Emeka Okwuosa, Managing Director of Oilserv, is a seasoned engineer, administrator, entrepreneur and a visionary, with over 33 years of experience in engineering particularly in maintenance and operations, teaching, wireline logging and interpretation, seismic acquisition, processing and interpretation, pipeline engineering, procurement and construction, project management, drilling and drilling services. He spoke with ROSELINE OKERE on the challenges of pipeline vandalism and need for government to take decisive action. Excerpts.
What measures would you prescribe to ensure the security of the pipeline?
Pipelines are built based on what is called ‘engineering codes’. And these codes determine the way you scope the project, the way you scope the specifications of the projects and once that is done by the clients, our job is to build to that specifications. There are many ways to secure a pipeline, but the most important one is the engagement of stakeholders- the government, community and all manner of people that have direct impact on the pipeline. There are various forms of technology like the defiled optic system. But what we have to know is that anybody that is tampering with a gas pipeline is a clear saboteur. So, whenever it happens, it means that somebody has gone up to vandalize the pipeline and cannot be easily stopped because it is an act of sabotage.
Government has to set up a system to guide the pipeline because it is a national asset. It is a very strategic national asset and anywhere in the world, you guide your pipelines. Either by using technology, engaging the communities around there and/or putting up a proper security, including military, but you have to guide your pipelines.
Do you support the idea that government should set up a separate security to guide the pipelines?
I’m not saying I support it because I don’t have the details, but what I’m saying in general is that you need to do a combination of general methods and methodology. You can’t restrict it to just putting police around it, because if you have a 500-kilometre pipeline, are you going to put soldiers or police around it? This is not feasible. It requires, again, the people around the area because they are the first and primary line of defence for the pipeline. Somebody and somehow will know that something is going to happen and report it somewhere.
Do you think drone will address the problems?
That is part of the solution. But it has to be an integrated solution. If you put drones, it means is that when you have detected any attempt by drones to vandalize pipeline, you have to quickly intervene. So, you need to have an integrated system because drone cannot intervene for you.
What do you now consider as the best method to stop vandalism?
It depends on the pipeline, the area and the community you are passing by. Like I said, it is a combination of all sorts methods and again, it is only when you take a specific pipeline that you can address such issues clearly and be able to put a formula for it. It is not easy to say this is the way forward. It is also being able to build the pipeline following the codes in such a way that it will be more difficult for anybody to get in there, which means you bury the pipelines and that is what we do.
The other one is being able to deploy technology, which is either putting a detection system along the line or drones to monitor. Finally, you have to put an intervention system. An intervention system means when you have detected it, something that must be done immediately. You need human beings to go there and take actions and that means it has to be purposeful, well organized and finally, a legal system such that when you catch somebody, you prosecute. If after arrests nothing happened, that encourages negative actions, but going forward it is quite a complex scenario that has solutions.
What is your assessment of the integrity of these pipelines?
It depends on the pipelines. Don’t forget when we talk pipelines, we have crude oil pipeline, products pipeline and gas pipelines. These are owned by different entities. From crude oil pipeline, mostly owned by the International Oil Companies and the indigenous producers, the codes are very clear. We know the codes, we know the standards and they are obliged to keep to the rules. So, they do the maintenance to ensure integrity. You also have to do the routine maintenance to keep the pipeline going and make sure you have the cartodic protection system working very well to slow down and/or stop corrosion. That way, pipeline can lasts for several years. The crude oil producers more or less keep to these codes.
You get to gas pipelines, they are owned by different entities. Gas pipelines mostly owned by Nigerian Gas Company and other entities. They are also well maintained. Where we have a gap is the product pipelines. For years, we have seen claims that product pipelines are being maintained, but they are not serviceable. Some of them have not been pigged for years. The tank farms are not working, there is a gap and that is where Petroleum Products and Marketing Company has to take the blame. You cannot be an owner of an asset and do not take care of it and you expect the asset to work. That’s why we still have problems in the distribution of products in Nigeria. Today, you cannot put petrol or diesel into pipeline and expect it to get to Yola. It means you have to continue moving this by trucks and it is not feasible.
How are you coping in terms of exploratory activities?
Exploration and production are parts of the whole package. We started with construction, expanded it into full Engineering, Procurement and Construction (EPC). Oilserve is the first indigenous company to go into full EPC. With that, we consolidated our activities and we have been able to build capacity. Then we moved on into gas development, exploration and production. The whole idea is to have a balanced portfolio and be able to de-risk the business. Now oil price is low, but then people will have to understand that oil price has never remained low or high. It is a cycle that has been going on for decades and for those who deeply understand the oil industry, you have to be able to read the cycle and know when to gauge.
Oil price is low, the reality today is that this is the best time to invest because you can price low. The main challenge is that you may not find the money to invest. We have gone into exploration and production to be able to gauge. Right now, exploration is more difficult because it is difficult to go out and drill and spend money on exploration with low oil price. You can still do it if you can get the services with reduced income, which is what is going on today. You can get into production asset where you optimize production, reduce your costs and be able to produce at a rate below $30 per barrel, manage until the price goes up.
What is the situation of the East-West pipeline contract, considering the dwindling crude price and financial challenges of the government?
I understand your East West pipeline to be OBB pipeline, and the project is ongoing and we are looking at completion in 2017. The scheduled completion is July 2017. The project has faced quite a few challenges like you will expect of any project. Projects come with plans, based on scope and as you progress, you may have changes in scope depending on what you intend to achieve. We also have challenges that come with community management and security issues. We also have several other challenges but at the end of it all, we are always having reduced and recalibration of the schedule.
Currently we are looking at July 2017. In terms of how it is being affected by the current situation in oil and gas industry, not really. This is a gas pipeline and I know there is a focus to try and get gas distribute come in top gear and this means clearly that this has been programme overtime and the funding is also being kept up by the Nigerian National Petroleum Corporation (NNPC) and the Federal Government. So clearly the funding is on stream and I believe by next year, we should have that pipeline fully functional to be able to increase the capacity of gas supply for domestic uses.
What is the capacity of the pipeline?
At peak supply, we are looking at maximum of two billion standard cubic feet of gas. Whether you achieve that or not depends on whether you have enough gas to feed it.
With the new price policy regime in the downstream sector, do you intend to spread your tentacles into refining of white products?
I mentioned here that we have moved into other business areas in other to de-risk our business. Do not forget that Oilserve started activities in 1995, so we have come quite a long way. This year will make it 21 years and you say that we have matured. Five years is enough for you not only to strategize but try the strategy and be able to fine-tune it.
We have done this and where we are today is that we have actually integrated and adapted to the situation. As we speak, we are undergoing massive strategy session to reposition ourselves to be able to work and determine which area to pay more attention to in medium term.
But in the long term, you have to twist from time to time to meet up with the short term and medium term results. It is a meter of planning, understanding the industry and not be a company that comes into the industry and do just trading. So, if you look at refining and refinery, they are different businesses. We do not intend to get into that. The only way we can get into the refining and refinery business would be to basically do modular refinery in other to utilize the production we may have going forward, if we do not want to evacuate the crude rather turn that into product and be able to use the product within the country. All these things are not required within the present predicament. But right now, we have not decided to go into refining. We must create the right value with the right strategy to go into it.
Most operators you serve are being owed by the NNPC. How are you coping with this situation?
Everybody is affected definitely. We have an industry-wide downturn. You have low activity and low price regime, so it is affecting everybody. It is also creating a challenge for the government to be able to cope with this issue of funding knowing fully well that oil in particular is the major ingredient of our economy. Oil still constitutes more than 60 per cent of our foreign exchange earnings as a country. You can realize that lots of things we use in Nigeria are purchased from overseas. So to fund these, you need to ensure you get enough money from the sale of crude to meet them
But I believe really strongly that, like the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who has stated severally that they are working on it. They are looking at alternative means of funding. They are also looking at being able to draw some funds from Middle East, China and from other sources. The government is in a better position to decide that but I believe they know what the problem is and that they are dealing with it. But as far as it affects PETAN members and Oilserve, it is a serious problem. We all know that it is not going to be there forever because if you at the price regime of crude oil, it appears like it has bottomed, you have upside going forward. It requires planning and decisions to get it to the $100 per barrels cap.
What is important is that the oil producers that need our services are still in business. So far as they are in business, they will need our services. It is just a matter of time.
What are the objectives of your activities outside Nigeria?
The objectives are what I called de-risking. You have to balance your portfolio, both in terms of different services and areas of operations as well as geographical spread.
What really is the situation of the Nigeria Content Fund?
The NCF is a major issue because some of us in PETAN who fought so hard with other stakeholders to be able to set up the NCDMB based on local content act, feel some of the aims are not being achieved as of now. It may be too early to judge, but some of the directions we are seeing, we need to make sure that some of them are looked into and corrected. We are slowly building up a stanch of fund that is being taken off from us. When I say us, I’m looking at service providers, and the producers. The purpose of that fund is very clear. It is for capacity building. But how the fund is being deployed today is not clear to any of us, until we all come together and look at it and make sure that this fund is being deployed properly, in other to build capacity. Capacity is not for one person, it is for the nation. We have to make sure the oil and gas industry positively rub off on the economy. How to do that is to continue to boost capacity, to provide jobs, grow the Nigerian participation in the exploration and distribution of oil and gas sector. That is the only way forward.The fund is a major ingredient and for me, I don’t see the direction of the fund and it is a major issue.
How have you been managing the expectations of your host community?
We have a process that has been working for us for years. Don’t forget that we are the only oil servicing company that was operating fully in repairs and recapitalisation of pipelines between 2001-2008 when militancy was at its peak. We managed to operate in the middle of the swamp. So, the trick is very simple and it is a matter of being able to understand what it should be like having a proper process in place to address them and be able to engage the community in a sustainable manner. If you deal with them, agree on anything and you do those things, when you come back, they will receive you.
But when they see you as somebody that usually takes advantage of them, there will be problems. It has to be a consistent relationship. This is from service company point of view. Of course, you cannot solve the entire problem doing it that way. You require engagement of oil and gas producers, because after our works, they will remain there. The government has a lot to do on how they organize communities and how they make sure the communities become stakeholders in all they do. When the communities are shut out from these processes, then they revert to where and how they can do something for themselves.
