PETAN Throws Weight Behind Drill-or-Drop Policy as Nigeria Eyes 3 Million BPD
The drill-or-drop policy requires companies awarded oil and gas licences to develop the assets within stipulated periods or risk losing them to the government.
According to the organisation, sustained investment in oil and gas production is critical to closing the gap between Nigeria’s production capacity and growing domestic refining demand.
PETAN Chairman, Engr Wole Ogunsanya, stated this on Monday at the association’s media roundtable in Lagos, themed “The State of Nigeria’s Oil and Gas Industry: Opportunities and Challenges”.
Ogunsanya said Nigeria must continue to develop its oil and gas resources regardless of fluctuations in international crude oil prices, particularly as domestic refining capacity expands.
He noted that the country currently produces about 1.7 million barrels of crude oil daily, while existing and planned refineries could collectively provide about three million barrels per day in refining capacity.
According to him, the Dangote Petroleum Refinery has a capacity of 650,000 barrels per day, while the Nigerian National Petroleum Company Limited’s refineries in Kaduna, Warri and Port Harcourt have a combined capacity of about 450,000 barrels per day.
He added that the BUA Group was building a refinery with a capacity of 350,000 barrels per day, while another proposed refining project could further increase the country’s capacity.
The PETAN chairman said the expansion of domestic refining presented an opportunity for Nigeria to increase crude oil production, stressing that the country needed additional investment in wells, surface equipment and pipelines to meet its production ambitions.
He noted that Nigeria had never produced more than 2.6 million barrels of crude oil per day, adding that inadequate infrastructure remained a major constraint to achieving higher output.
Ogunsanya said the country had the resources and market to sustain increased production but needed to address the gaps between its existing capacity and future requirements.
He also argued that the traditional boom-and-bust cycle in which oil production and investment decline when international prices fall should no longer define Nigeria’s petroleum industry.
According to him, domestic refineries will continue to require crude oil irrespective of international market conditions, making sustained production necessary even when prices are unfavourable.
“Whatever happens to the price of oil and gas in the near future, Nigeria must continue to produce oil and gas because we have got the refineries to feed, even if we are breaking even,” he said.
Ogunsanya said oil-producing countries that maintained investment in their petroleum industries during periods of low prices were better positioned to increase production when prices recovered.
He urged the government and industry operators to adopt strategic planning, sound governance and sustained investment to ensure that Nigeria could meet its production targets.
The PETAN chairman further disclosed that indigenous oil and gas service companies required about $6bn in equipment and hardware to support the country’s ambition of producing three million barrels of crude oil daily.
He said inadequate access to funding had constrained local companies from acquiring the rigs and specialised equipment needed to support higher production.
According to him, land drilling rigs could cost between $30m and $40m, while more sophisticated rigs could require investments of between $160m and $400m, depending on their specifications.
Ogunsanya, however, said financing initiatives involving oil-producing companies and banks could help bridge the funding gap and strengthen indigenous capacity.
He cited an agreement involving Renaissance Africa Energy Company and 13 banks to provide up to $4bn in financing for equipment acquisition by oilfield service companies.
Under the arrangement, he explained, companies with contracts from Renaissance could use the guaranteed payments to secure bank financing for equipment purchases, with revenue from the contracts supporting repayment.
He called on other oil-producing companies to adopt similar arrangements to help indigenous service providers acquire equipment and expand their capacity.
Ogunsanya also urged the Nigerian Content Development and Monitoring Board (NCDMB) to direct more of its funding towards equipment acquisition to support increased oil and gas production.
Beyond financing, he identified manpower development as another major challenge facing the industry, warning that the divestment of onshore and shallow-water assets by international oil companies had created concerns about the future training of Nigerian professionals.
He said multinational oil companies had historically played a significant role in training Nigerian engineers and developing their technical expertise.
However, with indigenous companies taking over more assets, he stressed the need for local exploration and production companies to establish structured training programmes to prepare younger professionals to operate the facilities.
The PETAN chairman said the association’s training initiative recruits about 100 engineers every two years and deploys them to member companies for practical experience.
He added that more than 60 per cent of the engineers were absorbed by PETAN member companies after completing the two-year programme.
Ogunsanya also disclosed that PETAN was working towards establishing a training centre in Rivers State to provide Nigerian professionals with access to facilities and practical training comparable to those available internationally.
He said the country could become a major global supplier of oil and gas professionals if it invested in training and developed the infrastructure required to build local expertise.
Speaking earlier, PETAN Publicity Secretary, Dr Joan Faluyi, said indigenous technical capacity must remain central to investment decisions and policies shaping Nigeria’s oil and gas industry.
Faluyi said the association’s members were directly involved in delivering the technical services required to translate industry investments and policy ambitions into practical results.
She noted that indigenous capacity extended beyond engineers to technicians, fabricators, young professionals and entrepreneurs who invest in facilities, develop teams and ensure the safe and reliable delivery of services.
According to her, the growth of indigenous oil and gas businesses has implications for employment, skills development and the value Nigeria retains from its petroleum resources.
