State-owned oil companies, including Nigeria’s NNPC, may face the risk of wasting $400 billion in Oil and Gas investments as the global energy needs to transition to other sources.
This was disclosed in a report by the Natural Resource Governance Institute (NRGI) titled, “Risky Bet: National Oil Companies in the Energy Transition,” as reported by Reuters on Monday.
“Over the next decade, NOCs could invest more than $400 billion (in 2021 prices) in oil and gas projects that will only break even if the world exceeds the global carbon budget.
“Most of this—more than $365 billion—is from developing and emerging economies, of which more than $80 billion is from low and low-middle income countries that receive international aid.
“This ‘Parisincompatible’ spending represents 22% of the total $1.9 trillion of capital expenditure that NOCs are projected to spend through to 2030.
“Over this period Rystad projects that the entire oil and gas industry will spend $4.6 trillion in capital expenditures,” the report stated.
The report added that state-owned oil companies may end up spending this amount on high-cost projects that could fail to make a substantial return.
“By investing in these risky projects, their governments and their public will have lost the opportunities to invest in areas of the economy that could generate jobs, economic growth, and development.
“The report highlighted that the failure of state-owned oil companies matters most for countries very dependent on their revenue including Algeria, Angola, Mozambique, and Nigeria.
“The prospect of structural decline poses particular challenges in their roles investing in commercial projects and spending public revenues in the upstream”
What you should know
- Nairametrics reported in November 2020 that the Nigerian National Petroleum Corporation (NNPC) claimed it cut its losses within one financial year by N800 billion. According to the NNPC GMD. Kyari, the corporation improved efficiency by cutting its losses by 97% within a financial year.
- Nigeria Liquified Natural Gas Company, NLNG, paid the Federal Government a dividend of N144 billion in the fiscal year ended December 2020.