(Adds Shell statement)
By Libby George
ABUJA, Feb 13 (Reuters) - Cost increases and uncertainty in
Nigeria's crucial energy sector could lead to a 35% decline in
oil output over 10 years as companies delay investments in key
oilfields, consultancy Wood Mackenzie said in new research due
to be published on Friday.
In findings shared exclusively with Reuters, the company
warned that three deep offshore fields, which would generate
more than $2 billion a year for the government at peak
production, are likely to be delayed as companies put their
money in regions with better and clearer terms.
"Nigeria is going to enter quite a steep decline in
production," said Lennert Koch, principal analyst of sub-Saharan
Africa upstream with Wood Mackenzie. "In order to keep its
revenue up...it needs to develop additional fields."
Without the three fields, Koch said Nigerian production
would drop 35% within a decade.
Nigeria is Africa's largest oil exporter, with output close
to 2 million barrels per day (bpd), but it needs continual
investment to maintain output as fields naturally decline. Oil
accounts for 90% of Nigeria's foreign currency earnings.
Wood Mackenzie delayed its projected startups for the
deepwater projects Bonga Southwest Aparo, operated by Shell, and
Preowei, operated by Total, by two years to 2027 and 2025
respectively, and for ExxonMobil's Owowo by four years to 2029.
Total said Preowei is under study with a final investment
decision scheduled for 2020 or a year later. Shell's Nigerian
unit said they are in discussions with government and venture
partners on "options to ensure the attractiveness of Nigerian
deep offshore investments."
Exxon did not immediately respond to a request for comment.
Together, the deepwater fields hold an estimated 1.5 billion
barrels of oil, and could add 300,000 bpd of oil.
Wood Mackenzie cited changes to tax and royalty laws and
uncertainty over oil reform as the main reasons for delays,
although it also estimated that the three projects are "not
economically viable" under current terms, and with oil under $60
per barrel.
In November, Nigeria boosted its share of deepwater oil
revenues in an effort to add some $1.5 billion to coffers in two
years, and last month enacted a finance bill increasing the VAT
rate from 5% to 7.5%. Koch said companies are also wary about whether terms of
development will change, as the government has promised to pass
a bill overhauling the oil sector this year but has yet to
release any details. Offshore oil projects are expensive and time-consuming but
key to boosting Nigeria's production. Its deepwater output has
grown from nothing at the beginning of the century to 780,000
bpd in 2019. "These are still world class resources," Koch said. "What
makes some of the other regions more attractive is just higher
returns (from) lower costs and less regulatory uncertainty."