The
Action Congress of Nigeria (ACN) has alerted the nation to an impending
collapse of the Nigerian economy, unless the Federal Government cuts the
astronomical cost of running a bloated government and takes urgent measures to
diversify the economy and shore up the production of oil, which remains the
mainstay of the country’s economy.
In
a statement issued in Lagos on Sunday by its National Publicity Secretary,
Alhaji Lai Mohammed, the party warned that if the listed measures were not
taken, the government may not be able to pay its bills, including workers’
salaries, within the next few years.
"Contrary
to what the FG may say, this warning is not about crying wolf but is actually
borne out of a patriotic fervour devoid of politicking, which is the usual
refrain of this government when alerted to its shortcomings,” it said. "We will
like to be proven wrong, but this will depend on uncommon and monumental
effort, rather than on the basis of the usual canned response from the
government.”
ACN
said the red alert was based on four empirical evidence: The cost of oil
production which has skyrocketed from 4 dollars per barrel in 2002 to 35
dollars presently; the massive corruption in the oil sector, with oil theft and
sabotage leading to lost production and costing Nigeria some 6 billion dollars
annually in crude theft; the sharp fall in the discovery of new oil and gas
reserves due to the low investment in the sector, and the most serious of all,
the challenge posed by alternative sources of global supply of oil and gas.
The
party said the cost of oil production rose from only 4 dollars per barrel in
2002 to 7 dollars per barrel in 2005 and, from the 12 dollars per barrel at the
onset of the Yar’Adua/Jonathan Administration
in 2007 to 35 dollars per barrel in 2012, according to the just-concluded
Nigeria Oil and Gas Conference in Abuja, where the mind-boggling cost hike was
attributed to the cost of security in the Niger Delta (put at 16 dollars per
barrel), it said.
"In
other words, the gains recorded from ending militancy in the Niger Delta due to
the Amnesty Programme have been wiped off by the cost of maintaining the
‘peace’. Here is how Shell Nigeria MD, Mutiu Sunmonu, described the situation:
‘Operating in the Nigerian oil and gas environment can be long and tortuous
with costs at the high end of the global scale. There are a multitude of
security related issues that have to be dealt with on a daily basis'.”
"In
the recent past, militancy has simply been replaced by INDUSTRIAL SCALE oil
theft and sabotage (emphasis ours). We, and others, have had to shut-in
significant production; spend huge amounts on replacing and repairing hardware
and deploying massive resources to clean up spills”.
On
the discovery of new oil and gas reserves, ACN said the disastrously-low level
of exploration activity in Nigeria is supported by the statistics released by
the US Department of Energy for deepwater discoveries from 2009 to 2011 in
which Brazil alone contributed some 40 new discoveries or 20 percent of the
global total, US and Australia contributed 10% each, countries like Ghana
making nine new discoveries or 5% of the global total, while Nigeria had only 4
discoveries or 2% of the global total during this period.
This
paltry discovery of new oil and gas reserves is due to the low investment in
the sector, which needs to attract 15 billion dollars annually in capital
investment, up from the present 3 billion dollars, in order to remain a
significant global oil supplier and a respected player in OPEC, the party said.
It
said, however, that all those challenges pale into little significance when
placed against the challenge posed by alternative sources of global supply of
oil and gas seriously – that is Shale oil and Shale gas!
"Here
are the facts: The US has more than doubled its estimates of recoverable
domestic Shale-gas resources to some 827 trillion cu. ft. (23 trillion cum),
more than 34 times the amount of gas the US uses in a year. Together with
supplies from conventional gas sources, the US may now have enough gas to last
a century at current consumption rates.
"Last
month, the agency released a similar announcement in respect of Shale oil to
the effect that California’s valleys alone hold as much as 15.4 billion barrels
of Shale oil, which companies were hitherto unable to reach because the oil
exists in pockets of rock that were expensive to reach before the present
advancements in tracking technology. Similar announcements are being made in
Europe and parts of Asia.
"For
the first time in nearly a decade, the US has regained the position of being
the world’s largest producer of natural gas and soon also oil. Thus, in less
than five years, the US has gone from seeking new sources of oil and gas
overseas to being self-sufficient. Industry experts believe that Shale oil and
Shale gas will revolutionize the industry—and change the world—in the coming
decades. It will prevent the rise of any new cartels and alter oil geopolitics.
"The
announced objective of the US Government is to drive down oil prices from the
current 100 dollars per barrel to 50 dollars per barrel within 2 years. If this
happens, which is very likely in view of the alternative sources, Nigeria, with
a cost of production of 35 dollars per barrel,would immediately go out of business,
with dire consequences for an economy that thrives largely (if not solely) on
oil,” the party said.
It
said the signs of imminent trouble are already visible for those who are
willing to see: The Brass LNG Project is unable to take Final Investment Decision
(FID) because of the collapse in the US LNG market and rising costs; and a
similar situation faces the Olokola LNG Project.
ACN
therefore called on the Federal Government to put on its thinking cap in order
to rise to the challenges listed above and save Nigeria’s economy from
collapse, adding that any delay could mean that those in charge of the
country’s affairs would not have enough time to change course as the ship of
state heads for the rocks.
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