Nigeria to March with $20bn Expansion and Spending on Oil Sector

Abuja, Nigeria | February 08, 2008 by D-8 Secretariat

“An estimated annual spending of about 15 to 20 billion dollars (10.2 to 13.6 billion euros) is anticipated in Nigeria’s exploration and production sector,” Nigerian Minister of State for Petroleum, Hon. Odien Ajumogobia told participants at a Gulf of Guinea Oil and Gas conference this week.

The minister said this “aggressive production capacity expansion plan” will put Nigeria in the forefront of investments in the Gulf of Guinea. This region also comprises Angola, Cameroon, Gabon, Congo, Equatorial Guinea and Sao Tome and Principe. In all, it has estimated oil reserves of about 60 billion barrels.

Ajumogobia said Nigeria’s crude oil reserves currently stand at about 35 billion barrels, putting the west African country in good position to play a critical role in global crude oil supplies. The minister said the state-run oil company, NNPC, was being restructured for better performance, adding that “this reform  will address the challenge of funding that has threatened the sector growth”.

“As a prelude to this, the federal government has this year allowed NNPC to attempt to raise third-party finance for its activities and about six billion dollars is currently being sourced from these sources,” Ajumogobia said. “This effort will enable the JVs (Joint Ventures) to sustain a higher level of activity estimated at about 15 billion dollars in total for 2008″, he added.

Joint-venture funding has been an issue between Nigeria and major oil companies, with the foreign companies accusing the west African country of defaulting in foreign currency cash call payments. Nigeria is Africa’s biggest oil producer, accounting for a daily output of 2.1 million barrels.

Dealing in $15bn with Foreign Firms

The country has also agreed with foreign companies on a joint investment of $15.2 billion in oil ventures this year and is seeking debt finance to foot part of its share of the bill, a top official said last week, as quoted by media sources of Nigeria.

The five joint ventures that pump the bulk of Nigeria’s crude oil have suffered from decades of underinvestment due to government budget constraints, causing output to stall or even decline despite huge reserves in the ground.

The government has a long-standing target of reaching 4 million barrels per day by 2010, but output has stagnated at around 2 million for the past few years. “Our target implicates a significant investment in the upstream which is not happening now,” Dr.Odein Ajumogobia, minister of state for petroleum said .

The government of President Umaru Yar’Adua aims to address the issue with a thorough reform of state-run Nigeria National Petroleum Corp. which should allow it to raise international capital at highly competitive interest rates. The government has decided to use $4.97 billion from its 2008 budget to invest in the ventures, and is seeking $3.8 billion financing from international and local banks to reach $8.8 billion.

Ajumogobia provided no comparative figures for 2007, but the government budgeted about $4.2 billion for the ventures last year and debt financing was negligeable.

In subsequent years, a restructured national oil company will increase debt financing until it covers the entire government share in the five ventures that pump about 1.5 million barrels of crude oil a day, he added. “We hope that money from the budget will reduce to the point where the industry can finance itself,” he said. The government has about a 60 percent share in each of the ventures with Royal Dutch Shell , ExxonMobil , Chevron , Total and Agip .

Nigeria also pumps about 500,000 barrels per day from new oilfields in deep water offshore, but these are guided by contracts under which the foreign partner foots all the investment costs and reaps a greater share of the revenue.

International banking consortiums have presented the government with proposals to find the extra money required in the joint ventures and the government is expected to decide on a financing arrangement within weeks. Ajumogobia said he hoped debt financing would exceed $30 billion in the joint ventures over the next four years, from close to zero now. Nigeria would have to negotiate a higher quota from Opec if the investments pay off with more production, he added.

D-8 Organization is to expect to have the Working Group on Energy meeting this year, where members’ needs of oil and energy can be discussed among memberstates. D-8 has already started to witness a number of significant collaboration projects among its member in major sectors including energy, such as between Iran, Indonesia, and Malaysia. D-8 Secretary General, Dipo Alam, is scheduled to have a number of working visits to Abuja and Lagos in April 2008, to discuss cooperation potentials as well as to meet with the new D-8 Commissioner assigned for Nigeria.

Read Also

• Nigeria Pumping 1.8-1.85 mln bpd of Oil: Minister
• Nigeria’s Agriculture Sector Boosted with N1.3bn Grant
• Nigeria’s Agriculture Sector Boosted with N1.3bn Grant
• Indonesia, Iran, and Malaysia to build $6b Oil Refinery in Banten
• $4 Billions Investment Plan for Refinery in Nigeria
• Nigeria: Another Potential Energy Supplier of D-8
• Iran and Nigeria signed nuclear technology for power plant
• Nigeria builds a $115 millions investment on the Ethanol Factory with China
• Brands Bet on Indonesia as Spending Booms
• Pakistan, Iran to hold talks on IPI