The Nigerian National Petroleum Corporation (NNPC) yesterday predicted that oil price could climb as high as $200 per barrel, as banks and major International Oil Companies (IOCs) withdraw from funding critical projects in the industry, leading to supply shortage and a huge upsurge in the amount the commodity is sold.
It said with the accelerated push to migrate to low carbon-intensive alternatives, time would tell whether the decisions being taken “very hastily” by some big oil companies would remain the right decisions.
Group General Manager, National Petroleum Investment Management Services (NAPIMS), a subsidiary of NNPC, Mr. Bala Wunti, said at the Nigeria International Petroleum Summit (NIPS), in Abuja, that the impact of the current decision to stop investing in the sector would begin to manifest in about five years, shooting oil price to around $200.
Other speakers at the session included the Deputy Managing Director, Deep Water, Total, Mr. Victor Bandele; Managing Director, Shell Nigeria E&P, Mr. Bayo Ojulari; Managing Director, Aftrac Limited, Mrs Patricia Simon-Hart; Managing Director, Aiteo Eastern E&P, Mr. Victor Okoronkwo, who was represented, and Managing Director, Waltersmith Petroman Oil, Mr. Chike Nwosu.
Wunti stated that the world is waiting to see whether the decision to begin defunding hydrocarbons are being compelled by activism or based on data, science, and reality.
He said: “I was talking to one of my senior colleagues yesterday, and he said, well, it is time for someone to speak the truth. If nothing is done and this trend continues, guys, we should be ready for a $200 per barrel of oil. The reason is simple, if you stop investing in the oil and gas sector, you can only produce what you have today.
“And what you have today, in many instances in five years, it will start declining, that is, if you we are not already in a declining mode, because many in Nigeria are in declining mode. So, if there’s no fresh capital for either brownfield or greenfield investment, we cannot grow production; if we don’t grow the production, the consequence is that we’re building a short supply for tomorrow.
“In basic economics, short supply means a higher price. So this is the world. This is the world that we see today and this has presented some very emergent trends.”
According to him, despite the decreasing investment in fossil fuels, demand for gas will increase as part of the energy mix, and this will continue to power businesses.
He predicted a growing power demand, saying that by 2050, the power consumption globally is going to grow from the current level of 27 terra joules of electricity to about 54 terra joules of electricity, exactly twice the current consumption.
While raising posers over where the electrical energy is going to come from, he said the present outlook showed both opportunities and some challenges.
He stated that the reason for choosing gas is not far-fetched, being a low-carbon intensive hydrocarbon.
“So, we see thermal power plant growing and these plants will need gas, and that indeed has led some of us to believe that gas, contrary to what many people think, is a destination for this transition point and a bridge fuel.
“In my own view, gas is going to be a destination fuel because at the end of the day, gas will be there, it will be there in the front, pronounced,” he added.
According to him, as a gas country, with the declaration of the “Decade of Gas”, it means the stage is now set and Nigeria can take advantage and position itself for the future.
Wunti said energy demand would continue to come from energy-deficient countries where energy poverty was pronounced and in undeveloped countries as well as developing countries. He added that the developed world has reached its saturation level.
“Where we see growth coming is in the emerging markets. Nigeria is one of them, Turkey, India is another, even China. You will see clearly that demand for hydrocarbon is going to come not from the US. Our hydrocarbon, when we export today, is heading to Asia, India, China,” he added.
He said renewables would only be relevant for “intermittent power”, adding that it will take a long time for carbon-free energy sources to take a foothold globally.
Wunti said big oil companies might reduce investment in hydrocarbon, the lowest being 10 per cent reduction and the largest being 40 per cent.
At the last estimation, Wunti stated that Nigeria has 36.89 barrels oil reserve and about 203 TCF of gas, meaning that NAPIMS controls about 70-75 per cent of the total oil reserves.
On the challenge of the cost of production, he said: “All we know is that $30 is very high, and therefore in reducing that, it presents a lot of opportunities for service contractors to come out with a very creative solution.” He stated that the target was to hit a single-digit production cost.