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Oil & gas: cautious optimism as Nigeria turns to Saudi Arabia

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Minister of Energy Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al Falih (left); Minister of State for Petroleum Resources, Ibe Kachikwu and the Nigerian Ambassador to the Kingdom of Saudi Arabia, Isa Dodo at a meeting in Riyadh, Saudi Arabia, weekend

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Stakeholders in the country’s oil and gas sector, yesterday, expressed optimism over the new drive by the Federal Government to tap from the wisdom of Saudi Arabia in its bid to address niggling challenges bedeviling the sector.
Experts were, however, quick to caution that unless government remained strategic in the terms of agreement geared towards mitigating current uncertainties that are hobbling the sector, breaking new grounds and making a headway would remain elusive.

Following an earlier visit of the Minister of Energy Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al Falih to Abuja last year, as well as a relationship established between President Muhammadu Buhari, the King of Saudi Arabia, Salman bin Abdulaziz Al Saud, and the Crown Prince, Mohammed bin Salman bin Abdulaziz Al Saud earlier in 2015, Buhari had directed the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu to leverage the existing relationship to attract investments from Saudi Arabia to Nigeria.

The delegation, which included top executives from key parastatals in the Ministry of Petroleum Resources focused on exploring areas of cooperation and collaboration in the oil and gas industry between both countries, especially in the downstream sector; refineries and petrochemicals; gas and mid-stream infrastructure, knowledge sharing, command and control, as well as stabilisation of the global oil market.

Already, Al Falih has expressed his country’s readiness to sign a Memorandum of Understanding (MoU) with Nigeria. The early draft of the MoU that will solidify the new partnership is expected to be ready in the first week of May, 2019, as the Organisation of Oil Exporting Countries (OPEC) governors for Saudi Arabia and Nigeria, Adeeb Al-Aama and Dr. Omar Farouk respectively have been nominated to fast-track the process for official endorsements and signing.

Kachikwu noted that the agreement would in principle open the country to potentially benefit from Saudi Arabia’s grounded approach to oil sector development, refinery revamp, possibility of a brand new refinery, LNG investments, and product supply trading in crude and refined products.

“We want to leverage the huge successes of the Saudi government in terms of petroleum. Last year alone, Saudi’s Aramco, the equivalent of our NNPC made about $200b. We have a lot of common ground, historical ties, religious ties and there’s a need to move further. We cooperate a lot with one another in OPEC, especially in the Ministry of Energy,” Kachikwu stated.

Apart from a series of engagements with key government personalities in Saudi, Kachikwu and his team also met up with top executives of Aramco, King Abdullah Petroleum Studies and Research Center (KAPSARC), Saudi Basic Industries Corporation (SABIC), and Royal Commission for Jubail and Yanbu (RCJY) to explore possible solutions and business opportunities that would help the country to grow its petroleum sector.

With the prevailing development, Nigeria could address oil and gas infrastructure shortfall hovering around N18t and stabilise economic development, particularly by locking leakages and spurring industrial activities through gas sector development.

Commenting on the initiative, the immediate past President of the Nigerian Association for Energy Economics (NAEE), Wumi Iledare termed it a welcome development, adding that the country stands to benefit more from genuine partners. Iledare, who is Ghana’s National Petroleum Professorial Chair in Oil and Gas Economics, however cautioned that the terms of agreement should ensure mutuality of interests, and must not be at the expense of any of the parties involved.

Chairman/CEO of International Energy Services (IES) Ltd, Dr. Diran Fawibe, equally expressed confidence that the emerging collaboration remains a strategic step, which should be should be supported. “There is a fundamental basis and platform for strategic cooperation between the two countries having a close and robust relationship as fellow members of OPEC. There is also a common understanding, which dates back many years when President Buhari was a young army colonel serving as petroleum minister with a lot of admiration and respect for him by the legendary Saudi Arabia’s Oil Minister, Sheik Ahmed Zaki Yamani.

“Apart from securing funds to expand our non-performing refineries and to establish petrochemical plants, Nigeria stands to learn a lot from Saudi Arabia in the deployment of technology to monitor our upstream assets with a view to eliminating current malpractices in the oil fields and to maximise efficiency in oil and gas production,” Fawibe noted.

With Aramco being a success story as a national oil company, Fawibe noted that the NNPC should imbibe major operational principles, culture and philosophy that form the bedrock of Aramco’s success of the oil firm.The Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju, on his part, said the moves makes reasonable economic sense.He said Kachikwu and his team’s visit to Saudi Arabia’s energy institutions would provide experiences on how to run an efficient, world-standard, state-owned energy company and integrated energy sector that is able to deliver profit to the state and services to consumers.

“I also think if the Saudis were to invest in Nigeria’s petroleum sector, it would provide a huge boost to the sector and the economy, as well as increase Foreign Direct Investment (FDI) in the downstream sector, especially the refineries. This will eliminate our import dependence, provide opportunity for us to serve as a hub for refined products exports, and generate employment and revenues for the economy,” Adenikinju said.
He, however, warned that for the expected benefits to pour in, the environment, legal and commercial issues among others must be right.

In his contribution, Chief Executive Officer, Mudiame International Limited and Mudiame Welding Institute Limited, Sunny Eromosele, is not convinced with the move because of the uncertainty in the nation’s oil sector.

According to him, even though the country needs knowledge transfer from Saudi Arabia, the trip could well be seen in the light of a mere jamboree without necessary frameworks in place in the country, especially the failure to sign the Petroleum Industry Bill (PIB).He added that since the President was proactive enough to send a delegation to the Arab country, he should muster the courage to endorse the PIB to law.

Eromosele said: “The bills should be signed into law. Nigeria needs a favourable and sustainable investment environment, and this is one of the foundational challenges. Without this, the visit could end up being a waste of resources, or just another tour.”And for PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, the partnership has the capacity to boost the country’s ability to harness her oil and gas industry potentials.

But he wants the draft agreements to pass through professional reviews by indigenous oil and gas experts before they are signed in order to avoid unwarranted challenges.Jaiyeola maintained that the nature of intended oil and gas reforms, draft Petroleum Industry Governance Bill, and investment direction by government and the private sector needed to be considered, while drafting the agreement in order to ensure that the country’s best interest is represented. “We also need to be futuristic and ensure that the agreements are structured to enable Nigeria continue to play active role in the future of crude oil, gas, and technology and innovation,” Jaiyeola stated.Farouk, who facilitated the engagement with the Saudi government, noted that the country remained open to investing massively in Nigeria, either in existing   refineries, or other downstream infrastructure.

He said: “The President is keenly interested in the rehabilitation of our refineries. And he is looking at taking advantage of opportunities presented by Saudi Arabia. He was here in 2015 and the government of Saudi pledged to support the President. Beyond refineries, we are also looking at downstream infrastructure, gas and pipelines, both to rehabilitate old ones and build new ones.”

During the visit, Kachikwu and his team visited Aramco’s Headquarters in Dhahran, where his delegation was received by its President/Chief Executive Officer, Amin Nasser and top management of the conglomerate.
The visit, which was aimed at crystallising ongoing discussions/collaboration with the Federal Government on investments in the oil and gas sector, also provided an opportunity for a close observation of Aramco’s Command Centre, the oil supply, planning and scheduling centre and the Geosteering Operations Centre in the Exploration and Petroleum Engineering Center (EXPEC).


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