Modeling Crude Oil Production Outlook: A Case Study of the Oil and Gas Industry in Nigeria
In the past four decades, Nigeria has made impact on the global oil and gas exploration and production industry. As one of the lead exporters of crude oil and natural gas in Africa, an oil production model which tracks oil exploitation process is imperative to facilitate good national economic planning and industry strategy. The impact of technological advancement, policy incentives and economics can be estimated from such petroleum production model. This paper reviews historical crude oil production in Nigeria; develops an empirical model to describe and explain the competing factors underlying its production patterns. The production model equations are formulated; with a non-linear curve fitting method to estimate the Hubbert’s model parameters for Nigeria. The model is used to forecast future production outlook for Nigeria. At the currently estimated reserves of 37.2 billion barrels, the model results suggest that production rate should have peaked at 2.70 MMSTB/D in year 2010, and forecasted that the estimated ultimate recovery, at year end 2050, will be 65 billion barrels (~ cumulative production of 31.25 billion barrels up till 2012 plus current proven reserves of 37.2 billion barrels). It suggests that the nation had just produced 50% of its currently estimated proved reserves. The Hubbert model was accurate for forecasting US crude oil production, but its strict symmetry has received criticism from experts (Lynch, 2002) (Cavallow, 2004) (Iledare, 2000) who believe that the model underestimates future production which our experiences also confirm. We specified the nature of the errors which resulted in considerable deviations of production trends from the Hubbert model. We suggest however, alternative model for analysing the exploitation process in Nigeria in the form of successive curve re- fitting of Hubbert model to new production data from time to time to check the effect of new technology, economics or policy implementation on Nigeria’s crude oil production.