As the world accelerates efforts to curb oil exploration on account of climate change concerns, analysts are calling for intense scrutiny into the activities of Nigeria National Petroleum Company Limited (NNPC), which is leading a flurry of exploration drilling in frontier basins across northern Nigeria.

A key concern many have is that there is not much available data other than the claims of the company and the government that these sites are proven basins as the country pumps billions of oil revenue into the project.

Nigeria still has the potential for major discoveries. Unlike the Niger Delta, many places in the country likely host many frontier basins with a significant number of large untested prospects. But the President Muhammadu Buhari government has focused mostly on drilling in northern basins.

Damilola Akinsanya, an oil and gas expert, said that frontier basins “are basins where exploration activities have not been carried out and where carried out, such exploration activities have only been short-term and a significant quantum of the deposits are still undiscovered”.

The classification of petroleum basins into “mature” or “frontier” is used to draw the distinction between basins that are well explored and those that are less explored or drilled, according to Akinsanya.

However, the bulk of new exploration activities funded by the government are on a frontier basis. Analysts say the problem with NNPC’s frontier exploration drive is that the state-owned company does not possess the integrity and technical competence to warrant confidence

The world is in an energy transition, moving inevitably to a low or net-zero carbon future. Fossil fuels are now being phased out, a process which a 2021 S&P Global Commodity Insights report notes will take only several decades.

Consequently, according to the report, “investor preferences are changing. Many no longer support hydrocarbon projects, or at least they don’t support projects that are not ‘agile’ — in terms of time-to-develop-or ‘advantaged’ – in terms of cost of development and carbon emissions. This means that frontier exploration – the riskiest of all exploration activities is also losing steam. These days, only around a dozen companies are actively pursuing frontier exploration worldwide.”

“But while frontier exploration activity is decreasing globally, sub-Saharan Africa seems to be an exception, with several high-impact frontier wells being drilled today in frontier areas. And companies have plans to do more in frontier basins across the region. In fact, sub-Saharan Africa’s rig market — which is an important indicator of upstream activity — is improving,” the report said.

This is why Nigeria should make current drilling efforts count. “Large discoveries tend to result in the production of barrels with lower costs per barrel and lower carbon intensity per barrel,” said analysts at S&P Global.

The results from the current drilling activities by NNPC will constitute an important signpost as to whether the trend of drilling frontier wells will continue and what value it would give the country.

Nigeria is heavily reliant on oil earnings, making the oil and gas industry the nation’s most critical in terms of fiscal contribution to the economy. According to the National Bureau of Statistics, the country earned N21 trillion ($45.6 billion) from the sale of crude oil in 2022.

The Petroleum Industry Act, which came into operation in 2021, established the Nigerian Upstream Petroleum Regulatory Commission and in Section 9 entrusts the commission with the function, among others, of promoting the exploration of frontier basins of Nigeria, but the NNPC appears at the moment to be in the driving seat.

Nigeria is expected to take more investment decisions to increase production so as to meet consumption projection it has set in the Liquified Petroleum Gas, LPG, space the Executive Secretary, ES of the Nigerian Content Development Monitoring Board, Simbi Wabote has said.

Wabote in an address to the 4th Edition of the Nigerian Oil & Gas Opportunity Fair (NOGOF), with the

theme;  “Oil & Gas Industry – Catalyst and Fuel for the Industrialization of Nigeria”, Executive Secretary, ES, of the Board, Simbi Wabote, on Thursday in Yenagoa Bayelsa State, said the theme reflects the pivotal role that the oil and gas industry is expected to play in driving the economic growth and development of Nigeria.

He said currently there are seeming opportunities driven by policies, guidelines, regulations, and statutes that are now attractive to investors as there is clarity on the framework governing their business endeavours.

According to the ES, there are several policies that have been formulated and implemented by the Government in their quest to stimulate economic growth and development.

He recalled that, in 2021, President Muhammadu Buhari, declared the Decade of Gas which among others seek to stimulate the development and utilization of gas resources for increased domestic utilization and export towards generating more revenue for the nation.

He also noted that other policies such as the automotive gas policy advocates for the use of Compressed Natural Gas,  CNG as an alternative fuel for vehicles which has also created a vista of opportunities in the supply and installation of conversion kits in vehicles to enable it use of CNG.

In addition, he said several industries have also installed kits to enable their power generating plants to utilize CNG and in some cases LNG instead of diesel to manage cost.

These policy initiatives have led to creation of several businesses and a surge in local utilisation of gas.

Although he said the annual consumption of LPG increased from 360,000tonnes in 2015 to 1.4million tonnes in 2022, he however added that while this growth is commendable, it is instructive to note that about half of the local LPG requirement is imported.

He further said despite that current local production level is still far below local market demand, the National Gas Expansion Program (NGEP), has set a 4 million tonnes projection for the year 2025.

By this estimation the Country would have to double efforts to meet estimated 2.6 million gap in 2025.

These gaps in volumes and consumption spread present opportunities in local processing, storage depots, trucking, cylinders manufacturing, distribution pipelines, conversion kits, and many other opportunities, said Wabote.

Speaking further, the ES, said the Nigerian Gas Flare Commercialisation Programme (NGFCP) is another policy that is aimed at promoting the development and utilization of gas.

“It also focuses on reducing greenhouse gas emissions in line with global efforts which are aimed at addressing climate change.

The key thing to note here is that every policy, regulation, or statute holds an array of opportunities that can be harnessed and utilized to achieve significant benefits.” he explained.

Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Limited, has promised that the Port Harcourt refinery, located in Rivers State, Nigeria, will kick off production of fuel and other refinery activities before the end of the year.

In an exclusive interview with Arise Television’s “The Morning Show” on Thursday, Kyari said that the reason why the Port Harcourt refinery is behind schedule is because of disruptions in the global supply value chain that were created by the Russia-Ukraine war and are not peculiar to Nigeria.

“Of course there is work going on in the Warri refinery that is already in earnest. For the Kaduna refinery, that is a different situation, and we have awarded the turnaround maintenance for the Kaduna refinery, which is already in place,” he said about the other two federal government refineries.

He admitted that with the Dangote Refinery, local refineries whose turnaround maintenance is nearing completion, and a couple of modular refineries, the country should be expecting a surplus of petroleum products by the end of next year.

“So ultimately, what this means is that we are going to have a surplus of product in the country by the end of next year,” he noted.

He reminded everyone of the projected contribution of the Dangote refinery once commercial production kicks off sometime in July or August.

“Once that happens, you would have a significant volume of PMS—once that happens, we fix our refineries and other modular refineries, and this country will be the hub of petroleum refineries on the continent and a reversal of market choice,” he said.

Earlier in the interview, the Group Managing Director debunked popular views, claiming that once the country starts a whole-scale domestic refinery of petroleum products, the price of fuel and others will come down drastically.

“There is this misconception that once you start to refine locally, the price is going to crash to half the price; that is not correct,” he said. “The distinction between domestic pricing and import pricing is simply two things.”

He listed two major instantaneous benefits outside of this price crash that will come to the country. According to Kyari, the security of the supply of products and businesses around refinery activities will improve.

He said, “First, it gives you security of supply—supply is by your door. You don’t need 14 days to move products from Europe into Nigeria. That goes away; you have access to this product because there’s no disruption in the supply chain. You have a short time to regulate and move around, so it gives you security of supply. This is the number one thing it does.

“Secondly, it creates a market around it for employment, taxes, and so many other benefits that will come to the country.”

He corrected another popular misconception around the pricing of refined petroleum products, saying that the prices of refined products, regardless of area of production, are determined by the international market.

“Therefore, at the gate of your refinery, you are pricing it as if you are getting it from Rotterdam or Amsterdam; that means the conversion of FX that determines the market value is determined by the international market,” he said.

“But there will be a delta; that delta is the cost of freight that builds up in your country. You will see a difference in price as a result of the freight difference,” he added.