At a time when Russia’s war against Ukraine is triggering increased demand for oil and gas, Nigeria could easily be witnessing both a fiscal and foreign exchange windfall but years of poor management of its natural resources have culminated in being the worst times for its people.
While Nigeria may not be matching Russia, which earns $1bn a day from energy exports to Europe alone, energy experts say Africa’s top producer can earn up to $10bn more from oil and gas exports per quarter on the back of rising oil price and emerging shortage of gas around the world.
BusinessDay has been talking to serving and retired senior Nigerian oil and gas chiefs on what the country can do to reverse the rot in the oil sector, which has suddenly become a source of pain rather than a positive contributor to economic growth and better wellbeing for its 200 million people.
One oil sector chief said President Muhammadu Buhari should declare a national emergency to deal with the scandalous level of oil theft in the country, and also invite leaders of the oil companies into a room and extract from them a plan that can be worked on in weeks to raise oil and gas production.
The crises in the oil sector, experts say, demands a high-level multi-stakeholder consultative approach involving lawmakers, government regulators, operators and every stakeholder.
“Between the upstream regulator and NNPC, they need to set up a ‘war room’ – some form of an effective tax force to develop a blueprint for returning the industry to full bloom,” Austin Avuru, chairman of AA Holdings, said in a recent article.
Avuru said the country needed a well-organised transition of the international oil companies (IOCs) in onshore fields driven by a clear policy direction to a crop of efficient independents with the requisite resources to continue developing the fields.
He added that just standing back and intervening by pre-emptive acquisitions cannot be a sustainable solution. He also called for a deliberate policy-driven return to the traditional onshore/shallow water terrains as 80 percent of Nigeria’s remaining reserves are still in this belt.
Avuru said: “Nigeria needs to address the twin problems of reliable pipeline evacuation and community restiveness. These problems have been heightened, not because there is no solution, but because we have abandoned every attention to them in the last 15 years
“Nigeria needs to match its gas slogan with effective, measurable, policy actions to drive investments in domestic gas supply.”
Uduimo Itsueli, chairman of Dubri Oil Company Limited, in a recent interview told BusinessDay that the future of Nigeria’s oil industry would be dominated by independents, whether Nigerian or foreign, “because the IOCs are not coming back.”
“The independents do not have the clout of the IOCs. So, we need to craft policies that can encourage them. We need to change how we do business. We need to encourage them, grow our own independents. And attract foreign ones quickly. If we want Nigerian independents to become larger, and possibly become IOCs, we need to encourage them; we need to create the right operating environment. We need to not be punitive as a government,” he said.
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Ayodele Oni, energy lawyer and partner at Bloomfield law firm, said Nigeria could make the oil industry attractive for both local and foreign independents by crafting efficient rules.
“There should be clarity of policy around upstream gas, market pricing for gas and regulation should be fair, clear and of common application without the government overregulating,” he added.
He said the government needed to do more to stem the tide of bunkering and other related issues such as oil theft.
Incentives for fulfilling environmental obligations will encourage companies to restore the environment as it was before oil operations and abide strictly with their abandonment and decommissioning obligations, said Oni.
Oni also enjoined the government to provide more incentives for gas production, considering the drive towards energy transition and gas as a cleaner energy, meet its net-zero commitments and provide working infrastructure to guarantee return on investments.
He urged the government to reduce operators’ risks, assist with financing the acquisition and development of the assets and reduce risks.
Joe Nwakue, partner at Zera Advisory & Consulting, said the country needed a new approach to tackle crude theft, stressing the need for better engagement with the host communities and boots on the ground.
“There is no question about it. I got the view that there’s equally complicity as far as security agencies are concerned. Look at what happened in Imo State some days ago; that will tell you there is no way an operation that size and that scale will be going on without state agencies being involved,” he said.
He also called for the use of more technology, whether satellite-based or fingerprinting, in the monitoring of the pipelines.
“For this to happen, we need to apply technology, we need far better metering standards than we currently have and we need international collaboration,” Nwakue said.
