face of current global crisis osten olorunsola Chairman Energy - - PowerPoint PPT Presentation

Nigerian oil & gas investment in the face of current global crisis

• sten olorunsola

Chairman Energy Institute Nigeria 202005

Livelihood = Health + Energy + Economy

Further reinforced by COVID-19 pandemic

Life is meaningless without energy and economy

Hence, Energy = Life

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COVID-19 ……..mother of all crisis

• Demand

reduction

• Demand

destruction

• Price war
• Market

damage

• Supply shock

& destruction

• Price collapse
• Oil & gas glut
• Economic

collapse

• Economic

recession

COVID-19 Health Emergency Caused by SARS CoV-2

Was like watching a slow motion of a crashing car

delved unprecedented consequences on global health, energy & economy

3

Demand projection 2020 was 101 MMb/d expected to decline by 9.3MMb/d to 2012 levels, and possibly improving to 97MMb/d

Oil supply and demand collapsed to 2012 levels

4

For 6-8 weeks

5

Global petroleum expected to rebound in 12-18 months

20 40 60 80 100 120 2018 2019 2020 2021

World liquid fuels consumption million barrels per day non-OECD Organization for Economic Cooperation and Development (OECD)

forecast

20 40 60 80 100 120 2018 2019 2020 2021

World liquid fuels production million barrels per day

forecast

Source: Short-Term Energy Outlook, May 2020

non-OPEC

Organization of the Petroleum Exporting Countries (OPEC)

• Discipline by OPEC+; US-China geopolitics; sensible policies by govts
• Low price will accelerate demand recovery and growth
• More private cars; lesser pooled transportation
• Less new cars mean continued use of less efficient old ones

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But we must keep two eyes on global energy transition

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Two immediate focus of the MoPR…….PIB + MFs

Industry Reforms + PIB Marginal Fields 2020 Bid Round

Delivery in 3 months Delivery in 6 months

8

Petroleum Industry Reforms (+PIB)

• Executive bill
• Making good progress
• Repackaged into two volumes
• Ready for FEC clearance +
• Presidential approval
• Transmission to NASS (2-3 weeks)
• NASS getting ready to take bills

through fast-tracked legislative process

• NASS technical advisory team to

be inaugurated 29/5

• Bill expected to be passed and

returned to the Presidency before summer vacation period

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• MPR priorities 2020
• Grow production capacity
• Increase oil & gas reserves in

particular, deeper hydrocarbon plays

• Provide opportunity for portfolio

rationalization

• Further promote indigenous

participation

• Provide opportunity to gainfully

engage competent Nigerians

• Promote common usage of

assets/facilities

Marginal fields 2020……broad driver & objectives

US$ 520 mln Signature bonuses and data fees

+

N1bln Application and processing fees There will be no formal promotion process

10

Marginal fields 2020……timing:- is this the right time?

The best time was 10 years ago, the next best time is ……now

• The start-off of the marginal fields programme

was 2003/4

• Production life span of the fields was not

expected to be more than 10-12yrs

• By now, where successful, they would have dried

up or at serious declines leading to gross utilization of installed and procured capacities

• In view of COVID-19, participants will likely be
• nly the bold and truly professional – only

eagles fly in raging wildfires

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Marginal fields 2020……will they be attractiveness?

• Proof of concept is over
• We have seen globally competitive

players

• Fields for 2020 will be:-
• better defined
• have more complete field data
• independently verified volumes
• more bankable
• low cost short term + strategic LT
• will not be constrained by Opec

cuts expected to end mid 2021, long before first oil

• Big producers declining naturally; no

major developments in the horizon

We now know how viable marginal fields can be and how strategic they can contribute to the development of the industry and Nigeria, in particular investments directed at the demand sides of the value chain

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Marginal fields 2020……require new business models

Urgency; smart, strategic, efficiency, sophistication Look beyond the upstream In country value retention Diversification/catalyst; petroleum industrialization Resourcing & supply chains; Management of LTO Strategic cooperation & collaboration Good governance and professionalism

Time for easy money seems gone

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Supply glut will be short term; must also invest in demand

80 85 90 95 100 105 110 Available 2020 Demand 2020 NFA New

Crude oil MMb/d

• There is still so much
• il availability
• Therefore upstream

will be relatively slow for some time

• Will be wise to

additionally invest in the demand domains (mid & downstreams)

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Marginal fields 2020……are there risks or landmines?

Fiscal stability Partnerships Financing Technical capacity Commercial viability Litigation Security Cost control Community friendliness

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Marginal fields 2020……conclusion

• Marginal fields are low cost high

value opportunities worth pursuing

• The planned 2020 bid round is

timely and will be very successful

• Collaboration, sense of urgency and

new business models required

• Despite the damage by COVID-19,

petroleum is still expected to dominate the energy space; and hopefully, the world would have learnt the hard lessons of market rascality and misbehaviours

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