Group photograph of speakers at NAPE 33rd Pre-conference Workshop held in Lagos.
-Felix Douglas
As the 42nd Nigerian Association of Petroleum Explorationists (NAPE) annual and international conference commences from November 10-14, it had a pre-conference workshop to dialogue on issues bothering the industry.
In his opening address, Dr. Abiodun Ogunjobi, President of NAPE reiterated that the pre-conference with the theme Leveraging Divestments and Local Content Capacity to Enhance Nigeria’s Oil and Gas Industry: Challenges and Opportunities will thrash out gray areas in the industry affecting operators.
“It is not a gain saying that the Nigeria oil and gas industry stands at a critical tussle where strategic divestment and enhancement capacity in driving growth and sustainability of the industry. This approach has challenges and opportunities that need to be carefully navigated so that industry long time ambition is achieved ensuring a stable and transparency regulatory environment is very crucial.”
Ogunjobi asserted that different changes in policy and regulation can mar investment in the oil and gas sector. Access to capital remains a significant barrier for local companies looking to expand their operations. Managing this financial risk is germane with divestment and the local companies need to sustain operation post-divestment.
According to the NAPE President, there is need to build and enhance local capacity to meet demand of the industry. Leveraging divestment and enhancing local content capacity is a unique opportunity to transform Nigerian oil and gas industry.
Focusing on sustainability can ensure long term goals and environmental stewardship.
The pre-conference workshop provided a viable platform for industry experts, policy maker and all the stakeholders to come together and discuss key issues relating to divestment and local capacity development.
The potential will be explored and benefits of the strategies identifying challenges and rise up to opportunities.
“As we delve into today’s divestment discussion, let us remember that our ultimate goal is to build resilience sustainable and a prosperous oil and gas industry in Nigeria.
The insight and strategy that will be developed play a crucial role in future of the country’s oil and gas industry,” Ogunjobi stated.
Marginal Field Programme arising from divestment of International Oil Companies (IOCs) saw the emergence of 24 blocs bided and won by indigenous companies but surprisingly, only 7 are successful. While some are still struggling to find their feet apparently facing licence revocation, others have something to cheer for their doggedness and resilience for breasting the tape.
Speaking on Exploring Opportunities Maximizing Existing and Potential Resources in Divested Asset, Aradel Holdings Plc Managing Director, Adegbite Falade, explained that the company pioneered the concept of marginal field from Chevron known as the Ogbele field. In year 2000 Ogbele was estimated to have 1000 barrels per day production. But 19 years after in 2005, the story is different with 30,000 barrels of oil and has moved to peak production. The geographical basin is prolific. Presently, it is registered with the stock market with 2 billion and significant growth to its credit.
Falade pointed out that Aradel’s drive is to build a company enhanced by technology including diversified portfolio, capacity expansion, built redundancies and applied technology. Ogbele has three evacuations points in its operations.
As part of its success, the indigenous company has 260 staff strength. Diversification has helped it to move forward. As part of diversification, Aradel has a gas station, refinery and is involved in renewable.
Falade stated that some of the challenges the indigenous company faces is fund and the resource base is small. Part of the challenges is local including regulatory hurdles. However, divestment is an opportunity to explore and not a challenge.
He advised regulators to scale up activities and not to be seen as threat to stifle the industry.
Adding his voice to Aradel’s activities in the oil and gas industry, Mr. Olarewaju Daramola, General Manager, Commercial, said the fundamentals of the sector is global. Those involved in barging mostly indigenous players collaborated in adopting technology to their operations.
The company is training professionals to assist in retraining younger generations. Aradel also improves performance of indigenous contractors giving jobs to its vendors as part of social intervention.
He lamented the length at which regulator handles some salient issues in the industry leading to operators seeking nod for barging to work together.
Daramola noted that the spirit of Petroleum Industry Act (PIA) was to assist indigenous companies but some aspects are damning for marginal operators. Aradel deals with two regulators since it involves in all operations from upstream to downstream and the experience is not palatable.
Speaking at the pre-conference, Osayande Igiehon the Managing Director and Chief Executive Officer of Heirs Energies Limited, was represented by Samuel Nwanze, Chief Financial Officer (CFO) of the company, stated that players in the sector should have a full grasps of the industry.
Nwanze made it known that Heirs acquisition was done in 2021 and within 100 days it projected from 21000 to 50000 barrels per day apparently a success story. The company focuses on its JV partners adding that Nigeria has a strong entrepreneurial spirit.
Although there are challenges but the company has also experienced growth. Infrastructure is a challenge that must be tackled moving forward with replacement of aging facility.
There were existential threat but the company recovered after identifying the problems through thorough analysis. Evacuation process was undertaken with innovative financial solutions. Since cost of operation was high alternative evacuation through pipeline operators and collaborated with JV partners.
According to the Heirs CFO it identified its challenges which were theft. Technology was put in place and the host community was involved. It used three pillars to address the issue and 96% of its losses were recovered. Measurement and metering issues were also resolved to get back on track. The industry structure has changed with indigenous operators occupying the space and collaboration among companies are in place.
Nwanze advocated for capacity development adding that independents have better understanding of risk. He said opportunity for innovation and technology advancement with partnership enhanced by alliances will work well for operators in the industry. Independents should build younger generation to advance their course.
One of the successful oil indigenous companies in Nigeria is Brittania-U. Speaking at a panel session at the pre-conference, Chairman/CEO Uju Ifejika has apparently delivered from expensive shallow water. The Ajapa field has been developed with significant progress. The MT Ultimate is one of the largest vessels flying Nigeria flag.
Ifejika called for an adjustment of the PIA to encourage investors especially local operators. Most banks have exited fund for the oil industry and some IOCs are exiting Nigeria to other African countries which should be a concern to the country. There should be an enabling environment for the industry to survive in Nigeria.
Ifejika believed there is no impossibility. She made a reference to the fire incident at Brittania-U Floating Production Storage and Offloading Facility (FPSO) and it was put out within 7 days. It was curtailed and the company is building a bigger platform with support from experts in the US.
She urged operators to collaborate and address challenges in the industry.
Giving his views on indigenous operations in Nigeria, Samson Ezuguorie, Chief Operation Officer (COO) of Seplat Energy Plc revealed that illegal connections are in Amukpe pipeline leading to crude losses of 5%
Technological solution has not been found and the terrain is challenging due to security threats. This is indeed a concern for shareholders and government interests.
Ezuguorie added that people should be inspired to work with innovation to improve production. Investment and governance policy to enhance the industry should be imbibed. He said Seplat has a legacy business.
He advocated that attention should be paid on regulatory requirement that will enable the IOCs to move to the deepwater supporting indigenous companies to be successful. IOCs have reduced investments in onshore.
In Ezuguorie views, PIA has not been successful because it has not attracted investment for production to grow. “We need to measure level of regulation.”
“Since IOCs are moving to the deepwater, the numbers of blocks taken by the multinationals are many but oil exploration declines. If number of blocs acquisition by IOCs are growing, exploration should reflect it.” There are pockets of self help in the industry in which indigenous companies are collaborating to empower people. Annual vendor capability is strengthened through Independent Petroleum Producers Group (IPPG) to enhance Research and Development (R&D) as stakeholders are working assiduously to avoid gaps.
The Seplat COO disclosed that the indigenous company contributes 30% of domestic gas in the country targeting 850 million capacities. It has grown its gas monitisation with solid foundation to a high level of transparency with good structure.
In terms of Corporate Social Responsibility (CSR), Seplat has done 4-5 thousands eye surgery tagged “I can see,” safe motherhood programme and Teacher Empowerment Programme (TEP). The company has built significant relationship producing result for enabling environment to assure growth.
Apparently expressing his views from regulatory perspective, Victor Diseiye Otobo, Head of National Oil and Gas Excellence Centre, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said Nigeria has 37.5 billion barrels oil condensate reserves spread across the country including swamp, offshore and deep offshore terrains. Nigeria has 209.26 Trillion Cubic Feet (TCF) of natural gas reserves.
Stakeholders believed that NUPRC regulatory functions have hampered the growth of oil with only 7 companies operating out of 24 who previously won bid rounds. This shows a failure of the marginal field programme.
Reacting to issues raised concerning regulatory activities, Otobo explained that after ten years without operation, blocs will be resold and revoked.
NUPRC issued 50 blocs and wondering why there are complaints that the regulator has not fare well.
The two regulators have their various functions and there is no conflict of interests as being insinuated. Upstream companies deal with NUPRC while those for gas and midstream are for the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
Otobo highlighted achievements of NUPRC. The regulator set up oil and gas excellence centre to check gaps involving industry players to close deficit in capacity and finding how it can adjust. Gaps identified by IPPG will be implemented in collaboration with players.
The regulator has given tax incentives to operators, leverage issue of bid rounds and created opportunities. It has put proper code to assist and support operators. A key aspect of success is on best practices to be used by operators.
The PIA has brought transparency to the oil industry as no minister has the power to award oil blocs giving credence to the act.
He assured that issues around the PIA will be resolved adding that standard has been set but some companies fell short of them. Recertification of metering was never met by some indigenous companies.
Comment here