Seplat Petroleum Development Co., a Nigerian oil producer that just bought assets from Chevron Corporation is thinking of deferring some oil investments in Nigeria but would be expanding gas output to survive low crude prices.
According to Seplat Chairman Ambroise Orjiako, We are looking very strongly to compensate for the revenue drop by increasing gas production.
There will also be “a lot of tightening” with the company deferring “non-essential” capital projects, Orjiako told Bloomberg TV Africa broadcast..
Seplat currently pumps about 70,000 barrels a day and is on course to meet its target of 85,000 barrels a day by next year.
Small Nigerian oil companies pumping less than 100,000 barrels per day, have seen their revenue eroded by the more than 50 percent drop in crude prices since they peaked in June last year, analysts including Pabina Yinkere of Vetiva Capital Management Ltd said.
They are further squeezed by higher production costs of about $30 for a barrel, compared with $15 a barrel for bigger oil companies such as Royal Dutch Shell Plc and ExxonMobil Corporation.
Seplat expects to double its gas-processing capacity to 280 million cubic feet per day by the end of first quarter when it completes expansion projects, Orjiako said.
This would enable the company take advantage of higher domestic gas prices of $2.50 per thousand cubic feet approved last year by the government.
Nigeria, which holds Africa’s biggest natural gas reserves of more than 180 trillion cubic feet, is building the pipeline infrastructure to supply power stations across the country of more than 170 million people.
Seplat is stepping up acquisitions to increase its assets base, optimize production and lower output costs, according to Orjiako.
The company early february announced it had bought two oil licenses from Chevron Corp.
U.K.-based explorer Afren Plc at the weekend said it ended merger talks with Seplat after failing to agree on an acceptable offer.
“If we get assets that fit where we’re looking for in the onshore or shallow waters, that are in production or near production, at the right price, we’re going to go for them,” Orjiako said.
Seplat Petroleum will add at least 600 billion cubic feet of gas and about 70 million barrels of oil reserves to its portfolio following the transaction it concluded with Chevron penultimate week to take over oil mining leases 53 and 55, according to Orjiako.
By Yemisi Izuora