Shell ‘losing enthusiasm to explore Nigeria’

Shell_NigeriaMajor challenges in Nigeria have dampened Shell's appetite for exploration - Ian Craig, Shell, director for sub-Saharan AfricaShell has said that a combination of issues has decreased its will to explore Nigeria’s oil and gas reserves

Nigeria’s biggest producer, Shell, said at the recent Nigerian Oil & Gas Conference in Abuja that attacks on oil pipelines, a dearth of funding from the state oil firm and regulatory uncertainty have dampened its appetite for exploration of the country’s huge oil and gas reserves. Ian Craig, Shell's director for sub-Saharan Africa, said in his speech that Nigeria could produce four million barrels of oil per day but that big changes would be needed for this to happen.

"We still face major challenges ... (there is) chronic underfunding of the onshore joint ventures where NNPC (the national oil company) is the majority shareholder," said Craig. ”The greatest challenge, however, is the massive organised oil theft business and the criminality and corruption which it fosters. This drives away talent ... increases costs, reduces revenues both for investors and the government and results in major environmental impacts.”

Nigeria currently produces around 2.5mn bpd of combined crude oil and condensate, and this will soon increase by 180,000 bpd according to Oil Minister, Diezani Allison-Madueke. Craig said the loss of oil to theft in Nigeria was currently in the region of around 150,000 bpd.

Thieves in the oil-rich Niger Delta use explosives or even just hacksaws to cut open pipelines and siphon out oil, a practice known as bunkering that hurts production and is thought to be part of a large international criminal enterprise. An amnesty for militants in 2009 saw attacks on oil facilities decrease but bunkering operations remain a costly headache.

Regulatory uncertainty will be cleared up only by the Petroleum Industry Bill, which aims to change everything from fiscal terms to an overhaul of the state oil company but has been stuck in the National Assembly for years.

"The challenges I have described in the onshore, shallow water and gas sectors have held back development and have unfortunately led to a reduced appetite for exploration," Craig said.

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