Covid-19 May Cost Nigeria $24bn Oil Sector Investment – AEC

The African Energy Chamber has projected a $24bn loss of investments in the Nigerian oil and gas sector between 2020 and 2025, as the scourge of the COVID-19 pandemic hit hard on the global petroleum industry.

According to the AEC, African Energy Outlook 2021, the $24bn loss of investments in the sector would account for 30 per cent of the total of $80bn loss of investments that would be recorded in the petroleum industry across Africa.

It said, “The detrimental impact of COVID-19 on global energy markets is also expected to have an impact on African activity.

“Compared to pre-COVID19 expectation, about $80bn less investments are expected in Africa towards 2025, with the years 2020 to 2022 carrying the brunt of the difference.

“Out of these $80bn, Nigeria is by far the most adverse impacted country with about $24bn moving out of the 2020-2025 window.”

The report also projected a delay in the Nigerian Liquefied Natural Gas, NLNG,and other gas projects in the country, due to the pandemic, which had also negatively impacted the price and demand of crude oil in the international market.

According to the report, upcoming gas projects would take a hit and run a risk of delays, while it noted that some oil majors operating in the country had already started shifting the timelines for their gas projects.

The report added, “The majority of the projects in Africa that were up for sanctioning were planned assuming an oil price of between $55 and $60 per barrel, bbl.

“The oil price currently hovering around $40/bbl therefore spells bad news, especially as the top upcoming Final Investment Decisions, in Africa have a break-even crude price of over $45 per barrel with some even close to $60 per barrel.

“ENI and ExxonMobil have both stated that they will focus on developing projects with a breakeven crude price of less than $35/bbl.

“Upcoming gas projects will also take a hit and run a risk of delays. Although Nigeria approved the development of NLNG train 7 last year, the upstream gas developments that were planned to supply feedgas to this development might now take a back seat.”

Details of the report further shows that at a higher crude oil price of $50 per barrel, and additional investments of up to $10bn, Nigeria would be able to produce a total of two billion barrels of crude oil between 2020 and 2030.

With an additional capital expenditure of $10bn in investment over the 2020-2030 period, the additional capital expenditure is estimated at $49bn at the $35 /bbl threshold increasing towards $100 billion as the $50/bbl threshold is approached.

The report showed that with the exception of few jurisdictions, producing a barrel of oil from African soil remains less competitive than producing the same barrel elsewhere.