Assessing Lokpobiri’s Challenging One Year as Oil Minister

Appointed to head one of Nigeria’s most strategic but challenging ministries in the last one year, Emmanuel Addeh assesses the efforts made by the Minister of State for Petroleum (Oil), Senator Heineken Lokpobiri to meet the targets set for him by President Bola Tinubu.

When he assumed office in August last year, Nigeria’s Deputy Oil Minister, Heineken Lokpobiri, stated that the single most important directive by the president was for him to drive the increase in crude oil production.

One other big challenge, he said, was a dire lack of investment in the Nigerian oil and gas sector, due to the protracted length of time before the passage of the Petroleum Industry Act (PIA).

This he said, was coupled with inconsistent government policies in the past, which drove potential investment to other climates.

As such, Lokpobiri explained that the primary policy thrust was, and remains, to increase production because increased production is the lowest hanging fruit for Nigeria’s economic recovery.

Daunting Challenges

Without exaggerating, oil has remained the bedrock of Nigeria’s economy for decades. So, when output dips, the country’s economy wobbles. So, for a long time, the sector has not been fully optimised.

Aside the big issues of underproduction, pipeline vandalism, underinvestment, among others, there are also some other challenges, including conflicts among partners, divestment issues, inconsistent policies as well as bureaucratic bottlenecks.

“When we assumed office, the biggest challenge met by this administration was a dire lack of investment in the Nigerian oil and gas sector, due to the protracted passage of the Petroleum Industry Act (PIA) and inconsistent government policies, which drove potential investment to other climates.

“Our primary policy thrust was, and remains, to increase production. You may ask, why is this our focus? Because increased production is the lowest-hanging fruit for Nigeria’s economic recovery. Higher production translates to greater investments, increased revenue and foreign exchange for the country, and a more functional midstream and downstream sector.

“We recognised numerous impediments to our progress early on, such as conflicts among partners, divestment issues, inconsistent policies, insecurity, and bureaucratic bottlenecks. Consequently, over the past months, our efforts have been dedicated to removing these obstacles, restoring investor confidence, and ensuring an enabling environment for businesses in the oil and gas sector to thrive.

“Our biggest challenge is that we have thousands of idle oil wells that are not exploring. I give you an example, between Rivers and Akwa Ibom which has over 170 oil wells, but only 10 are producing, the rest are just shut in with no explanation,” Lokpobiri said in an interview recently.

There is also the challenge of some of the assets being in the hands of people that are not putting them to use.

Rise in Oil Production

With crude oil production shrinking to as low as 1 million barrels per day at a point before the current government took over , there was an urgent reason to quickly ramp up production before the economy sank completely.

Worsened by divestment and by extension withdrawal by International Oil Companies (IOCs), the global energy transition movement further stifled investment. Amid these challenges, the country faced an urgent need to boost production volumes. This was the pressing reality in the upstream oil sector before the appointment of Lokpobiri.

A recent THISDAY analysis of recent data showed that Nigeria produced a total volume of 276.6 million barrels of crude oil in the first seven months of 2024. According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria raised production to 1.533 million barrels per day in July. This figure includes condensates.

The government says that production has now hit between 1.6 million bpd and 1.7 million bpd, that is, from a far lower figure.

Further analysis of recent data from the NUPRC indicated that Nigeria produced 44.2 million barrels of crude oil in January; pumped 38.3 million barrels of oil in February and 38.1 million barrels in March this year.

In April, total production was 38.4 million; in May, 38.8 million barrels were pumped and 38.3 million barrels were achieved in June while the latest released data for July production was 40.5 million barrels too climb to 276.6 million barrels.

“As of today, our budget is predicated on 1.7 million bpd and with condensate we are already meeting our budget projections. At least we are meeting our own mandate. Our target is to ensure we produce 2 to 3 million bpd per day. Our problem hasn’t been capacity,” the minister added.

Fight Against Oil Theft

Although now new, the menace of oil theft, pipeline vandalism, and illegal refining had in recent years become rampant in the Niger Delta, reflecting the severe challenges facing the industry.

In 2022, when things got to a point where his company had to shut down production, Chairman, Heirs Holdings, Tony Elumelu took to social media, tweeting: “How can we be losing over 95 per cent of oil production to thieves? Look at the Bonny Terminal which should be receiving over 200,000 barrels of crude oil daily, instead, it receives less than 3,000 barrels, leading the operator Shell to declare force majeure.

“The reason Nigeria is unable to meet its OPEC production quota is not because of low investment but because of theft, pure and simple! Meanwhile, oil-producing countries are smiling as their foreign reserve is rising. What is Nigeria’s problem? We need to hold our leaders more accountable!”

Although the problem has not been fully solved, there appears to be some progress.

Speaking with Financial Times, recently, Elumelu expressed optimism, saying, however, that oil thieves still take away 18 per cent of crude from the previous 95 per cent.

In resolving the menace of oil theft, Lokpobiri, recognising the necessity of a coordinated response, under the leadership of President Bola Tinubu assembled a high-level delegation for a physical assessment of the battle against crude oil theft on August 26, 2023.

They included: National Security Adviser Mallam Nuhu Ribadu; Minister of Defence, Minister of State for Petroleum Resources (Gas), and the Permanent Secretary of the Ministry of Petroleum Resources.

Also present were the Chief of Defence Staff, the Chief of Air Staff, a representative of the Chief of Army Staff, the Commander of Operation Delta Safe, a representative of the Director General of the Department of State Services (DSS), and the Special Adviser to the President on Energy.

This collaborative effort aimed to address the multifaceted challenges plaguing the oil industry and enhance security measures in the Niger Delta, seems to have since borne fruits.

Also co-opted into the team was Mallam Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), Mr. Bala Wunti, Chief Upstream Investment Officer, among others.

The stronger collaboration with local security groups like Tantita Security Services Limited, has also been critical in curbing the menace.

To further reduce oil theft, the minister of state, announced recently that the federal government had awarded contracts to ensure the full metering of Nigeria’s 187 oil flow stations as well as a software to track the movement of Nigeria’s oil in the high seas.

“As part of our steps to ensure that we have proper accountability, the Federal Executive Council (FEC) approved the metering of all our production. And we have 187 flow stations in the country, littered across the Niger Delta area, so that we will be able to properly account for what we produce and what we export,” he said.

Investment Commitments of over $20bn

Although it hasn’t been fully realised, there are now signs that investments will begin rolling in soon. Lokpobiri said the federal government was targeting a $20 billion investment in the oil sector because of the reforms that have taken place in the last year.

Lokpobiri said that there had been significant improvements in the oil sector in the last year, stressing that even major IOCs were showing interest in investing in Nigeria.

He noted that the oil companies had confirmed that they were not leaving Nigeria, but only moving offshore.

The Minister said: “As I am speaking, there is a company that will soon announce an investment of $10 billion in Nigeria, while another will invest $5 billion. We have created an enabling environment, that is why companies like Total Energies are showing interest and Schlumberger is also coming back and they have a programme to drill up to 100 wells.”

He said the reason why the Nigerian oil sector had suffered over the years was because of the unfriendly environment and that for over 12 years there had been no serious investment in the sector.

“By resolving conflicting issues and fostering a more consistent policy and business-friendly environment, we have made significant strides in attracting and sustaining investments in the sector.

“The business-friendly efforts of this administration have rekindled investors’ confidence in our oil and gas sector and ensured the return of companies such as industry service providers who had earlier seized or greatly reduced operations on our shores due to the unfavourable business climate.

“For example, we have met one-on-one with SLB’s global CEO, who further solidified their commitment to Nigeria,” he added.

He said the government has been working to eliminate the bureaucracies and bottlenecks that have stifled investment for over a decade by resolving conflicting issues and fostering a more consistent policy and business friendly environment.

He explained that there has been as extension of oil prospecting licenses to technically and ﬁnancially capable indigenous and international companies all geared towards increasing production.

Resolving Conflicts Among Operators, Communities

The perennial conflicts among operators as well as with host oil communities has always been a problem for the industry. But even that is being sorted out by the ministry.

“We have embarked on continuous engagement with IOCs and Independent Petroleum Producers Group (IPPG) members in resolving industry disputes towards increasing production Resolutions of internal joint venture contracts feud between joint ventures partners on critical productions ﬁelds.

“We are engaging local communities with critical assets running through them to protect the assets all in a bid to decrease oil theft in the country. We are consolidating existing security framework with private security firms and government security agencies for pipeline surveillance, which led to sharp decline in crude oil theft and thus increased production for export.

“During this period, we also experienced the coming on stream of OMLs 13 (Sterling Exploration) and 85 (First E&P), with the respective assets reaching first oil in the development of their licenses.

“These assets are expected to produce an average of 20,000 and 40,000 barrels per day respectively. One of our main objectives has been to create an environment where investment can thrive. For over a decade, the non-passage of the PIA and inconsistent policies had driven investments away,” the minister said recently.

Nigeria Discovers New Blend of Oil

Under the sector driven by the ministry of petroleum, Nigeria has announced the introduction of Utapate crude oil blend, a new crude grade into the international oil market.

Located offshore Akwa Ibom State in Nigeria, Utapate’s current crude oil production is at 28,000 barrels per day, with potential to increase it to 50,000 bpd.

What makes it a major stride for Nigeria is that the sulphur content of the new crude is just 0.0655 per cent. Earlier, the government announced the launch of Nembe crude oil.

Although not yet Uhuru given the challenges in the sector, what has become clear is that decisions are being taken to solve the many problems besetting the petroleum sector.