It's been a very long time since we have been able to report a different good news story every week in the Nigerian oil sector. But the positive trends, results and projections just keep on coming. It's almost enough to blow away the PIB blues . . . !
This week's good news comes from the Nigerian National Petroleum Corporation (NNPC) who have announced that Nigeria's oil production currently stands at 2 million barrels per day. We have written before that the barrels per day figure is not necessarily an indication of a healthy economy, particularly when fluctuations can be severe. It was not so long ago, after all, that the security situation in the Delta saw production drop down by almost 25%.
So we can agree that consistency of production is a far better metric than scale of production, but in this instance we get both! Maikanti Baru, who heads the Nigerian National Petroleum Corporation, has confirmed that this figure of 2million bpd is not simply a flash in the pan, but a level of production that has been sustained over several months which spells only good news for confidence in our market.
Whilst the minister was keen to point out that the improved security situation in the Delta was responsible for the improvement, other commentators will point as well to the pioneering efforts being made by indigenous oil and gas companies. After all, the safest pipelines in the world aren't much use without oil to transport through them! This year has seen a mammoth effort from local companies to finally reward the faith placed in them by the Local Content Act almost 7 years ago.
Privately owned indigenous companies are leading a new charge in a resurgent domestic sector. Energy tycoons like Benedict Peters at Aiteo Group, Austin Avuru at Seplat and the triumvirate of Tonye Cole, Tope Shonubi and Ade Odunsi at Sahara Energy are carving a new niche in the oil and gas sector through some shrewd investment, hires and acquisitions. Even the most optimistic analyst could not have imagined the degree to which the brave legislation from 2010 would unlock the potential of local content providers. Credit must go to the pragmatism of the Act, setting out to create practical and realistic steps to increase indigenous participation in the oil and gas sector by prescribing a minimum threshold for the use of local companies. But that faith has been rewarded in the expertise of the companies too.
Take Aiteo Group, for instance, who announced earlier this year that they had tripled production levels at the oil blocks under their stewardship compared to the volumes attained whilst the blocks were under the control of Shell. Aiteo is pushing 90,000 barrels per day from its sites near Bonny with levels, according to a recent news report in South Africa, of 150,000 bpd not far off. Aiteo Group has also played a clever game with its corporate social responsibility too, announcing a sponsorship with the Nigerian Football Federation (NFF) that will ensure that coaches and trainers are supported. Speaking about the deal, Benedict Peters at Aiteo Group was reported as saying that he hoped the deal would ‘reach a shared goal of a more prosperous Nigeria'. If that's not a message to the ambitions of local companies, I don't know what is.
Whilst Forcados, one of the primary export pipelines in Nigeriam that carries nearly 250,000 bpd in the region, remains closed and the PIB has been delayed again in Abuja, there is a lot to be confident about in Nigerian oil. The sector has shown resilience as much as creativity despite wider hardships: two virtues that could yet define the next era in Nigerian energy.