Saudi Energy Minister Prince Abdulaziz bin Salman has said that stakeholders who tell investors to invest but don’t want them in 7 or 10 years are calling for underinvestment in the oil sector. He highlighted the fact that the oil sector needs sustainable stability to allow markets to function.
He stated this during a recent interview with Energy experts. According to him, industries need that stability to reach a level of certainty to invest in the oil sector. He said:
- “So, the idea of saying invest but in 7 years, we don’t want you or in 10 years, we don’t want you, you are actually telling them not to invest.”
Clearer policies
During the interview, he said the oil and gas market is going through a phase of uncertainties, which are being exacerbated by the lack of investments. He emphasized the need for clearer policies and guidelines that will attract investors to the oil sector. He highlighted the fact that investments in the oil sector require money and lots of effort.
He stated further that oil sector stakeholders owe it to industries to give time for their efforts to be monetized. He gave an example of the establishment of refineries, which could take up to 6 years to set up and will need to be active between 20 to 25 years to make business sense. According to him, there is a need for 15 to 20 fields to achieve the reality of a million barrels.
The Nigerian context
Nigeria needs to attract a lot of investments to increase oil and gas revenues and this statement from Prince Salman is a valuable lesson the government can learn, says Kayode Oluwadare, an oil and gas analyst. It is important for Nigeria to create an enabling environment for potential investors to operate, Oluwadare says.
In 2022, Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva quoted KPMG data, stating that between 2015 and 2019, only 4% of the $70 billion investment inflows into Africa’s Oil and Gas industry came to Nigeria even though the country is the continent’s biggest producer with the largest reserves.
What you should know
The country has struggled to attract enough local and foreign investments into the sector. This has created a myriad of problems for the sector.
- One major problem is a decline in oil production and the deterioration of existing infrastructure. The lack of investment has also made it difficult for Nigeria to fully exploit its vast natural gas reserves and diversify its energy mix. Also, the government has also been slow to implement reforms that would make the sector more attractive to investors.
- Another challenge the country is dealing with is corruption and mismanagement. Nigeria has a long history of corruption in the oil and gas sector, with instances of embezzlement, bribery, and kickbacks. This has created a lack of trust among potential investors, who are often hesitant to invest in the sector.
- The security situation in Nigeria, particularly in the oil-rich Niger Delta region, has been a major deterrent to investment. Oil and gas facilities have been targeted by militant groups and criminal gangs, resulting in loss of production and damage to infrastructure.
Overall, Nigeria’s inability to attract sufficient investment into the oil and gas sector has hindered the country’s economic development and contributed to its ongoing economic challenges. Addressing these issues will be critical for Nigeria to fully realize the potential of its natural resources and diversify its economy.
