‘Decline in oil price just one factor out of many affecting investment in upstream’

Dr. Saka Matemilola, is the Nigeria Council Chairman, Society of Petroleum Engineers (SPE). In an interview with Frank Uzuegbunam, Editor, West Africa Energy, he talks about investment in the upstream sector, challenges confronting indigenous oil producers amongst other issues. Excerpts:

What has SPE achieved from the Oloibiri Lecture series over the years? 

SPE has provided a platform for bringing up many of the critical national issues on oil and gas and a lot of the players and especially government look forward to the forum for this purpose. A lot of policy issues have been released through the forum. It was at 2015 forum that the Minister of State for Petroleum announced the planned changes to the petroleum sector, which is now detailed out in the draft National Petroleum Policy. This year, we have gone a step further by setting up an advocacy team that will follow up the recommendations through the appropriate arms of government. The team is drawn from SPE, Nigeria Gas Association (NGA) and Nigeria Association of Petroleum Explorationists (NAPE).

How critical is this reduction in exploration activities to the oil and gas industry in particular?

The reduction in exploration activities does not portend well for the industry and for Nigeria. The effect of the lull in exploration activities translates to a decline in reserves replacement for oil and gas. The consequence will be that meeting our national aspiration of increasing oil production to 3 million barrels per day and gas of 10 billion cubic feet per day, will become more difficult to achieve.

The Federal Government signed the Joint Development Agreement with Sao Tome in respect to oil exploration in 2002.  It is almost 15 years and no single crude oil has been produced.  What do you think is responsible for this?

Signing of agreement between governments was just the first necessary step. The countries do not have the resources, nor capability to directly carry out the exploration and production activities. This is where investors and major E&P companies come in. The framework and conditions must be right to attract those who will carry out the exploration and production activities, otherwise nothing will come of it. We also need to realize that hydrocarbons are being discovered in many other parts of the world, including neighboring basins in Africa. So, we are in competition to attract the major E&P companies to invest.

What is responsible for the delay in several gas projects, such as the NLNG Train 7, OK LNG and Brass?

The delay in take off in the NLNG Train 7 and other gas projects is related to lack of firm commitment on part of the players, including government. There has also been a shift of government focus to domestic gas, which in my opinion, should take priority. Even at that, the domestic gas utilization policy has not been properly followed through. And that is the reason that progress has been painfully slow in the domestic gas sector as well.

Investment in the Nigeria’s oil sector has been on the decline due to the low oil prices. What is the effects of this on future oil production in Nigeria?

Decline in oil price is only one factor out of many that has affected investment in the upstream oil sector. Another major factor is the delay in passing the Petroleum Industry Reform Bill. This is a major uncertainty that will continue to hold back investment in the sector, as no investor will commit to major investment decision without having good clarity on the fiscal policy that will drive the business.

What are the challenges confronting the indigenous oil producers in the country and what do you think can be done by the government to ameliorate these challenges?

A lot of the indigenous companies are facing major challenges in raising capital for new projects. And this is mainly because of their negative perception of operating conditions in Nigeria’s petroleum sector – security issues; long contracting process, especially for the JVs; lack of clarity on fiscal policy, lack of sanctity of contracts, especially gas payment by government.