Founded sixty years ago, the Oil Producers Trade Section (OPTS) has become a foremost advocacy group in Nigeria helping to shape policies that will enhance growth in the country’s upstream value chain while protecting the interests of member companies. Rick Kennedy, Managing Director Chevron Nigeria and Chairman of OPTS, shares with select journalists including BusinessDay’s ISAAC ANYAOGU, factors that have kept the organisation going strong as it marks its 60th anniversary.
Sixty is such a milestone, tell us a little bit about the journey so far.
The OPTS really Is a trade group and the intent is to improve the health of the offshore and onshore oil and gas industry in Nigeria by allowing the operators to come together in a forum where they can address common issues.
Obviously, we have to respect laws on competition but, there are a number of common issues that we deal with, so we work collectively and I think the organisation has been very successful in moving various things forward on behalf of the industry and in partnership with the Nigerian government for the benefit of the country, as well as the oil and gas industry.
This is done through advocacy, providing inputs in the development of regulations. I think the other big success over that 60 years is not only contributing to enabling the success of the oil and gas industry but also being able as an industry to give back to the country in terms of direct and indirect jobs, revenue to the country and social investments by member companies. For example, we have provided funding for universities, scholarships, and other social investment activities tied to economic empowerment, health, as well as education.
At a high level, OPTS supported the government in moving forward with the oil industry bill and we are now focused on supporting the implementation of the petroleum industry act.
So what have been some of your biggest challenges thus far?
Probably the biggest issue of the day is oil theft, and the impact on the industry’s ability to produce safely and reliably. Our infrastructure has either been damaged or forced to be shut in and we are all aware of the impact on production and revenue to the government.
I think probably the other challenge that we have had more recently, given the state of the economy and the reduced revenue coming in due to oil theft, is the inability of the NNPC to pay its share of Joint Venture operating expenses in a timely manner.
And so outstanding cash calls are building up and lack of reinvestment just further hurts the ability of the industry to deliver…
But there were efforts made by the NNPC to address those arrears, what happened?
There was a significant effort to address the historical arrears. We were able to form a great partnership between the industry and the government to come up with an innovative approach to address it. That has been largely successful and I think in a few cases those historical arrears have been fully paid off.
Unfortunately, more recently, with maybe the challenges of the economic environment and then the increasing oil theft, outstanding has become an area of concern in the latter part of 2021 and through 2022.
Investments into the Nigerian oil sector have been few and far between and many projects are yet to come on stream, as an advocacy group, what measures do you recommend to attract investments into Nigeria?
That’s a good question. Obviously, there’s probably a long list of things but in general, developing and maintaining investor confidence is key. Are we competitive, relative to other opportunities, globally?
If the government can perhaps address and mitigate factors such as the impact of inflation, unemployment, and ease of doing business. Issues around security, for example, increase the cost of our operation. Cost competitiveness is really critical, and that’s something that we’re we’re doing a lot of work to address.
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The Nigerian upstream cost optimization programme is an area where the industry is partnering with the government to try to lower the contracting cycle time and drive down costs.
We are working closely with the regulators to help in develop regulations that are effective and streamlined hopefully, to minimize some of the administrative burdens that may be placed on the industry which again, leads to cost.
Historically, there’s been a lot of levies and fees and various taxes applied to the industry and we are seeing that continue even in the current legislative activity. There is a discussion on even more taxes to be placed on the industry to help fund various programmes and departments across the country.
So really, this whole area around cost competitiveness and driving down costs is a critical element. On the plus side, the passage of the petroleum industry Act has brought some clarity to the industry and a certain level of certainty around the fiscal framework. So that’s a real positive in gaining investor confidence.
What would you say are some of the successes recorded by the OPTS in the past 60 years?
Well, I’m going to point to the passage of the PIB and that’s not all OPTS, but I know we were involved. This success goes back to the willingness of President Buhari and the Minister of State for Petroleum Resources and NNPC GCEO to collaborate with the industry and this gave us an opportunity to make an input.
The government ended up crafting a very good bill that ultimately got passed and OPTS and the member companies spent a lot of time supporting that effort, providing input and ideas. So that to me is a very recent example of success.
In addition, we have given numerous scholarships to students in different communities. We’ve built numerous hospitals, in different communities within the nation and around the Niger Delta. During the COVID pandemic, the OPTS put forward about $30 million to support government efforts. We did a lot of vaccinations and built health care facilities in the six geopolitical zones of the country.
So for 60 years, you’ve managed to stay relevant as an advocacy group, what is the secret?
I think there’s probably an element around governance. We all have a common purpose and we do have positive intentions for the country, its citizens, and the government. We have very positive working relationships with all stakeholders. The folks that first came together to form OPTS, I think, laid down a good set of governance rules. It’s very inclusive. It’s very collaborative. We follow all relevant anti-trust and competition laws in how we conduct our activities.
It is several factors really, and right now we have 29 members, including five IOCs plus some other larger exploration and production companies and many of our indigenous companies. So we work hard to really bring in all the perspectives and collaborate very closely across the member companies.
There is a mindset of true partnership and collaboration, not only within the member companies but with all stakeholders in the country.
Energy transition and the clean energy movement are becoming a global phenomenon how concerned is OPTS as a group about this?
Individual companies are going to have their own perspectives on that. But I think what I would say for OPTS is that several of the companies have, especially those of us, the large IOCs that are part of the broader operations, have got Net Zero commitments by our corporations. For the member companies individually, I think there’s a focus on gas as a transition fuel but for every one of us, there are things we can do today to decarbonise our current operations.
We can make our own operations more reliable and more energy efficient. There’s a lot of work around gas flare reduction and various companies are looking at reducing methane emissions in their operations. All of these things are opportunities where we can be decarbonising and supporting the efforts towards achieving the net-zero objectives pledged by the country.
So, different members are tackling this, maybe a little differently but we all have opportunities to help out with the energy transition while continuing to develop and produce the oil and gas resources we all need.
As a body, we are looking at a roadmap for potential areas of collaboration for further greenhouse gas reduction. This work is in its early stages, and we would want to align that with the aspirations of the country and the government.
If you could just project into the future. What do you envision for the future of OPTS?
Oh, I think the future is bright for OPTS. One may argue, perhaps, that we should consider a name change but that’s for later. The oil and gas industry in Nigeria is critical to the country and its economy and we want to help deliver the energy that the population deserves, providing reliable and cost-effective energy, OPTS and its member companies will continue to be partners with the government and ensure that our industry remains healthy and relevant. And as we move through the energy transition, we’ll adapt along with that too.
