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‘NAPE’s contribution to oil, gas sector significant’

By Editor
15 November 2016   |   3:12 am
Mr. Nosa Omorodion (FNAPE) is President of the Nigerian Association of Petroleum Explorationists (NAPE). In this interview,the first part, which we ran yesterday, he spoke on the impact the organisation has made on its membership and the oil and gas industry generally. What impact has the low oil price environment had on exploration in Nigeria?…
Omorodion

Omorodion

Mr. Nosa Omorodion (FNAPE) is President of the Nigerian Association of Petroleum Explorationists (NAPE). In this interview,the first part, which we ran yesterday, he spoke on the impact the organisation has made on its membership and the oil and gas industry generally.

What impact has the low oil price environment had on exploration in Nigeria?
The inevitable slowing down of the economy occasioned by the adverse crude oil prices regime still persists. Before Nigeria officially acknowledged we are in a recession, low oil prices had resulted in the slowdown in projects as well as the stopping of exploration activities in some fields. In the upstream, there had been a sharp cut -back in projects with companies instead focusing on short term production.

Nigeria currently maintains an economically unstable negative net energy trade balance in which the nation exports virtually all the crude oil produced and imports a substantial part of its refined petroleum products needs while under-utilizing other energy sources such as bitumen, coal, lignite, and shale oil, thereby leading to a monoculture economy that is largely dependent on crude oil export.

The low oil price regime has lead to dwindling reserves, more burden on foreign reserves, pressure on infrastructure and social services, inability to meet commitments to lenders; I can go on and on. Reduction in hydrocarbon exploration and exploitation has dire consequences for a country like Nigeria with a mono- economy hinged on crude oil. Reduction in hydrocarbon exploration has resulted in declining oil and gas reserve base. It is not rocket science to draw the conclusion that Nigeria’s aspiration of 40 million barrels reserve base and 2.2 million barrels a day production quota is at best elusive. To make matters worse, increased competition from emerging African frontier plays is impacting on Nigeria’s position in the industry. Government must seek for more innovative and cost effective ways to increase reserves. Review and re-negotiate contracts; re-evaluate portfolio to understand why a portfolio is dormant or underperforming and take steps to guarantee reasonable return. The oil and gas industry must also focus on operational optimization to drive efficiency as well as embark on re-engineering of business models.

On the upside, it can be a blessing in disguise as it allows focus on other sectors. It can be the wake-up call we need to look inward and innovate to maximize other resources and potentials. The manufacturing sector is yet to pick up. The agro allied and non- oil sectors can become major revenue contributors. I read recently that we have witnessed unprecedented success in our IGR drive. I hope we can sustain this while at the same time we do not take our feet off the pedals in our drive to truly grow the economy.

How easy is it to meet Nigerian local content requirements in the exploration sector?
The ease of meeting the local content requirement would of course be based on the intentions and sincerity of the IOCs. The Nigerian content Development implementation framework is based on six main platforms, Indigenous assets ownership, manufacturing, training, suppliers’ development, research & development and infrastructural development. These are areas identified by government for progressive growing participation by Nigerian companies. Quite a number of IOC have made bold attempts at meeting these requirements, but more effort can still be made by the IOCs in turning local resources into jobs and opportunities for Nigerians I would like to see more actual domestication, which is where there are huge numbers of Nigerians in the workforce. I would like to see more components and equipment manufactured locally. There must be intentional efforts at developing fit –for-purpose curriculum as well as the award of scholarships for training in the appropriate areas. IOCs can improve the access to capital. I am aware that building domestic capacity in such a technical industry as the oil and gas industry takes time to mature but the pace can be up scaled. There is also the matter of the dearth of research and development institutions in the country as well as poor access to cutting edge technology. Perhaps more importantly IOCs should make the use of Nigerians as an intentional business strategy and model.

How critical in your opinion is the impact of fluctuating fiscal regimes in the oil and gas?
Thank you for your question. Last year when this present administration assumed office, NAPE proactively organized a special workshop titled “Positioning the Oil and Gas Industry for enhanced Performance in a New Dispensation ‘’The thinking behind organizing the workshop was to produce a document that would serve as a roadmap to guide the new administration on issues relating to the oil and gas industry. At the end of the workshop a communiqué was issued and transmitted to the Presidency. One of the topics discussed at that workshop was the issue of fiscal regimes.

As you know, the fiscal regime of a country is a set of laws, regulations and agreements which governs the economic benefits derived from petroleum exploration and production. The regime regulates the transactions between government and the oil companies. The Nigerian upstream fiscal regime consists of a combination of taxes, bonuses (signature and production), rents, fees and royalties, as well as, in the case of PSCs, production sharing arrangements. Fiscal instability, significant gaps and uncertainties in oil and gas regulating policies and laws in Nigeria have resulted in the loss of investor confidence in the past. Not only that, it has led to preferential investment in other countries in Africa and other regions by international oil companies. The lingering PIB situation has not helped matters either. It has become the easiest alibi for inactivity whether right or wrong. I must also mention here that the insecurity and pipeline vandalization being experienced in the Niger delta have been major contributory factors.

It is heartwarming though to see that concerted efforts are ongoing by the administration but more can be done. The Niger Delta situation needs to be addressed and more focused solutions targeted. It is most unfortunate that Nigeria has perhaps the longest contracting cycles in the world, some times as long as 36months. This long procurement and contracting cycle has lead to high levels of uncertainties in costing and planning. I am in alignment with NAPE’s recommendation that the length of contracting cycles be shortened by optimizing the functions of NIPEX. The contracting cycles for services and projects should be shortened to 3 months and 9 months respectively. Fluctuating fiscal regimes also impacts on Foreign Direct Investment which is promoted by the size of the domestic markets, fiscal stability, fiscal returns and high levels of transparency in government and government agencies. I believe that the regulatory framework should be enhanced. The DPR should be empowered, made more independent and renamed Petroleum Directorate to reflect its new status and function. Finally, the PIB should be unbundled to meet the exigencies of current realities. I will appreciate it if the reading public can take time to visit the NAPE website www.nape.org.ng to read the communique on this workshop.

Outside of Nigeria, where do you see as the new growth areas for hydrocarbons exploration in Africa?
With growing interest and investment from India, China and international oil companies operating in Africa, there has been increased competition for exploration acreage in recent years. As some of the traditional multinationals divest from areas in Africa, opportunities for new independents will emerge, causing the trading mix and diversity of the companies trading in Africa to change. Mozambique has joined Egypt, Nigeria, Libya, Algeria and Angola as major upstream power houses in Africa, it’s unlikely that Ghana or the other East African countries will disturb the equilibrium that has existed in Africa for the last two decades. Exploration and refining capacity in Africa will continue to increase, as countries strive to have a greater security of supply and increase export earnings from the sale of refined products. At the same time, uncertain regulatory frameworks, political intervention and the nationalization of resources will be key issues that will affect the oil and gas industry in the coming period.

Lagos state recently announced officially, its status as an oil producing state, what are your thoughts on this development?
Our business as explorationists is to find oil and gas. In that regard I am elated. In one of our Monthly Technical Meetings, we invited the Folawiyo Group, the company that spearheaded the search for hydrocarbon in the Dahomey basin, to tell the story of their journey to striking oil. It was a narrative of tenacity, grit and foresightedness. I am happy that the federal government has stepped up its endeavors in the search for oil in any region where prospective finds exist. In our conference this year, we also have the CEO of Lekoil who will be sharing the company’s experience and strides in Dahomey basin.

Lagos state is just one new state to join the league of oil producing states; certainly more states will be joining this elite league. The prospects for successful hydrocarbon campaign in other sedimentary basins are high. Anambra Basin has proven to also be relatively successful. Benue and Chad have potentials. There are mini-frontiers within the Niger Delta yet to be explored. It was such thoughts that informed the theme for our Management Session 2, for this year’s conference which focuses on Exploring Ultra Deep Reservoirs – a precursor to reserves replacement.

We have the 6thlargest bitumen deposits in the world and yet this remains highly under explored. We have done very well finding oil theoretically and on the pages of newspapers, about time we match this zeal with practical enabling fiscal and political environment. E&P does not have to be exploration and production only. It also means environment and politics, economics and profitability, enhancement and professionalism, etc. We need to get into the other E&P. Our ideas find oil and gas but for the ideas to nurture everyone has a part to play.

It is about time we stepped up to exploit and maximize the potentials we have been bequeathed by God. Many will crave to be so blessed. Non-hydrocarbon resources and the agricultural sector are also begging to be exploited.

The youth hold the keys to the future. What plans are in place by NAPE to ensure the gene pool for the production of professionally competent individuals is sustained?
It has been said that success without a successor is failure in disguise. NAPE as an association is very conscious of that maxim, and has put in place a comprehensive and robust agenda for the production of professionally competent individuals’ right from tertiary institutions to through to the industry. NAPE has Students’ Chapter in most of the tertiary institutions offering geosciences courses in Nigeria. There is a programme called the University Assistance Programme (UAP).The objective of the UAP programme is to support and supplement academic knowledge with industry experience and expertise mainly in the geosciences as well as career management in the oil and gas industry.

The program was designed to be implemented through 5 key initiatives: A conference hosted for Nigerian geosciences students biennially;, a Leadership Forum that provides interaction and collaboration between industry practitioners and academics on finding ways to advance and improve the study of geosciences education in Nigeria; Grants-in-Aid award programme, supported by individual or corporate donors to deserving beneficiary students and schools and the Visiting Geosciences Program that supports the presentation of seminars/ workshops in geosciences and career management in Nigerian tertiary institutions. NAPE also has a Young Professionals (YP) committee specially conceived for rookies in the industry to interact share lessons, knowledge and life experiences with older and more seasoned industry leaders. We birthed the Young Professionals (YP) Leadership forum last year and it proved to be an instant success. This year we have created a leadership and recognition award scheme aimed generally at sustaining the YPs, on the growth path in the industry.

Finally, what future plans does NAPE have?
The Nigerian Association of Petroleum Explorationists (NAPE) is the umbrella association for persons involved in the professional application of geosciences and related disciplines to the exploration and production of oil and gas in the country. It was founded in 1975 with over 7,000 strong membership which cuts across the oil and gas industry, government agencies and the academia. As an association we are blessed with members who have made a mark in the local and global oil and gas landscape. NAPE will continue to be a centre of academic excellence and scholarship.

We will continue to collaborate with other professional bodies in Nigeria and other jurisdictions. NAPE will more than ever before continue to participate and facilitate discourses that will elevate the practice of the profession of geosciences, as well as contribute to the shaping of policies that impact the oil and gas industry positively. Several pieces of key industry legislation like the Marginal fields and deep water acts were based on templates that came out of our Pre – Conference workshops.

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