Dan Kunle: Nigeria can add 500k barrels per day if Tinubu does the right thing

Nigeria can ramp up its crude oil production by 500,000 barrels a day if President Bola Tinubu adopts the right policies, Dan Kunle, renowned energy expert, has told TheCable.

The country currently produces an average of 1.3 million barrels per day (bpd), according to the latest data from the Organisation of Petroleum Exporting Countries (OPEC).

This contrasts sharply with 2.2mbpd the country used to produce over 10 years ago.

Nigeria’s share of the current 1.3mbpd output is thought to be less than half as a result of contractual commitments.

Even a chunk of the country’s share is already committed to repayment of foreign loans and legacy petrol subsidy debts, effectively denying the country cash inflow from oil exports.

This has impacted negatively on the exchange rate, with the naira rapidly losing value since 2014 when crude oil revenue started slowing down as a result of falling prices and theft.

The dipping oil production has been attributed to delayed or cancelled investments, divestments, aging fields and theft.

‘THERE IS A WAY OUT’

Kunle, whose experience in the energy sector spans three decades, told TheCable that Nigeria can achieve a significant increase in production if some idle oil assets are handed over to private investors.

“There are many oil blocks that are idle because of lack of active investment and production,” Kunle said, listing OML 42, OML 11 , OML 25 and OML 26 as examples.

“We also have the giant OPL 245 idle offshore in the last nine years. All these assets can bring 500,000 barrels per day to the basket of the federation. President Tinubu should take these assets from the NNPCL (Nigerian National Petroleum Company Ltd) and hand them over to private investors who borrowed to acquire 45 percent in some of these assets, especially OML 42.”

He said investors will not put their money at the disposal of NNPC  “unless they can manage their investments”.

“At this rate, if President Tinubu does not reorganise the NNPC, Nigeria will import crude oil and gas to sustain her economy,” he said.

“Oil and gas under the ground are not useful to humans until you invest to produce for use. Nigeria is weathering. We are sitting on huge oil and gas, we are on good soil for food productions, but we are in poverty and hunger.

“It is high time president got NNPC to free up all these idle assets. Oil and gas plus food production are the best ways to grow this domestic economy.

“NNPCL, in the last ten years, started to spend federation money at no interest cost to compete with the private sector investors in the oil and gas industry. How can explain NNPCL building petrol stations against the private investors who borrowed money to build theirs and have to go to an NNPCL subsidiary to look for products to sell against NNPCL’s subsidised prices?

“All the petrol stations are owing banks. NNPCL takes free federation money to kill the private investors in the midstream and downstream subsectors. These anomalies must stop. The president has to direct the BPE (Bureau of Public Enterprise) to begin the unbundling of NNPCL. This vertical monopoly in the industry is killing Nigeria.”

‘ENERGY SECTOR NEEDS A TURN AROUND’

He said it is “just time” for the president to take a holistic review of the energy sector.

“Oil and gas production has persistently dropped, to the extent that the NLNG could not meet her capacity outputs in the last two years. Domestic gas supplies suffered. Power production from gas was unstable. Crude oil production failed massively. NNPCL could not attain two million barrels and above,” he said.

“We cannot expect the president to keep this level of failure. Most of the NNPCL upstream assets onshore are idle without investment. Let them go to investors who are ready to negotiate with the communities and secure assurances of smooth operations.

“The power sector is very sick. Transmission company is very weak. Niger Delta Power Holding Company is due for overhaul. Power is not going to be cheap anytime near, because of the lack of investment and good management.

“I am very sure the president can turn around the fortune of Nigeria if the right team is put in place.”

‘REFINERIES WILL NEVER WORK OPTIMALLY’

Kunle said the government-owned refineries will never work optimally and will never deliver dividends or return the capital investment to the treasury.

“If we capitalise all the rehabilitation investments to date and add up to the original EPC (engineering and procurement) costs in the 1970s and 80s, the summation will alarm Nigerians. We can never expect NNPC to operate the refineries efficiently,” he said.

“Privatisation is the only way out or they will all go the way of Ajaokuta Steel. Please look around the country in the last 30 years which state-owned enterprise is successful in Nigeria. NLNG is 51 percent owned and operated by the IOCs. Nigerian public servants and managers are not trained to produce profit but to rentier. This is sad enough.

“Unfortunately for Nigeria, all the money we pumped from upstream to midstream and downstream is not going to be available anymore. Because the upstream lacks good investments, productions have persistently dropped and revenue streams have equally dropped.

“Total deregulation of the downstream is the answer. Overhaul NNPC and unbundle all the vertical monopoly structures created within NNPC.”