Oil - flickering signs of hope.

Author:Thompson, Jato
Position:Brief Article
 
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There are flickering signs of a recovery in the country's oil and gas sectors. After years of inadequate funding, low exploration and a persistent national fuel scarcity, the sector is stable but its condition remains critical.

But industry experts warn that any rally is likely to be weak because of the absence of fundamental reforms, incessant communal crisis and corruption in the sector.

Nevertheless, exploration has picked up, rising to 12 exploration rigs last July - the number was as low as three last year. Of more immediate importance to Nigeria's beleaguered motorists, the long queues of vehicles waiting at petrol stations for scarce fuel are gradually disappearing.

Poor funding at the root

Officials say the fuel shortage and the reduction in exploration activities over the last five years were largely due to inadequate funding of the sector. The upstream segment of the oil sector, for instance, was severely under-funded, with its budget pegged at $2bn (N89.76bn) yearly between 1994 and 1998. This was about 33% below the $3bn required to fund the Federal Government's 57% participating interest in seven oil prospecting joint ventures. Executive Chairman of Mobil Producing Nigeria Unlimited, Paul Caldwell, confirmed that the operating companies, at the peak of the cash squeeze had to reduce operations, drop services on drilling rigs and some service contracts and defer spending on selected capital projects.

The situation was worsened by regular defaults in the release of the government's budgetary allocation. Officials, however, say funding to the sub-sector has improved since the beginning of this year thus encouraging an upsurge in activities.

The Minister of State for Finance, Chief Jubril Martins-Kuye, confirmed that the new civilian government has made regular and full payment of its contribution. "The joint venture cash call is simply a technocrat's word for working capital. It is all the money that all partners in the venture have to put on the table in order to make sure that we take oil from the bowel of the soil," he explained.

The executive vice chairman of Mobil, Otunba Solomon Oladunni, also acknowledged the improvement in the government's payment but added that a $1.6bn (N151.80bn) debt owed to the operating companies was still outstanding.

Real momentum is yet to be built up and that is reflected in the number of wells drilled. "We still have a lot of cash arrears and Mobil's share is in excess of $300m. Once you are...

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