New Markets for Nigerian Gas

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Andrew Yakubu
Andrew Yakubu

Andrew Yakubu, group managing director, Nigeria National Petroleum Corporation, says Nigeria has found more markets for gas to replace the loss of its American market

|  By Maureen Chigbo  |  Mar. 4, 2013 @ 01:00 GMT

JUDGING by past Nigeria Oil and Gas, NOG, conferences, the opening ceremony of the just-ended NOG 13, was lacklustre. Instead of the usual practice of a very formal opening ceremony spiced with music and in some cases, cultural displays, while the audience sat comfortably and listened to thought-provoking speeches from both government officials and other stakeholders in the industry, participants stood for the short ceremony which lasted for about 25 minutes.

Mohammed
Mohammed

But this lack of panache at the beginning did not reflect on the other proceedings of the four-day conference.  In fact, the conference turned out to meet the expectations of many participants comprising stakeholders in the oil and gas industry, top government officials, the industry regulators, financial institutions, international oil companies and indigenous companies.

Osten Olorunsola, the director of the Department of Petroleum Resources, DPR, spinned the opening ceremony as an innovation which kept participants busy on the eve of the conference unlike in the past when those who arrived for the conference would have to while away the evening.

Unlike when the NOG started 13 years ago, the sea of heads of the 1000 delegates at the conference were mostly blacks interspersed with few whites, who constituted 10 percent of the conference attendees. When the conference started, 10 percent of the delegates were Nigerians while foreigners made up the 90 percent. This figure, to an extent depicts how the Nigerian content policy of the government has effected the oil and gas industry and the progress made in getting indigenous companies to play an active role in the oil and gas sector.

At the NOG 13, the speeches, technical sessions and panel discussions which were also dominated by Nigerian industry experts, were vibrant and gave a peep into what the Nigeria oil and gas would be in the next five years. There was not an all- encompassing theme for the four-day strategic conference which started February 18 to 21, with the opening of the exhibition stands.  There were topics for all the sessions that took place including “Setting Nigeria’s Oil and Gas Industry in a Domestic and Global Context – What Challenges & Opportunites Ahead? and Revamping Nigeria’s Oil & Gas Industry through Increased Investment – from Upstream to Downstream”

L-R; Dorothy Atake, Addax Petroleum GM External and Government Affairs, Diezani Alison-Madueke, Zegelaar
L-R; Dorothy Atake, Addax Petroleum GM External and Government Affairs, Diezani Alison-Madueke, Zegelaar

It all warmed up with the arrival of Diezani Alison-Madueke, minister of petroleum resources, who was more than an hour late and tendered no apologies to the audience, that had been waiting for her for the programme to start. She sparked off the array of speeches on day one after Alirio Parra, board member of the CWC Group Limited, convener of the conference, made it clear that the outcome of the conference would affect energy investment and trade for sometime to come. Parra had outlined the challenges posed to the country by the discovery of unconventional reserves which will surpass conventional oil reserves.

Alison-Madueke, elaborated on Nigeria’s oil and gas strategy in the next five years and what a new dawn the petroleum industry bill, PIB, would usher in to boost investment and production in the sector. The minister set the stage for an issue that dominated discussion throughout the conference when she painted the picture of  how Nigeria’s strategy for the next five years would be guided by the new Petroleum Industry Bill which is still awaiting in the National Assembly to be passed. Most of the things Alison-Madueke said were not really new but a rehash of policies and programmes being pursued to promote investment and production of oil and gas in the country. They include impact of the gas master plan on gas infrastructure, production and sales and growing oil production through the National Petroleum Development Company, NPDC, from 80,000 barrels per day to about 150 barrels per day. According to her, “despite being accused of selling oil blocks, what we did was to sign them over to NPDC and it has managed to increase NPDC’s production.”

Parra shaking hands with Sunmonu with Zegelaar watching
Parra shaking hands with Sunmonu with Zegelaar watching

Other things she talked about were the emergency gas supply to power plan done in April 2012 leading to increase in gas sales by more than 70 percent and the fact that gas utilisation has increased due to the infrastructure and expansion of excravos gas pipeline and the adverse effect of crude oil theft. As part of the solution, she said that the federal government was reaching out to countries involved in the stolen crude oil trade to check the problem.

Andrew Yakubu, group managing director, Nigeria National Petroleum Corporation, NNPC, amplified some of the issues raised by Alison-Madueke with regards to the advent of unconventional reserves and threat to the country. Yakubu allayed fears about unconventional reserves vis-à-vis conventional reserves, stating that Nigeria is not in any danger of losing its market share even though the market in the United States has been shut against the country.

“NO doubt, shale gas is a challenge to us. Shale gas will continue to grow. Shale gas contributes significantly to global gas supply and will challenge us. Presently, the US is leading,” he said, adding, “high production cost of Shale gas is one of the things that will have a negative impact on it”. According to him, “We have found very comfortable markets so far and Nigeria has the potential for having 600 cubic feet of gas some of which are shale gas. We are not unduly worried. In future it will have a high depreciation rate. We are mindful of the threat posed by Shale gas…. The initiatives of the federal government are to increase domestic gas utilisation.”

The group managing director of NNPC is of the view that despite criticisms that foreign direct investment, FDI, is diverted, Nigeria has the highest percentage of FDI followed by South Africa. For him, “Nigeria has a huge and massive opportunity for investment. It has a bright future in terms of energy mix and he is happy that investors are coming”.

Despite Yakubu’s optimism, some international oil companies are not so sure about that. Infact most of the representatives of the IOC’s at the NOG were of the view that investment into the country is stalled because of the uncertainty posed by the PIB. The IOCs have always had issues on the PIB which centres around the fiscal regimes and the contractual agreements especially that of production sharing contract, PSC.  This is why Mutiu Sumunu, country chair of Shell Petroleum Development Company, SPDC, said: “a good PIB must be such as to allow the industry to operate a as normal  business. It is crucial that the NNPC should be cut loose from the stronghold of government” to enable it operate effectively.

For Guy Maurice, managing director of Total E & P Nigeria Ltd, “A good PIB will encourage deepwater development. It will bring massive job. A balanced PIB will fetch enough revenue for the country and give incentive for operators to run. “If everybody makes a little discovery in deepwater, it increases the reserves. In the industry, a project delayed increases cost.”

Cornelis Zegelaar, senior vice president and managing director, Addax Petroleum Nigeria, “Nigeria is a very important player in the energy market. When you look at the PIB, it focuses on the onshore and offshore. It should also take care of those that are on the Shallow waters (those in between offshore and onshore).

It appears that the federal government is very concerned about the apprehension of the IOC’s over the PIB and has bent backwards to accommodate them. That’s why Abiye Membere, group executive director, Exploration and Production, NNPC, likened the case of the IOCs over the PIB to that of a child who is used to getting chocolate to go to school and then one day you change and give the child ordinary sweet. “The child will definitely protest,” he said. Olorunsola, director, DPR, and chairman, technical committee on PIB, succinctly captured the behaviour of the IOCs, when he said that it was a case of wanting more. “If you give somebody 50 percent of what he is asking, he will continue to pressure you to see if he can get 100 percent.”

After all the dithering and discussions at the conference over PIB, crude oil theft, pipeline vandalisation and the Nigeria  content, the conference ended with participants satisfied and looking forward to the annual event next. Usman Mohammed, managing director of New Energy Services, captured the views of most participants when he told Realnews that “the local content cannot promote itself unless the IOCs are on it. The IOCs cannot be fully on it unless the PIB is passed and they know what laws they are operating with. There is a phobia. If you look at the oil and gas investment it is high and it is better to know the rules.” He added: “There is a good turnout. Many Nigerian companies came. It is good. For me, I have no complaint. I think it’s okay.”

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