the Shale Shale in our Oil

Shale Gas, i.e. natural gas derived from share rock is probably more dangerous to Nigeria than Boko Haram, corruption and illiteracy put together. For every cubic metre of shale gas recovered and sold means one less barrel of oil sold by Nigeria to the US. Nigeria sells the bulk of her oil to the United States. Majority of the energy consumed in the US comes from fossil fuels i.e. oil. In 2009, the Energy Information Administration EIA data showed 37% of America energy came from petroleum, 21% from coal and 25% from natural gas. Nuclear power supplied 9% and renewable energy supplied 8%. The Economist reports that between 2005 and 2010, America’s shale-gas industry, grew by 45% a year. As a proportion of America’s overall gas production, shale gas has increased from 4% in 2005 to 24% today. The Economist reports that America produces more gas than it knows what to do with. Its storage facilities are rapidly filling, and its gas price (prices for gas, unlike oil, are set regionally) has collapsed. Shale production is projected to increase from 23% of total US gas production in 2010 to 49% by 2035. The maths is quite simple today, America energy comes from crude oil by 2035 it will be gas, not imported gas, but local shale gas. The implication? Nigeria will lose her biggest buyer of crude oil. Crude oil in 2011 netted Nigeria N6.816t in income (via crude oil sales, Petroleum Profits taxes, gas sales, Royalties,) and contributes the cream of our forex imports. If we lose the US, where will we sell our oil? Asia remains the biggest market but India and China are much further than Texas and the extra distance means Nigeria has to offer incentives (she already does) to crude buyers to import our low sulphur Qua Ibo crude. Also competition with clean gas will also reduce the markets we can sell our oil to. Already the Qatar gigantic LNG gas project which was built to supply America is now billed to go to Japan. No buyers mean no dollars, no dollars means we can’t print naira to spend. This means we can’t fund our police, polytechnics and politicians (wait, politicians that's a good thing right?). Ok now the bad news, it’s already started, the U.S. purchases of Nigerian crude fell to a five-year low in February 2012, already Nigeria can’t sell about 31 cargos of oil. If oil sales or price fall to $70, we are sitting ducks (consider that we import everything). For years we have put our prosperity eggs in one basket of oil and quite frankly the chickens are coming home to roost. Selling crude oil is cheaper and more profitable than selling palm oil. However, how many jobs does the oil and gas industry create? A few thousands how many does palm oil create? Hundreds of thousands. Nigeria got a seed in the form of crude but we have treated that seed like a harvest. It not yet curtains, Nigeria probably has 2 decades of selling crude oil before the combination of loss of North and South American markets (Brazil has a gigantic Salt oil fields), Asia (China has the greatest deposits of shale gas) conspire to take crude oil at $60 a barrel. The starting point is to go back to agriculture, then agro allied then manufacturing then services. To create a rich Nigeria, we have to create an educated Nigeria. Rural families, who are farmers, will only send their kids to school, if they get richer to afford school fees and buy mechanised farming equipment. Already agriculture employs 44% of the active labour force but we still do subsistence farm using the rainfall meaning for half the year almost half of the population are technically unemployed, thus poor. There can be no poverty elimination that will work unless it is built on the back of the agriculture. A good starting point is to repeal of the Land Use Act to get land cheaper and faster to the rural farmers and to pledge as collateral and attract credit from banks Land Reform is really more important than the PIB. The faster Nigeria opens up the agric space, eliminate subsidies and devolve powers to the states the better we are to withstand the shock that is coming. It’s our problem, we will solve it