the United States has ceased, some
stakeholders are expressing concerns
over the broad impact of this on the oil &
gas industry and the Nigerian economy
at large; given the size and position of
US’ patronage of Nigerian oil.
As a background, this development can,
at least in part, be attributed to the Shale
Oil and Shale Gas revolution in the
United States. New breakthroughs in
technology – such as hydraulic fracturing
and horizontal drilling – have enabled
energy producers to tap previously
inaccessible shale oil resources, which
has led to a Shale boom in the country,
thereby reducing its import and overall
dependence on oil imports.
Shale oil is a relatively new type of crude
oil, known also as kerogen oil or oil-shale
oil. It is an ‘unconventional’ oil
produced from oil shale rock fragments
by pyrolysis, hydrogenation, or thermal
dissolution. These processes convert the
organic matter within the rock (kerogen)
into synthetic oil and gas. The resulting
oil can be used immediately as a fuel or
upgraded to meet refinery feedstock
specifications by adding hydrogen and
removing impurities such as sulfur and
nitrogen. The refined products can be
used for the same purposes as those
derived from crude oil. Global
technically recoverable reserves of shale
oil are estimated by the EIA at 345
billion barrels and 21% of these lies in
the United States of America.
Over the past five years, U.S. oil
production has soared, while oil imports,
especially from OPEC members fell
significantly. A development which,
according to the Nigerian Minister of
Petroleum Resources and her other OPEC
counterparts, was of “grave concern”.
But then, as impactful as this
development is, should it cause panic
about the immediate, short, medium and
long term economic potentials of
Nigeria? One would argue not.
The loss of American patronage for
Nigerian oil is not really the issue. In the
short term, Nigeria will simply source
new markets for its oil. There are
promising new and existing markets to
explore. (See table below for
consumption pattern of some selected
countries). Argentina recently ordered
for a consignment of Nigerian Bonny
Light. The sustained situation in the
Middle East (with subsisting sanctions on
Iran) will continue to turn India and
other Asia patrons towards Nigeria.
However, the immediate worry to
Nigeria, as well as other OPEC countries,
would be drop in oil prices. Typically,
the response would be a cut in
production to shore up prices, but in the
long run, drop in volumes, even at
shored up prices, will still lead to
reduced revenue and does not really
assuage the concerns.
Given the present importance of this
sector to the Nigerian economy, a
broader value chain enhancement
strategy would be required for the long
term, and the country is already looking
into this.
According to the Petroleum Minister “…
Nigeria must adopt new strategies. We
must change our ways and policies that
we may hold dear which may cause us
economic stress in the future. This
market called shale oil and gas has
resulted in Nigeria seeking new markets
for its oil. Nigeria needs to be
economically competitive. And from the
end of the petroleum sector, Nigeria
needs to be energy competitive…”
The question is: to what level would we
explore ‘energy competitiveness’?
It is important to look into ways of
facilitating “in-country energy value-
add” as opposed to direct lifting of
crude. This is why the passage of the
Petroleum Industry Bill (PIB) would be
crucial at this point.
In-country energy value-add starts from
refining, gas utilization, and other spin-
off sectors from oil & gas, such as
petrochemicals. This is because, while
the impacts of Shale Oil development can
be mitigated in the short to medium
term, there is a need to be aware of its
long term implications.
Really, the emergence of Shale Oil should
not be a thing of fear. It presents both
strategic opportunities and challenges
for the global oil and gas industry.
According to PriceWaterHouseCoopers
(PWC) in their 2013 Shale oil report, “Oil
producers, for example, will have to
carefully assess their current portfolios
and planned projects against lower oil
price scenarios. Lower than expected oil
prices could also create long-term
benefits for a wide range of businesses
with products that use oil or oil-related
products as inputs (e.g. petrochemicals
and plastics, airlines, automotive
manufacturers and heavy industry more
generally).”
Nigeria could also look into its own Shale
reserve exploration. According to
BusinessDay (2013), research has shown
that mid-cretaceous oil shale deposits
exist in the Lokpanta area of the
Abakaliki Anticlinorium, a depocentre in
the Lower Benue trough of Nigeria. The
reserves are estimated at 5.79 billion
tonnes with a recoverable hydrocarbon
reserve of about 1.7 billion barrels. If
proven, this would make Nigeria the
second African nation after Libya (with
26 billion barrels) to have Shale Oil
reserves.
Above all, the evolution in the oil & gas
industry ultimately calls for economic
diversification. Once again, the Federal
Government of Nigeria is on this
trajectory with efforts aimed at
diversifying the economy to reduce the
dependence on oil.
This is perhaps the real comforting news.
Already the rebased GDP shows reduced
influence of oil & gas in the economy,
although crude oil earning still
contributes over 80% of Foreign
Exchange earnings. As the National
Industrialization Policy is being
implemented, Nigeria will be able to
focus on other key ways to position in
the African market.


http://www.eczellon.com/impact-shale-oil-development-nigerian-economy/?utm_source=taboola&utm_medium=referral