The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has reported a significant drop in Nigeria’s total annual upstream capital expenditure. According to the Commission, the expenditure has decreased from $27 billion in 2014 to less than $6 billion in 2022.
Speaking at the World Petroleum Congress in Calgary, Canada, Gbenga Komolafe, the Chief Executive of NUPRC, highlighted that this decrease represents a 74% decline in capital expenditure (CAPEX). Mr. Komolafe attributed this decline to various factors, with regulatory uncertainty playing a significant role in impacting investment in Nigeria’s oil and gas industry.
Mr. Komolafe further emphasized that the years leading up to the enactment of the Petroleum Industry Act also had a negative effect on industry investment. He noted that the defunding of fossil fuel development due to energy transition and the global call for decarbonization were additional contributing factors to the decline in CAPEX.
Furthermore, Mr. Komolafe highlighted that most International Oil Companies (IOCs) deprioritized Nigeria in their investment portfolios, resulting in a redirection of capital expenditure to other countries. This, in turn, led to a reduction in investment in Nigeria’s upstream sector.
Efforts to Revitalize the Upstream Sector
The NUPRC boss stated that the country’s rig count was negatively affected by under-investment. He mentioned that Nigeria had an average of seventeen active oil rigs in 2019, one of the highest counts in Africa at the time. However, the average rig count declined to eleven in 2020 and further dropped to seven in 2021. The recent increase to 31 rigs in August 2023 indicates positive signals of new investments entering the country’s upstream sector.
Mr. Komolafe identified the relatively high crude oil prices as one of the factors contributing to increased activity in the petroleum upstream sector. He also acknowledged that investors’ acceptance of the Petroleum Industry Act and its effective implementation by the regulator played a role in the sector’s rejuvenation.
Looking ahead, Mr. Komolafe expressed optimism about the projected outlook for the Nigerian upstream sector and the regulator’s commitment to attracting more investments. He stressed the importance of leveraging this opportunity to revamp the sector.
The Petroleum Industry Act has played a significant role in repositioning the Nigerian petroleum sector. The Act has established efficient and effective governing institutions with clear and separate roles for the industry, according to the NUPRC boss.
NAN
