We have tremendous opportunity to industrialise Nigeria through our gas endowment, but…

Oladiran Fawibe is the chairman and chief executive officer of International Energy Services Limited/Doris Joint venture. In this interview with Olusola Bello,
Fawibe speaks on many issues affecting the Nigerian oil and gas industry. Excerpt:

What is your view on the current state of the Nigerian oil and gas sector?
The oil and gas industry are the engine rooms of the Nigerian economy. The review of the economy was done recently across various sectors and the economy is contracting. Like it is often said we are just a quarter away from another recession.
Recession affects different sectors such as manufacturing trade, services, and oil and gas. Oil and gas are very critical. We have always been saying we have to channel the resources from oil and gas to develop other sectors of the economy, so that the economy becomes self-sustaining. Fundamentally, oil is now in a state of transition whereby we have to use our oil resources in a judicious manner to help other sectors of the economy develop so that they can be lifted up before oil becomes irrelevant.
You can see the usage of fossil fuels in developed countries for all manners of economic activities. But one of the basic issues now is that even the oil demand would not be as it used to be in the past. And when there is low demand for oil, obviously nations that depend on revenue from oil would now be having some problems particularly for revenue generation. Nigeria leaders therefore should take cognizance of these dynamics in the oil and gas industry not just locally but at the international level, so that our national policies would align with the understanding of what obtains across the world.

What would you say concerning the current level of reserve?
For the Nigerian oil and gas industry, we can signpost a number of issues. Professional organisations have come up from time to time to identify some of the challenges Nigerian Oil and Gas are facing. For example, the Society of Petroleum Engineers and Nigerian Association of Petroleum Explorationists (NAPE) did emphasise the need to increase our oil reserve through explorations so that we don’t just continue to depend on producing the oil reserve that we have now. We need to increase it and the only way we can do it is by increasing explorations. Some international oil companies have also joined the chorus.

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What are the factors we can play upon to ensure this happens?
One key factor that has been on the lips of everybody has been the Petroleum Industry Bill that is supposed to create an enabling environment for investment to come to Nigeria. It is unfortunate that for many years we have lost the opportunity when the oil and gas industry was still very active and people were looking at Nigeria as a very viable environment to invest in. But now, there is the dearth of investible funds. Many companies that would have invested in the Nigerian oil and gas industry have moved elsewhere. Some of them are even reducing their investment appetite for fossil fuel as they are going into renewable energy.

So, to a large extent, we have lost some opportunities.
The current level of the reserve we have can support a production level of about 2.2 million barrels per day for a couple of years more. But if we don’t add to it, the chances are that we would then be going done and in our producibility which would not be good for us. We have set a target of 40 billion barrels for national reserve for many years but we have been gyrating along 36 and 37 billion barrels while in fact, we have the potentials to increase it to 40 billion barrels. This is because there are still many fields out there, especially in the deepwater that can be explored to add to the national reserve and achieve the target of 40 billion barrels. But companies that would invest in explorations in these areas would need a conducive and enabling environment to do so by way of fiscal regime that will encourage them. We cannot be penny wise and pound foolish. If we want to make a quick gain it would not work out. This was why we had the unfortunate incident of last year where the government was accusing the oil companies of stealing oil revenue whereby the office of the Attorney General of the Federation (AGF) stated that companies were owing to the government $62 billion and many professional bodies came up by saying that technically the government may have a point in terms of reviewing the government share when the price of oil rose beyond $20 per barrel. But to the extent that we did not invoke the clause at that time. How can we just wake up one morning and accuse the companies whereas we went to bed, sleeping when we were supposed to have raised the issue about reviewing the agreement that would enable government to have more revenue. The hangover of this would not just be blank with respect to the IOCs. And like we have always said, whatever we might want to do especially with respect to involving or encouraging indigenous participation in the oil and gas industry. We still need the IOCs because they have big pockets to be able to fund exploration and development in deep water and some difficult terrains. Nigeria independent companies are doing very well in many respects, but they still need these IOCs to work together with the government if only to be able to achieve the objective of developing oil and gas.
To summarise these points, we need policies and enabling environment and encourage explorations, to make oil production in the country sustainable otherwise our ability to produce at a reasonable level that would export and earn foreign exchange would then be considerably reduced.

What is your view about the government move towards gas?
It often said that Nigeria is more endowed with gas than crude oil. Currently, the gas reserve is over 200 trillion cubic feet of gas. This could make the country a major gas producer in the world. This is another area where we have missed opportunities.
At the time we would have developed Nigeria LNG to the level that would make big gas exporter we failed. Thanks to the present administration that encouraged the building of train7 which construction would start hopefully by next year. For Bonny NLNG, there is nothing that is stopping us from making it eight trains or more.
The country proposed Brass and Olokola LNG before. At the time these projects were proposed there were opportunities for the country to develop them and put our gas into the international market. If those projects have come up today, we have to struggle to get the markets for their output because other countries have come up since that time to develop their gas.
But if we are talking about domestic utilisation of the gas, the opportunities are just there. For example, the countries that are taking our gas identified opportunities for the utilisation of such gas.
A big country like Nigeria with about 200 million people can certainly produce about two to three times what we are currently producing by way of developing various avenues of using gas, either to generate electricity, you know we are still far behind the level of power we need to drive the economy and other activities. We should be able to use the gas to support the manufacturing industry, not only for power, for developing petrochemicals and produce intermediate products which can further be developed and used by manufacturing companies for economic activities. There are so many areas that are crying for utilisation of gas, that is why experts have suggested that we should not just be running around for oil bid rounds but we should actually undertake gas bid rounds so as not to limit our gas potentials to associated gas.
We have tremendous opportunity to industrialise Nigeria through our gas endowment. And it is unfortunate for not doing so.

Downstream sector of the petroleum industry what can say about it?
We often said that the state of the downstream is lackluster. The only hope on the horizon is the Dangote Refinery that will help to reduce our dependence on imported fuel. Because for quite some decades our local refineries are not working. We often talked of rehabilitation every day but at the end of the day, we have not seen anything. We can put some hope on the present management of NNPC particularly the group managing director working in consonance with the minister of Petroleum.
If they can fulfill the commitments they are making to Nigerians, then maybe those refineries may come on stream whether it is 2022 or 2023 and then working along Dangote refinery. Then we would have achieved a lot in wiping out the shame from the faces of Nigerians; that a major oil-producing country is an importer of refined products. There are also plans to undertake condensate refinery which would also add to the level of our output for fuel in the country.

Modular Refinery?
I am not a fan of modular refinery. If we approve the modular refinery projects perhaps it could help to reduce political tension in the Niger Delta. But of the over 20 modular refineries that have been approved by the government none of them today has been completed or is functioning. Only recently one of them in Edo was said to have attained 60 percent. All others are still on the drawing board. But anything whether it is 1000 barrels per day or 500 barrels can be helpful at least within the locality in which they are operating.
I keep saying if we are going to use modular refineries they can be cited close to the source of raw material so that the cost can be minimised. In the United States of America where you have the modular refineries, they are actually located near the fields and they serve local markets. It is not like you produce in Niger Delta and take the product to Lagos or elsewhere.
However, whatever the refineries are able to produce would solve the country’s energy mix and help solve some of the problems. But more importantly, it may provide employment for some of the locals around the place and also help to stop the oil theft that is still rampant in the Niger Delta region.

Subsidy removal, how appropriate is it at this point in time?
The downstream sector still needs a lot of reforms. The current management of the NNPC especially the group managing director has been emphasing that subsidy has been removed and the Federal Government has made the commitment to the IMF or World Bank and some of the loans being given to the Federal Government are anchored on the basis that there would be no subsidy.
The subsidy on fuel is one sour point that has created a lot of problems for the downstream sector. Its removal has to be done realistically and as matter of fact, it must be legislated upon. If it is done by administrative fiat chances are that we would be going back on it and it would not be permanent
The removal of subsidy would eliminate all kinds of fraudulent cases associated with the procurement of fuel from the country. Like I have said, if the government is dead serious about the removal of subsidy this time, and I have no reason to doubt the government this time, the policy should be legislated upon. In this case, the reform of the downstream would then be meaningful.

How has COVID19 affected the oil and gas industry?
COVID-19 has created a lot of problems for the service sector. Everybody knows that the service sector provides the fulcrum for support for the oil and gas sector in various aspects. A lot of activities done by the IOCs and even Independent companies are carried out by the service sector. Now we have a situation where the activities of IOCs and major independent companies have been substantially reduced. This has affected the activities of various oil servicing companies. When you go to some of the IOCs some of the offices are like ghost towns. Because they are not making new investments, they are just doing maintenance jobs. In some cases, the maintenance of some of their facilities are not done as they should be done because they have no incentives to do so. Their corporate headquarters are not putting money in the local companies here and the government being unable to contribute or jump start some of these projects, hence the reason why things are at a very low ebb. If this is the case where do you expect oil servicing companies to get jobs?. This is why many service companies have laid off some of their staff.
When you compare the performance of the oil services Pre COVID-19 to what is happening today their performance is about 50 percent of what it use to be. So many of the companies are now in bad financial shape.
I hope the oil companies would be engaged at the highest level of government so that investment could be made in the sector. It is also my belief that the Petroleum Industry Bill would be passed very soon. So that the oil companies have an environment to see their way forward and then removed the uncertainty that has dogged the oil and gas investment in this country for too long.

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