Stakeholders allay fear over interest of U.S., others in shale oil

[TGD]

• 'Nigeria can offer new product'

DESPITE the rising interest in the production of shale oil in the United States (U.S.) and other countries, it may not adversely affect Nigeria's position in oil export business, according to stakeholders.

Besides, the country's potential to produce the shale oil has also been established despite its current higher relative cost of production.

Oil shale, also known as kerogen shale, is an organic-rich fine-grained sedimentary rock containing kerogen from which liquid hydrocarbons called shale oil can be produced.

Shale oil is a substitute for conventional crude oil. However, extracting oil from shale is costlier both financially and in terms of its environmental impact than the production of conventional crude.

Deposits of oil shale occur around the world, including major deposits in the U.S. Estimates of global deposits range from 2.8 to 3.3 trillion barrels (450×109 to 520×109 m3) of recoverable oil.

Shale oil gains attention as a potential abundant source of oil whenever the price of crude oil rises. At the same time, shale oil mining and processing raise a number of environmental concerns, such as land use, waste disposal, water use, waste-water management, greenhouse-gas emissions and air pollution. Estonia and China have well-established oil shale industries, and Brazil, Germany, Russia also utilise oil shale.

The Nigerian Association of Petroleum Explorationists (NAPE), International Energy Agency and Ernst & Young believe that the discovery of shale should not be a source of worry to Nigeria.

In fact, some of the oil multinationals in Nigeria believe that the market would still be intact for them, despite the alternatives of shale gas that may be available to their traditional market.

Sources in some of the oil companies said they were proud of Nigerian grade, the sweet crude which has been categorised as one of the best offers in the international market.

A top official of an oil multinational that prefers anonymity explained that sweet crude is one of the best in the world and easier to refine, hence the necessary priority given to the product.

He said: "Our traditional customers may have alternative sources, but the quality of the products will always be there. Besides, the need for energy is a global phenomenon so it is not segmented to a certain country or a particular customer. There may be alternatives such as shale oil, but I must remind you that our product is easier to produce and easier to refine, compared to heavy crude."

Another source from a separate oil firm, who registered his displeasure over the trend in the sector, particularly on the delay in the passage of the Petroleum Industry Bill (PIB), believed that Nigeria could only create problems for itself, if things were not put right.

He allayed the fear of a likely adverse effect of shale oil on Nigeria's export but urged that the Federal Government must always put the industry in the right direction.

"Shale oil is not really a problem to Nigeria. Losing United States market does not mean the nation could not exploit other markets. Demand for energy is growing worldwide and we can always get markets to fit in, depending on how we position the industry," he said.

Specifically, NAPE, which revealed the level of shale oil deposit in Nigeria to The Guardian recently, believed that the hydrocarbon would not be commercially viable in Nigeria due to its high cost of exploration.

President of NAPE, George Osahon, told The Guardian that the country should not fret over the exploitation of shale oil in the U.S., as the country could boast of the hydrocarbon in large quantity, but would do better in exploiting the conventional oil.

Osahon stated: "The discovery of shale oil is all over the world, but the United States is the country, which has actually started the production of the commodity. Anything that happens in any part of the world in respect to energy, must affect the global energy mix.  For me, there is nothing to worry about concerning the discovery of shale oil. Nigeria should not fret over this new way of oil exploitation.  In fact, we should be worried finding out way to continue to be relevant in the global oil market.

"Don't forget that when it comes to oil and gas, we have not fully exploited what we have in the country.  We have so many basins in Nigeria, which have not been exploited.  We have shale oil in Nigeria, which can be exploited, but the question is 'what is the cost of exploiting a barrel of shale oil compared to the cost of exploiting conventional oil?'  What we need to do is to concentrate on exploiting the conventional oil, which is cheaper, before going into the exploitation of the more expensive shale oil."

Director, International Energy Agency, Maria van der Hoeven, said recently that new crude oil output from shale beds in North America would improve global energy supplies, but the importance of OPEC would not diminish as demand from developing countries was growing.

"Given the known resources in OPEC, the importance of OPEC will not diminish, definitely not, but trade routes will change," Hoeven said.

This assurance might allay the apprehension of Nigeria (an OPEC member) over a likely threat to its export base.

The IEA scribe said that OPEC nations remained the world's biggest producers, and while North American demand for imported oil would fall, demand from developing countries in Asia like China and India would continue to grow.

According to Hoeven, Shale oil's coming to the market complements the spare capacity held by OPEC, particularly Saudi Arabia, and this would make the market more comfortable than in the past few years "because the situation was rather tight...although the market was efficiently supplied, spare capacity was tight."

She suggested that the changing patterns now being seen in the global trade in oil would also apply to refined oil products.

"We foresee a radical change in the world energy map," she said.

Nigeria's crude exports were reported to have plunged to 1.873 million bpd in February from more than 2.2 million bpd in January, marking the lowest export volume since April 2009 when exports averaged 1.857 million bpd, figures published by the Joint Organisations Data Initiative show.

Ernst & Young also said that the discovery of shale gas in the U.S. and South Africa may not be a threat to Nigeria's gas export business.

Speaking at the Strategic Growth Forum in Lagos recently, Partner-Assurance, Africa Oil and Gas Sector Leader, Elias Pungong said that though many countries were embracing the exploration of shale gas, it would not impact adversely on Nigeria's gas export business.

According to him, Nigerian gas has been adjudged one of the best in the world, a fact, which many countries would find difficult to ignore.

Pungong therefore called for stronger policies that would encourage more investment in the oil and gas sector.

The Guardian