Nigeria risks losing a third of its oil output by 2015 unless it finds ways to boost investment in joint ventures with foreign energy companies, an internal report by President Umaru Yar’Adua’s energy advisers warns.
By Matthew Green in Lagos
The progess report, seen by the Financial Times, highlights the government’s need to find ways to finance the oil industry in the country.
It comes after an internal memo from the Shell Petroleum Development Company late last year that said funding problems could put the existence of the company’s joint venture with the Nigerian government at risk. The fresh warning could add to supply fears that have pushed oil prices to fresh records this week and saw prices reach a record $114.95 a barrel on Wednesday.
Traders are already worried about Russia’s oil production, considered critical to keep up with Asian demand, after warnings from industry executives that production there has peaked at about 10m barrels a day.
Mr Yar’Adua’s advisers include former Opec secretary-general Rilwanu Lukman, who chairs a committee created to draft proposals for an overhaul of Nigeria’s energy sector. The government hopes the reform process will help double production in Africa’s biggest crude exporter from its current 2.1m b/d.
The report says funding shortfalls “portend a grave danger not just to the reform process, but to the continued well-being of the industry as a whole”, adding that even if funding levels are maintained “total oil and gas production will decline by 30 per cent from its current level by 2015”.
The government’s failure to pay its share of costs of the joint ventures with companies such as Shell, ExxonMobil and Chevron, is one of the biggest obstacles to raising production.
The Nigerian government and Shell declined to comment.