Members of indigenous Oil and gas producers at the recently concluded Nigeria Oil and Gas conference in Abuja x-rayed their operations within the context of the hydrocarbon industry and demanded that the government must create an enabling environment for them to succeed.
Their emphasis was what needs to be done to produce gas that would boost the power sector and by extension the economy without much of the challenges they are currently facing.
They are however of the view that the government doesn’t create a market but rather it should support markets.
But for the government to provide the enabling environment they resolved that they would be doing more of advocacy so that they can engage the government better and through they may be able to evolve solutions together.
Ainojie Alex Irune, chief operating officer Oando Energy Resources said that the consequence of not getting things right in the industry is what has led the Central Bank of Nigeria to abridge the financial shortfalls in the industry as they occur
“I think the industry operators and the government should work hand in hand because it is not it is a government and private sector thing. I think the Public-Private Partnership (PPP) models only work if both parties understand that they are equally culpable, to this point advocacy is what the stakeholders need to step up to do”, he said/
The other thing that can ensure the success of the indigenous Producers he said, is collaboration. He said as indigenous companies they do have a considerable balance sheet challenges because they borrow funds at about 15 percent interest rate because of the country risks as against what is obtainable anywhere in Europe which is between 1.3 to 4 percent, in Asia 3.5 percent, US 2.9 percent and South Africa 5 percent. The indigenous companies he explained cannot compete unless they can solve the enabling environmental challenges.
Investment is purely based on market conditions and the return on the cash deployed. An investor he said would always see a country like Nigeria as not being the only their fund can go if the enabling environment is not favorable for them.
“As indigenous players we must understand that the attractiveness of Nigeria first and foremost as an investment destination is their responsibility so through collaborations, reducing cost, co-sharing, and co deploring”. The operators he said must come together if need be even in the acquisition of some of the acreages whether it is in gas or oil, power generation or gas to the power value chain.
Another speaker,Ebiaho Emafo,managing director,Eroton Exploration and Production Company lamented the environment in which the indigenous producers are operating stating that about 85 percent of the gas produced goes to the power sector and if the power sector is not able to generate enough electricity for the populace and generate enough revenue to pay for the gas, then there is a problem.
“As an indigenous investor you would want to invest money where you are going to get a return, so investing in gas when you know you are not going to get your money is a challenge”, he said.
According to him, there is a lot of regulations put in place by the government suggesting that she does not want producers to flare gas. This he said makes a lot of sense but when confronted with some of the challenges in the sector you may find out that it is easier to flare, especially when you realize the gas produced is taking and you are not going to get paid for what you supply.
He, however, advised the operators to keep on talking as they still need to work on gas infrastructure which would enable them to supply gas to the domestic market, especially for industries within their areas of operations and beyond.
He emphasized on the need for them to work towards collaboration because when they work together it reduces total cost and gain value for the business which they operate.
In his contribution on national gas utilization, Wale Olafisanof AMNI International Petroleum Development said there is the need for the operators to rise and stop the concept of being spoon-fed as nobody is going to come from anywhere in this world to develop Nigeria saying that Nigerians need to do that for themselves.
He said he does not believe that Nigerians cannot pay for power. As indigenous companies, he stated they must hold fast what we have and develop this country for the sake of generations coming. To achieve this he said they need collaboration and discipline because our future depends on this.
“Yes, we are doing about 22 percent of oil productions, we can do more than that in gas if we start that now. We can say it is more expensive in terms of capital expenditure (CAPEX) if you have good project money would follow it,” he said.
He said the gas being produced is not just for the power sector but for petrochemical, agriculture and so on.
Kemi Fatogbe of CBN while commenting on the situation with gas subsector said while every other nation is pushing towards gas utilization the country is still dragging its foot by not giving it the attention it requires. She said however that the industry has not done enough advocacy about what needs to be done in the industry to make the government bring out impactful policies.
She said one of the key points is that is very important is that gas projects must be bankable, they have to be de-risked and conversation about how they could be de-risked needs to happen while and the advocacy must be taken to the right places because they cannot rely on Central Bank of Nigeria (CBN) for intervention all the time. The bank she stated has made over a trillion Naira already.
We all know what the problems are; that is, we don’t have reflected market tariff and no infrastructure in place, so who we need to engage those that matter to make things happen.
Ladi Bada, managing director of Shoreline Natural Resources said the Nigerian independents are not looking for the subvention from CBN but for equalisation where they feel there is dis-equalization.
He said the good news is that within the last 10 years the industry has witnessed the growth of indigenous companies, as they have improved in both productions of gas and gas plants. Today he said the country is consuming about 1000 million scf of gas a day what is required is over 2000million scf a day just a minimum and indigenous companies from Seplat to ND Western and a few other companies already have their pipelines projects either midway completed or partly completed and these are close to 800million scf per day.
Indigenous companies need collaboration to achieve cost optimization in gas production.
Olusola Bello
