FG expresses worry over rising crude oil prices

He said the high oil price was beneficial to the producing countries on the short-term but could be dangerous on the long-term.

According to him, high oil price is largely responsible for the failure of Shehu Shagari’s administration in 1983.

"Some of us recall the high price of oil when it was $40 per barrel. There was a lot of panic in the market and we quickly witnessed a cycle, which should be of concern to us today. The high price fuelled recession and reduction in crude oil demand and we saw a crash in demand. If you recall in 1983 when Shagari administration fell, one of the reasons that administration fell was because of lack of revenue to fund its programmes. We saw a reduction of price of oil from $40 per barrel to $10 and $9 per barrel in a very short space of time. This made the government to be unable to fund projects and programmes. So, I think producers should be cautious in identifying the trend and dealing with it. With $90-$100 per barrel today and the volatility we have seen in the last few months, it is especially timely to discuss the issue in a forum like this," he said.

The minister noted that there had been a lot of speculations on the possible causes of the rising price, warning that with predictions of $120 per barrel by international agencies, producer nations are on the road they have never been before.

"Some of the factors being speculated as driving the price are hedge fund, forward buying and inadequate refining capacity. But I think underlying these perhaps, is the inability of producer nations to provide sufficient oil in the market to meet rising demand.

The International Energy Agency (IEA) has predicted that oil will continue to play significant role in meeting global energy demand over the next five years. But the volume of oil required in the market could increase by 35-40-percent of what it is today, and that poses significant challenges," he added.

The minister stated that most of this demand will go into the transportation sector, as according to him, the number of vehicles on the roads globally is expected to increase from its present level of 700-million to over 1.2-billion, within this period.

This he said, could lead to a lot of fuel consumption. Ajumogobia also stated that industrial and residential use would also account for a significant portion of global oil demand.

He identified three conditions which must be met to address this situation.

The three conditions according to him include security and stability of the oil market, environmental consideration and perhaps, in the developing countries, sustainable development-using oil resources to develop other sectors of the economy.

In a key-note address, Basil Omiyi, managing director of Shell Petroleum Development Company (SPDC) and Country Chair Shell Companies in Nigeria , stated that the greatest challenge was how to meet energy demand by maintaining safety of supply.

He disclosed that according to Shell’s scenario, this demand will double by 2015, with China accounting for 30-percent.

According to him, oil, coal and gas will continue to dominate the energy sector despite the challenges of hydro and nuclear power.

Omiyi noted that Nigeria accounts for 10-percent of global proved oil reserves and eight percent of global proved gas reserves.

The country he said was the 12th world’s largest producer of oil and 8th largest exporter in 2006.

He challenged the country’s explorationists not to concentrate only on deepwater offshore and the Niger Delta basins.

According to him, five other basins- Chad, Anambra, Benue , Sokoto and Bida, are good sedimentary basins, which should not be ignored.

In his message, Emmanuel Enu, President of NAPE and exploration manager of Shell Petroleum Development Company (SPDC) traced the history of petroleum exploration in the country to 1908, when a German firm, Nigerian Bitumen Corporation unsuccessfully explored in the Araromi area of the present Ondo State .

He regretted that the enthusiasm that characterised deepwater exploration in 1993 when the first deepwater blocs were awarded had dwindled, due to the results from majority of the wells drilled in the outer trust bay, which turned out to be dry.

The NAPE President maintained that this prompted some deepwater operators to relinquish their blocs.

"It looks like explorationists have quickly forgotten that it took us over forty years from our initial exploration efforts on land before we hit the first discovery. It is therefore disheartening to note that less than 15-years of deepwater exploration, some IOC operators are beginning to vacate the deepwater scene," he said.