ABUJA, JULY 26, 2017 – Nigeria plans to cut its oil exploration costs and move away from reliance on crude for export revenues, according to a national petroleum policy approved by the federal executive council this week.
Africa’s largest oil exporter said it expects oil prices to stay near $45 per barrel “for the foreseeable future” and that it must diversify its economy and develop its own refining and petrochemical sectors.
“The most realistic line of action for any nation with oil as the backbone of its economy is to diversify, because indices strongly point to the possibility that the era of oil booms may be over for good,” the policy said.
The policy said Nigeria would aim to reduce the cost of extracting its oil, which at $29 per barrel is “one of the highest” in the world.
The 112-page policy document is an outline of what the government will look to include in the Petroleum Industry Bill (PIB), the sprawling legislative effort aimed at overhauling the OPEC members energy sector.
The senate passed one bill in May, but the House of Representatives has yet to act on it. The PIB has also been broken into several parts to aid its passage, with three to five more bills expected, including one to codify a gas policy agreed earlier this month.
The petroleum policy also calls for a regulator to oversee the oil industry, more private investment across the sector and the revival of Nigeria’s refineries, which have not operated consistently at more than 50 percent of capacity since 2002.
Oil “demand growth will markedly soften, except for the petrochemicals sector which is likely to be the main market for oil”, the policy states. “Nigeria has to move downstream into the value-added sectors of refining and petrochemicals.”
The policy also called for a removal of gasoline price caps and the permanent elimination of fuel subsidies.
Despite its ambition, analysts said the plan was lacking in detail and faced significant legislative hurdles.
“This policy offers a basis for legislation that would need to be approved, but it’s light on specifics. For some of the big ticket changes and goals proposed, there should more of be a notional road map,” said Aaron Sayne, senior governance officer with the Natural Resource Governance Institute, a non-profit group that advises nations on how to manage natural resources.
He said the PIB governance bill passed by the Senate was one of the most straightforward steps, and the bills to come, particularly any that propose changes to oil company revenues, would be far more challenging.
“The road for the others likely will be harder, particularly the one on fiscal terms”, which oil companies are likely to fight, Sayne said.