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Collaborations among stakeholders, and cost cutting measures hold the key to unlocking the $28bn dollar investments needed to ramp up Nigeria’s crude output to 4m barrels per day (bpd) operators in the oil and gas sector say.
At the inaugural West African International Petroleum Exhibition and Conference (WAIPEC) backed by the Petroleum Technology Association of Nigeria (PETAN), and held at Eko Hotels, Lagos, on February 22, oil sector operators harped on the need to collaborate more and cut costs to survive under a weak, disruptive oil market.
A speech by Maikanti Baru, group managing director of The Nigerian National Petroleum Corporation (NNPC) delivered through Siky Aliyu, the managing director of the National Engineering and Technical Company (NETCO) a subsidiary of NNPC, accused local operators of being unwilling to collaborate, even when they lack capacity.
“The environment is characterised by sharp practices like unhealthy and fierce competition, the attitude of underbidding to get consideration, compromising quality to save cost, exposure to potential health, safety and environment issues, variation, change-order hunting.”
The effect of this situation has led to low capacity and inability to complete assignments and stagnation of capacity as well as lack of new investments.
However, Saka Matemilola, chairman of the Society of Petroleum Engineers, at a media briefing in Lagos on February 21, said about $28m private sector investments assisted by government incentives, would attract investment to grow crude oil output by 4 million bpd and gas production to 10 billion cubic feet.
Operators however say if government ministries and departments show enough collaboration and encourage such action, it will encourage local operators to collaborate more.
The federal ministries of power and the finance ministry as well as the petroleum resources ministry, were said not to have a commonality of policies and there are no inputs from different ministries during policy formulation.
“Government should first take the lead by collaborating among themselves,” said an operator from the audience, during an interactive session.
“We have a situation where government is more concerned with Foreign Direct Investments and no concern about final investment decisions.”
Ifueko Omogui-Okaro, managing partner at Compliance Professionals PLC said a take away from the panel discussion is for operators and government to improve on collaborations, as it has become a matter of survival.
Bayo Ojulari, managing director, the Shell Nigeria Exploration and Production Company, in his presentation, cited examples of countries where collaborations have worked, including Malaysia, Brazil and South Korea.
Ojulari said major drivers of their success are consistency of government’s policies.
Increase in service quality and delivery, local capacity and capability development, volume of work and economies of scale, harmonisation of technical standards, and collaboration among operators and academia.
Moses Omatsola, a former managing director and CEO of Conoil Producing Ltd, said, “The cost of operations in Nigeria and indeed in West Africa, is massive, in a low oil price environment collaborations are now the only way to survive.”
