‘We need legal backing, effective pricing to harness gas potential’
Despite the huge gas reserves that we have, just last week, ENI told us that they have made a significant discovery in the Niger Delta region, but there are still gas shortages in the domestic market. What do you think is responsible for this?
We do not have sufficient gas infrastructure. For the gas master plan which is the nation’s dream, this is something we started running with some years ago and we have not fully optimized it. In fact, I do not even think we have gone about 10 to 20 percent. What we should have now for all our gas reserves is a crisscross of gas pipelines all over the country. We have got the PIB yet to be passed into law, an environment that is not clear to investors yet whether local or international and policies that is completely clear to give you a clear line to sight your investments as well as other myriad of issues. We cannot develop the gas space without addressing these issues. The country’s power sector is also caught up in the gas issue because it is one of the biggest sectors that use gas. We need to unbundle up the power sector. These are some of the things that have held the gas industry hostage for some years now.
If you were to advise the new Minister of State – Petroleum on how to unbundle the gas sector what would that be?
The first one for me would be the legal vacuum. As a country that that runs on people, we do not have procedures and processes. This changes every four years once there is a new government. If you do not have legal documents that is bills that backs up whatever you are running with, anyone can come in and change it whenever they feel like and that does not give confidence to any investor. Also, if we do not have legal documents to back this, you also have contracts that can be scuttled at any time.
We have to also look at the pricing. These two are the key, then of course maybe advocacy. Currently, the government is talking of the Economic Recovery Growth Plan (ERGP). The plans in the ERGP are hinged on moving the economy forward and what would move the economy forward is adequate power supply. What is power hinge on? It is hinged on gas. So, we need to put a cost reflective tariff that will make sense to people investing in the sector. If you talk to the stakeholders in the power sector, they would tell you that if it is not making sense they will not invest. So, we need to unbundle some of these things if we are serious to move the country forward. As we do know that the conversation globally is about the energy space and how to move more and more towards a cleaner environment. We are currently not doing gas and our crude is not exactly at its best right now. So, if we are serious as a country, what we need to do is take a focus on gas.
But the situation is not all bad news. We have done some of the first steps which is the gas policy. The gas policy has a leg in the PIGB and other bills too. We have got the fiscal policies hanging there. We’ve got the policies on communities and the impact on communities as well. There’s no country that is serious with their oil and gas industry that does not have a governing document because that is the document that is very clear. That is a document that serves as the framework on which you can spend money and invest money. If we do not consciously make this environment what we want, the money, capital goes to the place of higher returns.
What role is Neconde playing to ensure that we have adequate supply of gas for domestic use?
One of the first things that we started doing is what I have come here to do, which is the company has taken a focus on its reserves.
What we are working towards now is a complete zero flare situation. We have taken some of our associated gas for now, currently we have already commercialized it and we currently have buyers. Our short term plan is to also maximize on that associated gas. So, we are putting in place more gas infrastructure and we currently have a central processing facility. We are adding of course the associated infrastructure that is required for that; pipelines and so on and so forth. This requires investment. We are looking at the economic models that support us in boosting our gas production. In addition, we are also looking at the non-associated gas because that is where the main focus is, that is where the big business is.
Now you will be tapping into the gas reserves at OML 42. How does your kind of structure work? Are you doing it alone or with your JV partners?
Neconde is developing OML42 currently with her JV partners. So you know in 2011, we went through a proper bid process and then the bid was awarded on $585 million. So, ever since then we have been developing this asset jointly. We have what is called an Asset Management Team (AMT) so jointly we look at the issues and jointly use our technologies.
You do not seem to have painted a very bright picture for Nigeria in the LNG space. You said Mozambique and others are coming out big. If eventually, they get it right, will Nigeria still have a place in the market place?
Well, globally it is business. Competition remains. Competition is not a bad picture. Currently, I serve on the Nigeria Gas Association as a financial secretary and even before getting into the council, I had work with the association in smaller subcommittees. It’s not a gloomy picture but what we are trying to say is that we need to tidy up our act. Business is business. If we do not get our act together, if you are aware, it took us 10 years to get an FID. Gas is still in need worldwide but we need to take into the economics of even transportation. Those are the things that will come into play.
We have seen that the indigenous oil firms Like Neconde have started developing capacity to match that of the IOC’s especially exploration and production. What gaps still exists?
I want to answer this first as a Nigerian. It is not really in our culture to do Research and Development (R&D) and that is the gaps that still exists. It is only imperative for any serious company to focus on our own innovative technology. The indigenous oil firms have to focus on that and as a nation, we need to focus on that as well. Go to China, go to India, go to Japan, they are constantly rolling out solutions even in the gas industry.
The Federal Government announced plans to divest some percentage of its equity from the joint ventures partners to fund the 2019 budget. What do you think about this proposal?
Neconde is a product of such bids in the past. So yes, it is okay for a nation at a place where we are to do it. It would be encouraging if we can get more participation from private investors who can take those assets and run with them. Some of these assets as we realize are assets I referred to as marginal fields. So for some of the IOC’s, those are assets that’s really in their big picture, what their visions were, they were too small for them. But a lot of individuals firms have rather made successes, success stories out of those assets they have maximized. And by extension they have contributed to the GDP and in creating employment as well as technology development. So, if the government is looking towards doing another bid licensing round, it is good. You have got Angola and Ghana doing licensing bid rounds and these countries are putting in place transactional models, clear cut timelines, clear cut dates and running with those schedules and then meeting those schedules. For us here unfortunately sometimes we start, we stop, we stall. Those are not very good clear cut signals to investors. So yes is it’s encouraging. If the government can work with this and then just run and give these assets to Nigerians or any other investors who are willing to work with it.