The future does not belong to oil despite the fact that 90 per cent of Nigeria’s foreign exchange and 86 per cent of its total export earnings derive from oil.
In its latest Nigerian Oil and Gas Industry Annual Report, the Department of Petroleum Resources (DPR) confirms that Nigeria’s crude oil deposit will be exhausted in roughly five decades from now.
This view is premised on the nation’s Reserves Depletion Rate, standing at 2.04% per annum.
If oil is explored at this momentum, Nigeria’s primary source of income will cease come 2067.
Yet, this grim end may come too early if oil is exploited at a greater rate and this is hugely probable considering that Nigeria may resort to a bigger oil production if its volatile economy faces a sweeping crisis that upsets that balance in the medium term.
“The Nation’s depletion rate and life index are 2.04% and 49.03 years respectively. These parameters lie within the long-term range.
“However, to achieve the aspiration of the Federal government of 4MMBOPD daily production and reserves of 40MMMB, there is the need for corresponding increase in reserves as production is increases, otherwise, the life index will fall from a sustainable long-term threshold to a less futuristic and sustainable medium to short term range, “ the document says.
The nation’s Oil and Condensate Reserves is shared across various contract types namely Joint Venture, Production Sharing Contract, Sole Risk and Marginal Field.
Of this four, the Joint Venture, which is constituted by international oil exploration companies such as Mobil, Chevron and Total, is the highest production rate of nearly 41.64%. Interestingly, it has a low depletion rate in the neighbourhood of 1.8% and a high life index of 56.34 years.
The Production Sharing Contract, making up 36.08% of Nigeria’s total oil output, has the lowest life index of 32.15 years and the highest depletion rate currently 3.10%. Succinctly put, it poses the biggest threat to Nigeria’s oil future at its current production rate.
The Sole Risk, presently responsible for 20.14% of the national production, maintains the lowest depletion rate of 1.5% at the same time the highest life index of 65.49 years.
On its part, the Marginal Field contributes 2.14% to the nation’s production basket at a 2.7% depletion rate while maintaining a life index of 36.83%.
Beyond the fiscal challenge Nigeria faces from acute oil depletion lies the external vulnerability in the potential monumental fall in national oil revenue in the years ahead.
As developed and emerging economies warm up for a large-scale migration from gasoline-powered cars to electric cars, shrinking patronage from some of Nigeria’s oil partners like the US, India, Brazil, Spain, France and the Netherlands may eat away at government’s revenue voraciously.
Currently, electric cars are having their moment, no thanks to a growing global patronage, spurred in part by the massive campaign for the invention in the West.
Apart from the peerless benefit of offering renewable energy, electric cars easily promote the global massive campaign for environmental friendly initiatives; they are famous for not emitting carbon.
And, of course, there is the ever-present negative factor of volatility in oil prices, which have been on a free-fall lately with Brent Crude (the international benchmark for Nigeria’s Bonny Light) tumbling from $70.74 per barrel to $57.26 in barely six weeks.