Nigeria’s Oil and Gas sector has been a bedrock of the Nigerian economy, contributing significantly to employment, GDP GDP and revenue to the government. But the industry remains fraught with challenges from infrastructure decay to regulatory hurdles, and operational inefficiencies. Bolaji Ogundare, group executive director of Newcross Group and Pan Ocean Oil Corporation (Nigeria), in this interview with Dipo Oladehinde, head of Energy at BusinessDay and Faith Esifiho, energy reporter, delves into the intricacies that fuel these issues and suggests potential solutions to Nigeria’s current energy challenges.
Nigeria’s oil and gas sector has been a cornerstone of the economy, but it has also faced significant challenges. What is your assessment of the sector’s current state, and what do you see as its biggest opportunities and hurdles going forward?
When you look at Nigeria’s energy sector, we can liken it to a middle-aged male or female who has seen some ups and downs in life but is committed to reinventing itself and competing with newer entities. In the earlier phases, the phases of production are easy, but as the country gets older, value and performance are sustained with wisdom and experience. When I look at the current energy state of the country, we are not doing well considering how long we have had our industry going but the next phased growth can be driven following the enactment of the Petroleum Industry Act. With the Act, many areas within it are designed to stimulate investment in the energy sector of Nigeria. We are definitely in the right direction with our overall energy trends. We have a long way to go, but the overall direction is what is most encouraging.
What does Nigeria need to do to attract the right kind of foreign direct investment that would make it more competitive?
Nigeria is a leading energy player in Africa, but it faces challenges in attracting foreign direct investment (FDI). While recent government incentives through executive orders are promising, improving the overall business environment is crucial. Key issues include security, regulatory efficiency, and transparency. The government is taking steps to address these, but it will take time for investors to regain confidence. Sustained improvements in these areas are essential to attract significant FDI and boost Nigeria’s competitiveness. Nigeria is working to streamline the approval process for field development and asset commercialization to attract more FDI. While these changes are promising, it will take time for foreign investors to rebuild confidence in the country’s business environment. Consistent implementation of these reforms is crucial to encourage foreign investment. Investors generally need to see a minimum of two cycles of a sustained enabling environment to move their capital.
You have commended the introduction of executive order. What are your thoughts on the potential impact of this sort of intervention, especially the timing? Is that in the right direction or is it too late?
It is never too late. There is already a capital flight to Guyana and Mozambique, but there are still companies investing and taking incentives and advantage of the Petroleum Industry Act. Yes, people wished it happened years ago, but it’s happening now and this is the time for us to take advantage of these opportunities. However, it needs patience. People have to understand that when an executive order comes out, there has to be an implementation of that executive order. There has to be reprogramming or mind shift of people in specific positions to understand what the executive order means to what they had been doing. Following this, final investment decisions will be made by the energy companies that want to operate and explore the opportunities. Also, investing in the energy sector is a lengthy process. Potential investors conduct thorough research, including analyzing the government’s financial policies, before committing. Even after a decision is made, it can take up to two years for an execution team to mobilize.
How do you view Nigeria’s approach to compressed natural gas (CNG)?
Energy has to be used developed and delivered most efficiently and as cheaply as possible. One of the things we know about CNG, which is one of the distillates from the hydrocarbon process, is that it is more environmentally friendly and cost-efficient than gasoline as an energy source. We also need to democratise it so that every petrol station in Nigeria should have a CNG filling station. We also need to invest heavily in the support structure to maintain the system. It’s an entire value chain with significant job opportunities. To maximise its benefits, Nigeria needs to invest in comprehensive CNG infrastructure, including widespread filling stations and trained personnel. This approach, modelled after successful implementations in countries like Iran, Pakistan, China India ensures the efficient and sustainable use of CNG. The government must prioritise the entire CNG value chain, from production to distribution and maintenance, to fully realise its potential as a cost-effective and environmentally friendly fuel.
What role is your organisation playing in Nigeria’s transition to gas?
So, holistically, we play a significant role in the gas transition, which is very important. When we look at Pan Ocean, one of the companies within our group, when the original gas master plan operationalise, we committed with NNPC to build the Ovade- Ogharefe gas plant, which is a 200 mmscf/day plant in Ovade, Delta State. It was of first project in sub-Saharan Africa to qualify for carbon credits and deliver it under the Kyoto Protocol. Through Newcross Petroleum and Newcross exploration, we also deliver gas to different facilities which feed into the domestic and LNG markets. In addition, Newcross Petroleum with Platform Petroleum are partners in the PNG Gas Plant in Egbaoma, which is a 30 mmscf/day Liquified Petroleum Gas Plant. We are also working on a project right now, which will put us into the CNG picture, because we already supply gas to CNG producers, and we have seen how important it is for us to be part of that value chain. So, we are currently working on a model that will allow us to be part of the CNG generation business in Nigeria.
Nigeria’s current oil production of approximately 1.2 million barrels daily has sparked discussions about increasing output to two million. What strategies can be implemented to achieve this ambitious goal?
Achieving two million barrels, or better still 2.6 mbd of oil production requires a long-term perspective, not just a short-term sprint that cannot be sustained year on year. Investing in exploration is crucial for future growth and because it is risky and expensive, it’s not unusual for incentives to be tied to the activity, whether successful or not For exploration to take place, most companies need more incentives for you to do true exploration because, as we know, they are very high-risk and highly capital-intensive with million-dollar investments. So significant incentives need to be in place to encourage that exploration period. Once viable prospects are found, the focus can shift to production. Successful project management with a long-term outlook is essential for this methodical journey.
Do you think gas can play a bigger role in Nigeria’s economy than it currently does?
Gas is key to Nigeria’s industrialisation. Despite abundant gas reserves, the country is underutilising this resource. The focus has primarily been on gas for power generation, neglecting its potential for industries struggling with energy costs. Shifting to a gas-powered economy requires increased gas exploration and infrastructure development. Diversifying gas use, such as promoting CNG for automobiles, can free up more gas for industrial applications. While gas development takes longer than oil, the potential benefits of a gas-powered Nigeria are significant and warrant increased investment and commitment including from a climate perspective.
Given the capital-intensive nature of the oil and gas industry, what strategies can we implement to unlock investment opportunities and stimulate exploration for operators like yourselves?
Africa requires Afro-centric financial institutions to fund and support its energy sector development. The recent establishment of the African Energy Bank and Afrexim is a positive step, but more is needed. There is an opportunity for the bank, which will be based in Abuja to focus on impactful energy projects across the continent. Despite abundant resources, Africa’s energy utilisation remains low. To accelerate progress, it’s not just about the fossil fuel industry, it is crucial to establish local manufacturing capabilities for non-fossil fuel energy components. We need to ensure that the manufacturing components of non-fossil fuel energy components are taking place in Africa.
How can Nigeria’s oil sector maintain a level of excellence in retaining and training the human capital we need to achieve what you are talking about?
Nigeria faces a significant manpower challenge. raduates have a competency gap, that’s needed by the energy sector, thus slowing down the integration into the workforce, and, hindering job creation. To address this, the government needs to incentivize companies to invest in education. We need to give tax breaks to companies for funding university curriculum and supporting hiring, training, and scholarships, can improve the quality of graduates. While not guaranteeing retention, this approach can bolster the overall skillset of the Nigerian workforce. We need to duplicate these incentives across all sectors, not just oil, to benefit the entire youth population. If as a country, we execute this strategy, the concept of “Japa” will be minimized.
IOCs are divesting from Nigeria, fueling concerns about the capabilities of local operators. How do you address these doubts?
Despite being dominated by international oil companies (IOCs) with predominantly Nigerian staff, the sector had and is facing hurdles. Macroeconomic instability, rampant illegal bunkering, complex community relations, and regulatory challenges hinder progress. The industry’s competitiveness is intensified by emerging African oil players like Ghana and Mozambique. Nevertheless, Nigerian operators demonstrate competence in gross stability in the operating environment. However, overcoming the financial, environmental, and operational obstacles will be crucial for our sustained growth and contribution to the nation’s economy.
Can you expatiate more on the impacts of regulatory activities on Pan-Ocean and Newcross activities?
The Petroleum Industry Act (PIA) is a game-changer for the oil and gas sector. It’s brought operators and regulators, like NUPRC, closer together, creating a more business-friendly environment. While some projects faced delays, the President’s recent intervention has accelerated approvals. This highlights the importance of decisive executive leadership in guiding the regulatory process. Overall, the regulatory landscape is improving, supporting industry growth.
Internally within Pan-Ocean and Newcross, what interesting Projects are you working on and what’s the outlook for partnership?
While production targets are often the focus, our strategy extends beyond that. We are intentionally prioritising human capital development, fostering a positive work culture, and building elements of diversity, equity and inclusion into our DNA. We are significantly investing in studying and leveraging our data for informed decision-making. Recently, In partnership with a technology company, we launched our Research and Data Analytics Unit ( RADA), The objective is for us to be more data-guided, such that as we grow our organisation. We are looking at data to help us make decisions. Our goal is to evolve from an oil-centric company to an energy provider, including gas and renewable energy. Via NewX Energy Resources (our non-fossil fuel entity) , we are exploring opportunities in the renewable energy space. Infrastructure play will be key to our sustainability. The Amukpe- Escravos Pipeline (a NEPL- Pan Ocean pipeline), ranks as a strong alternative to the Trans-forcados line. Our five-year plan aims to significantly boost oil and gas production, but our ultimate success hinges on creating a happy and fulfilling workplace for our employees.
What are the major areas you want the government to address in terms of ease of doing business in Nigeria?
Our organisation has navigated regulatory hurdles relatively smoothly. By strictly adhering to government requirements and maintaining open communication, we have minimised delays. While challenges exist, proactive engagement often resolves issues efficiently. There is a growing recognition among regulators of the business environment and the importance of timely approvals.
