000

200,000

250,000

19

58

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

Cru

de

an

d C

on

de

nsa

te R

ese

rve

s in

Mil

lio

n B

bls

Ga

s R

ese

rve

s in

Bil

lio

n S

cf

NIGERIA'S CRUDE OIL AND GAS RESERVES

Gas Oil + Cond


RECOGNISING THE PAST

8

Surface exposed flow lines

Gas flaring

Operational activities in the Past were characterized by:

– Relatively shallow drilling

– Open mud pits

– Discharge of cuttings and produced water into the

environment

– Exposed flow lines and shallow trunk lines

– Installation of Block valves at river crossings

– Flaring of associated gas

– Activities limited to onshore environment

– Scattered development wells resulting in large foot

prints

– Usage of high explosives for seismic activities

– Operators were mainly IOCs and the prevailing

upstream arrangement was Joint Venture

For all the above activities, the required permits were obtained

DEPARTMENT OF PETROLEUM RESOURCES 9

Crude Theft

Militancy

Currently, operations in the Niger Delta are characterized by the following:

– Facility vandalisation, crude theft and widespread

militancy

– Protected mud pit to prevent leakages into aquifers

– Zero discharge, thanks to the EGASPIN

– Discharge of produced water into the environment

– Buried flow lines and trunk lines

– Buried Block valves at river crossings

– Minimising flaring of associated gas

– Activities extended to the continental shelf and

deepwater

– Cluster drilling to minimize footprint

– Diversified operatorship

TAKING CARE OF THE PRESENT

Human and Environmental degradation


10

CRUDE OIL PRODUCTION BY UPSTREAM

ARRANGEMENT (2000 – 2013)

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

1,000,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Cru

de

Oil

Pro

du

ctio

n in

Ba

rre

ls

CRUDE OIL PRODUCTION BY UPSTREAM ARRANGEMENT

JV (6) PSC (34) SR (20) MF (26)

JV production is being gradually replaced with PSC and SR output

Growth Strategies for The Nigerian Oil and Gas Industry; Driving Exploration and Boosting Reserve Levels 11

Onshore

Biafra

war

Shallow Offshore

Deep Water

Onshore production, a major activity area for JV operation continues to shrink and progressively replaced by high-cost Offshore oil

CRUDE OIL PRODUCTION BY TERRAIN (1965 – 2012)

CRUDE OIL PRODUCTION BY TERRAIN

Prod

ucti

on in

Mil

lion

Bar

rels

per

day


12

DRIVING EXPLORATION: SEISMIC ACTIVITIES

Increase in seismic activities would facilitate regional/ basinal studies and lead to more reserve boosting discoveries


13

DRIVING EXPLORATION THROUGH DRILLING ACTIVITIES

Investment in exploration drilling is one of the surest ways of revitalising activities and increasing reserves in a matured basin


JOINT VENTURE ASSETS – 2005


JOINT VENTURE ASSETS - 2007


JOINT VENTURE ASSETS - 2014

16


ANTICIPATING THE FUTURE

17

Remediation

Enhanced Oil Recovery

The future is bound to be in line with the trend in other basins as follows:

– The Niger Delta will mature some more and the

incidents of discoveries will drop

– Gas will become more important in the mature Niger

Delta

– More money would be expended on abandonment

– Industry will witness better cooperation and

collaboration among operators

– There could be a reversal in the trend of offshore

movement of operating companies

– Indigenous companies will play more role in

exploration and production activities especially in

small and partially depleted fields abandoned by

major operators

– Gas flaring will be few and far between

– The Joint Venture relationship will undergo significant

modification to take care of costs


Several policies have been put in place by Government and are

sometime backed up with Legislation

Policies in the industry has been used mainly in three different

ways as follows:

– To incentivize or encourage a particular practice or operation

– To disincentivise or discourage a particular act by introducing punitive

measures

– To enforce environmental and other industry standards

Incentivising policies include local content law/ indigenous

operatorship, newcomer status for PPT rate, expensing two

appraisal wells, etc.

Punitive policies include gas flaring fines, MER, comingling, etc.

Standard enforcement policies include zero discharge, right of

way, etc.

USAGE OF POLICIES

18


SETTING THE GOAL AND FORMULATING THE

POLICY - THE NORWEGIAN EXPERIENCE

19

Source: Norwegian Central Bureau of Statistics

Source: Norwegian Petroleum Directorate

Source: Norwegian Petroleum Directorate Source: Norwegian Petroleum Directorate


CONCLUSION

The petroleum industry is experiencing and will continue to

experience changes as conventional oil and gas come under

pressure from unconventional sources and renewables

For Nigeria, oil and gas is likely to dominate the economy well

into the future. Therefore, the need for progressive policies

that will shape the industry for better performance and shore

up the proceeds from petroleum towards developing other

sectors of the economy cannot be overemphasized

Reacting to situations before making a move e.g. the current

divestment drive, is bound to leave Nigeria playing second

fiddle to its counterparts and peers in Africa and other parts of

the world.


THANK YOU

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Paper presented at the 2014 NMGS International Conference ... · Policy Options for the Oil and Gas...

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