Sound bites from SPE-NAICE 2016 conference
The 40th edition of Society of Petroleum Engineers, Nigeria Annual International Conference and Exhibition (NAICE 2016) held recently with the theme ‘Transparency in the oil and gas business: an imperative for energy security and stability’.
“Transparency in the oil and gas remains the panacea to improve the investment climate based on the similar rate of returns in all other regions,” said George Kalu, Chairman Society of Petroleum Engineers, Nigeria Council, in his address.
Energy security hinge on transparency
Maikanti Baru, Group Managing Director, Nigeria National Petroleum Corporation (NNPC), in a speech read on his behalf by Siky Aliyu, Managing Director, National Engineering and Technical Company Limited (NETCO), said the conference theme perfectly fits perfectly with the current government’s drive in reforming Nigerian oil and gas sector.
“Incidentally, my 11th point agenda dwells on professionalism and accountability. We intend to entrench professionalism in conducting our business through transparency, accountability and respect for all stakeholders”, he said.
“Transparency encourages competition and competition enhances industry performance. It discourages fraudulent behavior and promotes effectiveness, equity, ethics, and efficiency”, said Wumi Iledare, a professor at the Emerald Energy Institute, University of Port Harcourt.
Osten Olorunshola, chairman, Energy Institute, Nigeria and a former director in the Department of Petroleum Resources (DPR) identified the gaps in guidelines and rules; process and tools; people and systems as hindrances to transparency in Nigeria’s oil industry.
“The guidelines are too flexible and confusing leading to low entry requirements. We have developed a system where due diligence is insufficient and predominantly manual. It is also characterised by sub-optimal evaluation of bids and evaluations skewed in favour of self-interest, political pressures and forced marriages,” Olorunshola said.
Clay Neff, Chairman of Chevron Nigeria and Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry said that “increased awareness of the importance of transparency has led to better cooperation with NEITI in its audit reports. There are clearer contract and tendering processes, managed more fairly and close contact with regulators”.
Under $20 will do the magic number
Nigerian oil firms especially marginal field operators need to keep the production cost of its crude oil at sub-$20 per barrel to remain competitive and maintain profitability in this era of low oil prices and battle for market share.
Ademola Adeyemi-Bero, managing director, First E and P Development Company Limited predicated that crude oil prices would remain volatile over the next few years thus, the need to focus on production cost by marginal field operators so as to deal with the tripartite problems of low oil prices, forex challenges and renewed insurgency.
“Marginal field operators need to collaborate more with service companies as this would strengthen their operation for further effectiveness and this can drive production cost lower to sub-$10 per barrel,” he said.
Gbenga Onadeko, Senior Vice President, Welltec, said that with improved technology, marginal field operators can further drive their cost down and improve their production output. Onadeko said that strategic investment in the use of modern aspect of technology across the value chain of production will no doubt enhance maximization of output for each field in the long run.
The current unit cost of production hovering over $30 per barrel is worsened by militant activities and security posing threat to the operation of the international oil companies and marginal field operators.
Interference deterred further divestment
High level of interference by political and government official in the process of divestment of oil blocks deterred other international oil companies (IOCs) from going ahead with divestment of their oil assets after the Shell experience.
“It is interference from government and legislators that made the other IOCs to step back from also divesting some of their assets,” said Mutiu Sumonu, chairman of Julius Berger.
The interference led a situation where due diligence was compromised and investors without requisite technical expertise and financial competence acquired divested assets they could not produce because technical competence has been sacrificed for political expedience. Thus, Nigeria is missing out on opportunities to increase local participation in oil exploration and production, generate increased revenue from acreages now lying fallow, deepen capacity and better engage with local communities to check militancy as local E&P companies have better track record of engagement with host communities.
“Some marginal fields are lying idle because some of the bidders who acquired the divested assets lack financial and technical competence to run them”, Sumonu added.
Tony Chukwueke, technical director, Tenoil Petroleum Services and a former director of DPR, said that divestment could not happen because it is difficult to do without consideration for political stakeholders.
“When we were at the DPR, we created a system that accommodated political stakeholders through local content vehicles and community stakeholders by allocating 10 percent for the purpose,” he said.
Roadmap to the future
Austin Avuru, managing Director of Seplat said that the challenges the country is currently facing in the oil sector at the moment is enormous considering that about 70 percent of onshore and shallow waters production have been shut in for about 5 months now.
“In spite of the current challenges, there is light at the end of the tunnel”, Avuru said, adding that there is need to strengthen and grow NIgeria’s local refining capacity to at least 1.2million barrels per barrel a day by 2020 and achieve a domestic gas utilization of 3BCF within the same period.
But that aspiration cannot be achieved unless attention to key challenges facing the oil and gas business in Nigeria prominent of which are security especially with militant activities in the Niger Delta, efficiency of cash call funding are tackled.
SPE NAICE is foremost technology conference and has held annually since its inception in 1976 with a focus to collect and encourage the dissemination of technical knowledge and technologies relating to the oil and gas industry and to provide an E&P market place for Sub-Saharan Africa, attracting industry regulators, high level government officials, and petroleum technology professionals at all levels, as well as other very important oil and gas industry stakeholders.
FRANK UZUEGBUNAM