Nigeria may miss 1.78m bpd oil production over lack of industry plan

•FG disagrees

By Adewale Sanyaolu

The Federal Government’s aspiration to achieve an oil production level of 1.78 million barrels per day (bpd) as contained in the 2024 operations blueprint may not be realistic over the absence of an industry programme or work plan. Founder and Chairman of AA Holdings, Mr. Austin Avuru, stated this at KPMG 2024 budget roundtable held in Lagos at the weekend.

Avuru said the assumptions of 1.78 million bpd and $77 per barrel oil price are ambitious targets deliberately set by the Federal Government to ginger the industry to up their game, adding that unfortunately they are clearly not realisable.

‘‘Today, we are doing oil and unblended condensates at 1.46 million bpd. That is where we are today and that is 23 per cent shortfall from the budget figure. Today oil price is roughly where the budget figure is at $77 per barrel and fairly volatile within a five per cent band. It could be $74 or $80 per barrel.

“So we are already maxed out in terms of oil price. In terms of production figure like I said, we are 23 per cent short and when you build in a 10 to 12 per cent natural decline year-on year, it means we are looking for a 40 per cent increase in production to get to 1.78 million bpd.

But even above that, to get to an average of 1.78 million bpd in 2024, we are looking at exiting 2024 at about 2.2 million bpd, and this is clearly not realisable because I have not seen a work programme in the industry today that suggests those numbers could be reaslised.

However and  as I stated earlier, these ambitious targets were deliberately set so that those who run the industry will know what is ahead of them to meet those targets and what they need to do.

But, the Minister of Budget and National Planning, Mr. Abubakar Atiku Baguda, maintained that irrespective of all bottlenecks, the country would meet its oil production target. He said the country has done it before and could do it again, challenging all hands to be deck, working hard to ensure there was no shortfall

Also speaking on the impact of the Petroleum Industry Act (PIA) since it became a law two years ago, Head of Energy Line of Business, KPMG, Mr. Ayo Salami, said even though the Federal Government has declared a decade of gas, the PIA has failed to address concerns around gas fiscals.

‘‘One would have expected that having declared a decade of gas, the laws around that should support that, but unfortunately I must say that the PIA has failed to do that,’’.

He said prior to the PIA coming on stream, taxes around gas operations were at 30 per cent but with PIA, there has been selective treatment as natural gas liquids produced in an associated gas field  upstream are now going to be taxed at a higher rate.

Again, he worried why gas should  prices should still continue to be regulated either at the downstream or upstream level, saying such policies would not in any way support investment, thus creating a major setback for the Decade of Gas initiative.