The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has reported a significant decline in the country’s annual upstream capital expenditure (CAPEX) from $27 billion in 2014 to less than $6 billion in 2022. This revelation was made by Mr. Gbenga Komolafe, Chief Executive of NUPRC, during the World Petroleum Congress (WPC) held in Calgary, Canada.
Mr. Komolafe, represented by Mr. Kelechi Ofoegbu, the Executive Commissioner, highlighted a substantial 74 percent decrease in CAPEX. He attributed this decline to several factors, with regulatory uncertainty playing a pivotal role in deterring investments in Nigeria’s oil and gas industry. The years leading up to the enactment of the Petroleum Industry Act (PIA) also witnessed challenges that impacted industry investment.
Other contributing factors include the shift away from fossil fuel development due to global decarbonisation efforts and the energy transition. Many international oil companies deprioritized Nigeria in favor of other countries, diverting their capital expenditure away from the Nigerian upstream sector.
This underinvestment had a negative impact on Nigeria’s rig count, with the average number of active oil rigs decreasing from seventeen in 2019 to eleven in 2020, seven in 2021, and ten in 2022. However, there has been recent growth, with the rig count reaching as high as 31 by August 2023, signaling renewed investment interest.
Mr. Komolafe attributed this positive development to relatively high crude oil prices and investors’ acceptance of the PIA, coupled with its effective implementation by the regulator.
Looking ahead, Mr. Komolafe expressed optimism about the future outlook, stating that the NUPRC, as the regulator in the oil and gas upstream sector, would leverage this opportunity to attract more investments and revitalize the Nigerian upstream sector.
He also emphasized that the PIA has repositioned the Nigerian petroleum sector by establishing efficient governing institutions with clear roles, promoting transparency, accountability, and creating a favorable business environment for petroleum operations. The Commission has already developed 24 priority regulations to support the spirit of the PIA, ensuring a predictable regulatory environment for stakeholders.
Regarding the energy transition, Mr. Komolafe emphasized the importance of oil and gas producers embracing the reality of the green transition and strategically leveraging opportunities presented in this evolving era. Nigeria’s substantial gas reserves, estimated at 208.83 trillion cubic feet (TCF) with potential for further growth, position natural gas as a pivotal transition fuel toward cleaner energy sources.
Recognizing the significance of natural gas in Nigeria’s energy mix, the government has initiated the Decade of Gas program to facilitate industrial development and align with the nation’s net-zero emission commitment for 2050.
In related discussions, Mr. Bala Wunti, Chief Upstream Investment Officer at NNPC Upstream Investment Management Services (NUIMS), highlighted that achieving net-zero emissions would require an improved enabling environment, robust project preparation, and coordinated financing efforts, considering the unique context of each country, whether developed or developing.
Mr. Wunti emphasized the need for strong gas utilization across various sectors, particularly in power generation, to meet rising electricity demands until 2030. He also noted that delivering Nigeria’s current Nationally Determined Contributions (NDC) would necessitate a substantial increase in the use of Compressed Natural Gas (CNG) for vehicles and Liquefied Petroleum Gas (LPG) for cooking by 2050.
