LAGOS, Sep 08, 2005 (Dow Jones Commodities News Select via Comtex) By Vincent Nwanma Of DOW JONES NEWSWIRES
As doubts rise over Nigeria's ability to meet crude oil reserve and production targets set by the country, the government and oil explorers have disagreed over the realization of the targets.
The doubts came as operators revealed that the rate of reserves addition was slowing down because of decreased exploration and low commercial finds in new fields.
Meanwhile, the government and industry operators this week began talks on the design of a new Memorandum of Understanding to govern relationships between state and operators in the oil and gas industry.
The Nigerian government restated Thursday the country's ability to realize the target of 40 billion barrels reserves by 2010, and a production rate of 4 million barrels per day by the same date.
"The targets can be achieved," said Sunday Afolabi, Chief Petroleum Engineer at the Department of Petroleum Resources, regulator of Nigeria's oil and gas industry.
Afolabi represented Tony Chukwueke, head of the DPR, at a seminar on challenges facing Nigeria's oil and gas industry, Thursday.
Stressing that "crude oil production is a function of many factors," Afolabi said Nigeria could achieve the target through work-over programs on dormant wells, among others.
"There are several wells that have been shut down over the years as a result of community problems," he said.
Protests by host communities have led to the shutting down of many oil facilities by companies, which are forced to abandon the locations in preference for others.
Nigeria's crude oil reserves currently stand at about 35 billion barrels, while the country's production is about 2.4 million b/d.
But the Nigerian Association of Explorationists warned Wednesday that the country was in danger of not meeting the objectives.
The explorationists said Nigeria was producing crude from the inland shelf but was not doing enough exploration area, to replace reserves depleted by production.
They observed that while Nigeria had added about 6 billion barrels to its reserves within 10 years, the country hadn't added up to one billion barrel of crude in the past year.
Also speaking Thursday at the seminar, Tunde Afolabi, head of an indigenous oil company, said there had been no commercial find of crude oil in any of the blocks awarded by the government in the 2000 Licensing Round.
Blocks awarded during that exercise were located in different zones, including the deepwater region.
The explorationists argued Wednesday that many of the operators now moving into the deepwater are doing so to escape community problems associated with onshore production.
The talks on a new MoU are expected to produce a new agreement to replace the existing one formulated in 2000.
Under the existing MoU, the government takes all the revenue above $30/barrel.
"At the time the MoU was being crafted, nobody believed the price of oil could reach $30/barrel, let alone surpass it," said an official of an oil major Thursday.
The official said although the price of oil is much higher currently than the benchmark price in the existing document, the current provision should be retained.
"In a cyclical industry such as this, we know that prices would always go up and come down," said the official.
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