Nigeria’s oil rig count down 29% to 135 in 2020

There are indications that limited investment has taken a toll on exploration, as Nigeria’s rig count dropped year-on-year by 27.8 percent to 135 in the year 2020, from 187 in 2019.

The oil rig count, a major index for measuring the level of activities in the upstream oil sector, was contained in the latest industry data released by the Organisation of Petroleum Exporting Countries, OPEC.

On Quarter-on-Quarter, QoQ basis, the data shows a steady decline in the level of activities all through the year with the highest count of 56 recorded in the first quarter, while subsequent quarters show declines to 33, 24 and 22 deployed in the second, third and fourth quarters respectively.

Also the QoQ breakdown paints a better picture for the 2019 operations which show a more consistent increase after a marginal decline in the second quarter. The first quarter of the year had recorded 43 rigs while the second quarter recorded 42, but the third and fourth quarters recorded 47 and 55 rigs respectively.

Though the global oil cartel has, in its various industry reports, specifically point to the outbreak of the Coronavirus (COVID-19) pandemic in the first quarter of 2020 as the major setback in the industry globally, it did not specify what was responsible for the decline in rig count in Nigeria.

African Countries

Meanwhile, unlike Nigeria, other African oil and gas producing countries, such as Algeria, Libya, Gabon, Angola, and Congo, examined in the study, increased their rig deployment, and by extension, exploration during the period.

Specifically, Algeria increased its rig count from 398 in 2019 to 509 in 2020, showing an increase of 27.9 per cent.

Libya increased its rig count from 149 in 2019 to 164 in 2020, thus showing an increase of 10.1 per cent, while Gabon increased its rig deployment from 50 in 2019 to 68 in 2020, indicating an increase of 36 per cent.

Also, Angola and Congo increased their rig deployment from 38 and 12 in 2019 to 60 and 46 respectively in 2020, thus showing an increase of 57.9 per cent and 283 per cent respectively.

However, Equatorial Guinea, which deployed 12 rigs in 2020, against 16 in 2019, witnessed a 25 per cent decline.

Factors

Investigation by Energy Vanguard, weekend, attributed the negative situation in Nigeria to factors, especially low investment, prolonged delay in the passage of the nation’s Petroleum Industry Bill, PIB, and Coronavirus pandemic, which has also caused some operators to work remotely.

Implications

In a telephone interview with Energy Vanguard, Dr. Bala Zaka, a Port Harcourt-based Energy analyst, said: “The development showed that Nigeria, which failed to hit its 40 billion barrels reserves target by 2020, due mainly to low investment, might also fail to realise the target in 2025.”

He added: “It also means that the nation’s current 37 billion barrel reserves might be depleted much faster than expected if the nation does not invest much in exploration, required to make new finds and increase reserves. Furthermore, it also means that other emerging African oil nations could overtake Nigeria, especially in terms of reserves, production capacity, and global ranking.”

Experts

However, in an interview with Energy Vanguard, weekend, Prof. Omowumi Iledare, Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management, Institute for Oil and Gas Studies, University of Cape Coast, Ghana, said: “The rig count is far below expectation, bearing in mind that Nigeria is a leading producer with 30 billion barrels reserves and over 200 trillion standard cubic feet of gas.

“Some influential parties only seem to be interested in sharing oil revenue than boosting investment through effective and efficient legislation.

“But we need to pass the PIB as quickly as possible this year in order to step up activities in the industry.”

In another interview with Energy Vanguard, Victoria Ibezim-Ohaeri, Executive Director, Spaces for Change, said: “Nigeria needs to pass the Petroleum Industry Bill (PIB) as soon as possible to ensure the country gets the maximum benefits from its petroleum resources.

“Crude oil dominates Nigeria’s economy, accounting for around 80% of export earnings. Nigeria has the largest oil and gas reserves in sub-Saharan Africa with an estimated 37bn barrels of oil and 188 trillion cubic feet of gas.

“Yet for decades, the virtually ungovernable industry has been plagued by poor leadership, eye-watering corruption, and environmental degradation. Nigerian administrations since the 1960s have – with varying degrees of effort – failed at reform. In the last 20 years, multiple governments have attempted to pass an all-encompassing Petroleum Industry Bill (PIB), the scope and complexity of which has ensured repeated failure.

“The extant regulatory framework of the oil and gas sector which includes the Ministry of Petroleum Resources, NNPC Act 1997, the Petroleum Act 1969, the Oil and Pipelines Act 1990, the Petroleum Profit Tax Act 1959, the Petroleum Products Pricing Regulatory Act 2003 amongst others have had a more ruinous effect on the oil and the gas sector, as they have not promoted a culture of transparency in the oil and gas sector.”

She added: “The Petroleum Industry Bill (PIB) seeks to increase government revenue from oil, and as well lay down a strengthened legal and regulatory framework for the Nigerian oil industry, set up structures for the establishment of commercially driven petroleum entities; and promote transparency in the administration of Nigerian petroleum resources.

“Succinctly put, the bill seeks to address the problem of administering petroleum resources in line with global best practices, and to provide for efficient and independent sector regulation.”

Conclusion

Nevertheless, some experts, including Prof. Omowumi Iledare, and Ibezim-Ohaeri, have called on the legislators and other stakeholders, to sink their differences, and collectively work toward the passage of the PIB in order to boost activities, especially exploration in the oil and gas industry.