The Group Managing Director, Nigerian National Petroleum Company Limited, Mele Kyari, on Tuesday announced that the decline in the funding of oil investments had virtually led to a halt in the drilling of crude oil by operators in the sector except for the NNPC.

Kyari, who disclosed this while speaking at the ongoing 2022 Nigeria Oil and Gas conference with the theme, “Funding the Nigerian Energy Mix for Sustainable Economic Growth,” also announced that the President, Major General Muhammadu Buhari (retd.), would unveil the largest capitalised firm in Africa, NNPC Limited, on July 19, 2022.

This came as the Secretary-General, Organisation of Petroleum Exporting Countries, Sanusi Barkindo, declared that the oil sector was currently under siege going by the challenges confronting the industry. Over 80 per cent of Nigeria’s foreign exchange earnings come from oil sales.

Speaking on the challenges in the industry, the NNPC boss stated that though there were other concerns in the business, the issue with reduced funding had really impacted severely on the sector.

Kyari said Nigeria was number one in terms of oil reserves in Africa, adding that “we should be the number one producer of oil, but today we have our challenges, which my colleagues (earlier speakers) have pointed out.

“Yes, there are engagements going on and the support that we are getting from government security agencies and the leadership that the Minister of State is giving us to make sure we address this issue around security.

“But that is not only the problem we have. We have seen a clear natural decline that is happening in our industry today and this is real. And when such decline comes and you are not able to put money to put it back, no one is drilling today except NNPC by the way, and a few others.”

He added, “So if you don’t drill and decline continues, then you are not only going to see the effect of theft and other vandal actions that we are seeing today, you are also going to see the collateral effect of lack of investments.”

Kyari further explained that the lack of investments years before the outbreak of COVID-19 had started manifesting in the money supply in the market.

He charged participants at the conference to reset their financing strategy and urged operators and multilateral agencies to speak to themselves about this concern.

On the transition in the NNPC from a federal corporation to a commercially-driven limited company, the oil firm’s boss said, “On the 1st of July this year, we crossed over to become NNPC Limited both technically, financially, and in every aspect.

“And on July 19, 2022, Mr. President will unveil the NNPC Limited to all of us. The meaning of this to our industry is that you are going to have a partner of choice, a partner that will be the largest capitalised company in Africa.”

Commenting on the energy transition, Kyari said operators in the sector must look for money to grow the industry and Nigeria’s energy mix based on the realities being unfolded by the transition.

“We are seeing the great resistance across the globe on funding fossil fuels until something happened early this year,” Kyari stated.

He noted that the war in Ukraine proved to the world that it would be tough to proceed in the way and manner in which the energy transition concept was conceived.

“Therefore in every aspect, we do need to talk to each other, countries of the world need to speak to each other. And we are engaging with our partners,” Kyari stated.

He added, “We have agencies and multilateral institutions that are involved in energy transition and they should understand that in reality we must be supported and that support can come in two ways.

“One is to accept that gas will be transition fuel of choice. And that is the reality. Therefore that funding must come specifically for gas.”

In his address at the conference, the OPEC scribe corroborated the position of the NNPC boss as regards the drop in investments in the oil sector, as he revealed that the industry was currently under siege going by the many challenges besetting it.

Barkindo said, “Years of underinvestment in the oil sector help explain the current market tightness and razor-thin spare capacity margins.

“In OPEC’s 62-year history, spare capacity has never been as low as it is today, and this takes into account periods of war, natural disaster, and other market shocks. If this trend  continues, it could haunt us in the future.”

On the outcome fallout of the challenges confronting the sector, the outgoing OPEC chief said, “Our industry is now facing huge challenges along multiple fronts.

“And these threaten our investment potential now and in the longer term. To put it bluntly, the oil and gas industry is under siege!