Bank-Anthony Okoroafor is the Chairman of Petroleum Technology Association of Nigeria (PETAN) and MD/CEO of two reputable oil services companies – CB Geophysical Solutions Ltd and Vhelbherg International Ltd. In this interview with Nume Ekeghe and Ugo Aliogo, he proffered workable solutions to the militancy in the Niger Delta. He also spoke on a wide range of issues in the Nigerian oil and sector. Excerpts:
What is the state of Nigerian oil and gas industry; specifically, what are we doing now in terms of production and crude oil reserve. The government over the years, set targets to increase the crude oil reserve to 40billion barrels and production to 4million barrels per day. Where are we today?
Our production has been reduced from 2.5 million barrels of oil per day (mbopd) to about 1.4 mbopd due mainly to militancy, crude theft and vandalism. The targets of increasing our crude oil reserves to 40billion barrels and production to four million barrels per day can only be achieved when we invest in explorations and developments. These do not happen by decree. There are many factors that contribute to this. Oil & Gas projects tend to have medium – long term gestation periods particularly gas projects. The decisions we take today will shape the outcomes in seven to 10 years’ time in future. We must explore to grow our reserves and we must drill several wells to increase our production. We have not added any reserve in the past 10 years. We need more attractive fiscal terms, more acreage availability through mandatory relinquishment of unused acreages, strong work commitment and effective acreage management by drill or drop system.
Why have these targets not been realised over the years. Could it be as a result of delay in passage of the Petroleum Industry Bill or are there other factors that hampered these set targets?
Uncertainty of fiscal framework is one of the factors. We need attractive fiscal terms. The failure in the passage of the PIB when the price of crude was high and oil companies were willing and able to invest was a missed opportunity.
Security challenges are becoming more complex. Also the funding challenges; inability to meet cash call obligations; pipeline vandalism and crude oil theft are also major setbacks.
The NNPC said recently it was carrying out an aggressive exploration campaign in offshore, onshore and the inland basins of Chad, Anambra, Benue, Bida and Sokoto Dahomey. Specifically, it said it was carrying out infield developments targeted at growing the reserve and production. Could you tell us the situation now?
We do not have much data in inland basins. Now with improvements in technology and seismic, it will do our country great in acquiring reliable data in the inland basins; relaunch a licencing round in our inland basins. Much has not been done in inland basins. The inland basins of Nigeria include Anambra basin, the lower, middle and upper Benue, the southeastern sector of the chad basin, the mid Niger Bida basin and the Sokoto basin. Upper Benue was done 20 years ago but not very intense, drilled one or two wells. NNPC carried out exploratory seismic work in Anambra basin more than 20 years ago. No serious work has been done in Bida basin. Geological survey was done in Sokoto basin. Aeromagnetic survey was carried out in most parts of Nigeria but this only helps identify rocks and areas for future seismic work. These aeromagnetic surveys were done by the solid minerals ministry. The data will be resting in some places. It is only Chad basin that serious seismic work and studies plus laboratory work has been done. This was suspended due to insurgency. Exploration seismic in Chad basin was ongoing in 2012. IDSL is doing seismic work in the swamp between Epe and Ikorodu for Cromwell. Seven Energy is doing 3D seismic in the Anambra Basin. Orient carried out 3D seismic in some sections in Anambra basin. There was discovery of gas in Komani area of Gombe. IDSL was to shoot a 3D seismic to confirm the size. I will confirm if it was done. 700km 2D seismic was planned in the Benue trough from Obuloafor up to Oturkpo, Lafia etc and upper.
In offshore, last exploration work was done in the 80’s and 90’s, which led to the opening of deep water assets and mapping of the several OPL’s. It was done by Mabon JV with the Department of Petroleum Resources (DPR) participation as a multi-client seismic. People bought the seismic data from the company. There is speculative seismic works done in open acreages in offshore as multi-client seismic by companies. They recoup their money by selling the data to interested companies. But individual companies carry out production seismics to confirm certain structures or more details of their production; some to explore deeper horizons.
The issue of the federal government not being able to honour its JV cash call has been a source of concern in the industry. Can you tell us how this has impacted the oil industry. What role is PETAN playing in all of these?
The Oil & Gas industry is dying. Activity level is at the lowest. Projects have been deferred or cancelled. Service industries that have built capacities and capabilities are laying-off well trained personnel. Banks are no longer lending, there is tightened access to capital with decreasing cash flows, highly leveraged companies will struggle as lenders and investors tighten access to capital, limiting their ability to continue exploration and developmental activities. Rig count is almost zero, well intervention and well completion activities are down to zero level. There is increasing cost pressures to reduce and control costs. There is also rising political instability risks. We must as a matter of urgency, review our fiscal terms to maintain attractiveness and investment. Investment goes to friendly environments. We should honour our joint ventures (JV) cash calls or convert them to Sovereign Loans. Another possible scenario is to reduce government equity in these JVs to 10 percent and focus more on royalties and taxes, which generate close to 80% to the government. Investors’ confidence in oil and gas activity in Nigeria is being eroded because of this framework of uncertainty. This is a time that the Nigerian Content Development & Monitoring Board (NCDMB) can use the NCF to support Nigerian companies to survive this bad wind blowing in the industry. The role of PETAN is to continue to speak up to ensure that our oil and gas industry survives, is run efficiently and fairly and that Nigerians are not shortchanged in the process.
PETAN, an association you head currently, played a key role in initiating the local content. The sole aim was to grow indigenous participation in the oil and gas sector and ensure the locals get preferential treatment for oil industry jobs. Would you say this purpose has been significantly achieved?
A lot of progress has been made but we are not yet there. We have made progress in creating more Nigerian service companies, vessel ownership, fabrications, rig ownership, pipe coating, logging companies, pipe laying companies, waste handling companies, well testing, well head, seismic companies, gyro companies, rov companies, training companies and Exploration and Production (E&P) companies but more needs to be done. We need to have strong Nigerian EPC leaders; we need to have Nigerian owned vessels transporting Nigerian crude; we need to scale up to bigger projects. In projects like Egina, where 0% of the umbilical was assembled in Nigeria; less than 50% of the Xmas tree assembled in Nigeria; 100% of the pipe imported from Antwerp, less than 50% of the FPSO integration to be done in Nigeria; 0% of reels fabricated in Nigeria. We need to scale-up.
We need more great Nigerian E& P companies and service company champions in all sectors of the entire crude oil and gas value chain. There must be a deliberate policy to achieve these. The minister and government should try within the time of this administration to create at least five strong Nigerian E & P companies and five strong service champions. History will be kind to this administration if this was achieved.
I was at a meeting with an oil industry MD, who said most Nigerian engineers lack competence for oil industry jobs. In fact he said the fresh graduates they hired are not fit for jobs, as a result the company spends so much on their training. How true is this?
It is not true. We have intelligent and smart Nigerian engineers. I was trained in Nigeria, excelled with a multinational company all over the world before I decided to set up my companies in Nigeria. A lot of people have slavery mindset; they still see the white as masters. What we are not doing right is investing in our universities and polytechnics. We must put the right and futuristic technologies in our institutions. We must create a unique Nigerian brand. We must go and lecture in our institutions as CSRs. We must remove the belief that nothing can be done without connection, corruption or settlement. The mindset of slavery, colonialism and deprivation must be eliminated for us to move forward. We must believe in our graduates; invest in their education and have confidence in them. We should give them the confidence and mindset that they can make it.
When you hire right, you get the best candidates and then you have to train them to adapt to your technology and systems. We should encourage TETFUND, PTDF, NCDMB et al to invest in polytechnics (primary source of middle-level manpower) and the universities.
You are an engineer, how have you brought your experience to bear in running the affairs of PETAN. What new ideas have you brought on board to move the oil industry forward? Also, people are beginning to see the annual OTC, which PETAN organises as a mere jamboree. What would say Nigeria has taken away from this event over the years?
I have put in my experience as an indigenous oil & gas entrepreneur of more than 26 years plus working in 12 countries for a multinational oil service company as an expatriate plus my education from Harvard and Georgetown universities and commonsense to bear in my leadership of PETAN. We have initiated lots of creative ideas, contractor financing to help NOC’s bring their fields to production fast without spending their money. We are working on PETAN Seal of Quality and Competence to help regulate all oil and gas service companies build competences; achieve higher percentages level of Nigerian Content; create service company champions that can compete any part of the world and institutionalise a level playing field where competence and capabilities reign. We are creating better collaborations to expand the pie and create sustainable long term value. We are also re-emphasising our mantra that value should be placed on existing in-country capacity not patronage. The OTC is not a jamboree for serious minded companies. OTC offers a veritable opportunity to oil and gas industry stakeholders to gather, deliberate and articulate ideas on relevant developments , trends and challenges . Our takeaway from OTC 2016 is gaining technical knowledge and making valuable contacts, exposure to new technologies and global developments, telling investors that Nigeria is still good for business via PETAN investors’ forum, panel sessions, exhibition and local content workshop; marketing Nigeria’s challenges and opportunities.
What is the relationship between PETAN and other oil industry players, particularly the international oil companies (IOCs)?
The Nigerian oil industry is said to be corrupt-ridden, how can this be addressed?
By creating great institutions and not personalities; instilling corporate governance in our affairs and promoting more openness and transparency. Let the rules be very clear to all. This should apply to all sectors of our economy and not only in the oil and gas industry. The spending in the oil and gas industry is nothing compared to the spending in other sectors of the economy.
Security issues are giving every Nigerian a sleepless night, how are they affecting production and plans for new finds
Very very bad. Lots of unexpected shut-ins. Production is down to 1.4 mbopd and this will definitely affect new investments as investment does not thrive in unsafe environments.
Specifically, the resurgence of attacks on oil installations in the Niger Delta is a major source of concern for government, the oil industry and Nigerians as a whole, what do you think government can do to address the heinous act
We need a Marshal Plan for the rapid development of the Niger Delta. Those who fail to learn from history are condemned to repeat it. We can start with creating an Energy Corridor in Niger Delta by setting up five modular refineries, gas plants; create many sustainable employments, entrepreneurs and ensure 24 hours power supply. By creating opportunities for many, business can thrive; the security of lives and property can improve. This will take time but the result will be sustainable and a win – win formular for both the Niger Delta and the government will be created. It is not going to be easy but will stabilise the Niger Delta, a place that has not really seen any development for many years. What is urgently needed is development that people can see and touch.
How has the plummeting oil prices impacted the Nigerian oil and gas industry?
It has affected us in a very bad way. First, the oil firms are cancelling contracts and they are deferring their budgets; what this implies to the service industry is unavailability of jobs, low cash flow and access to capital is very tight, and there is so much pressure on cost control. A lot of companies are laying off their workers (this is a capability that they have built over time) therefore it has devastated the industry.
Can you mention some of the projects that have been affected?
If you look at OPL 245, it has been shifted and nobody is certain when most of these projects are going to take place.
How has it hampered Oil Production?
What really affected Nigeria’s production is militancy in the Niger-Delta and not the drop in the price of the crude. What the drop in price has done to Nigeria is that there is no investments coming into the country, the oil firms do not have money to handle any projects. Oil and gas projects have longer gestation periods (some seven, eight and 10years depending on the project). For instance, if we want 4 million barrels per day, we have to start now, we have to increase a lot of exploration works, and we have to drill a lot of wells, but these things are not happening. Our reserve is 36 billion barrels and we have not added anything to it in the last 10 years.
We keep announcing that we want to increase reserve to 40 billion barrels and we are not doing anything about it, it will be difficult to achieve. If you look at offshore exploration activities, you will realise we are doing nothing; the few works that were done, were done by multi-clients. If you also look at the inland basins, apart from Chad where some exploration works were done, but stopped due to the insurgency in the north. It is important that we create data in our inland basins and create another source of crude and gas that is different from the Niger Delta. We need to acquire data of some of the inland basins such as the Anambra basin and most of the inland basins. Some jobs have been done, but not intensive.
There has been delay in the passage of Petroleum Industry Bill (PIB) and it has hindered new investments into Nigeria. Already, one year has gone and nothing significant seems to have happen since the new government took over. Do you think the National Assembly will pass this bill soon?
The objectives of the PIB were to enhance exploration and exploitation of petroleum resources, to significantly increase domestic gas supplies especially for power and industry, to create competitive business environment for the exploitation of oil and gas, to establish fiscal framework that is flexible, stable and competitively attractive, to create commercially viable national oil company, to create strong and effective regulatory institution, to promote Nigerian content and to promote and protect health safety and environment.
I believe they have made progress in the Senate. The bill was divided into four and it has passed through first and second reading. The present Chairman, Upstream, the Senate Leadership and the House of Representatives are kin on passing it. We need to watch and see how it evolves because if we don’t pass the PIB bill, we are in serious trouble. Nobody is ready to bring out his money and invest in a place where the fiscal frame work is not clear. Therefore, it is critical to pass the PIB bill. The greatest mistake we made was not passing the bill when the oil price was $100 and oil companies were ready to invest and there was money for investment. But all hopes are not lost; we must pass the PIB bill because it is the key.
During the Offshore Technology Conference in Houston, Texas in May, you specifically expressed concern that the Nigerian Content Fund (NCF) was not being disbursed to develop the oil industry, has anything positive happened between that May and now?
There is more than $8 million dollars in that fund. What you should understand is that the money is our money because all our invoices, one percent goes to that fund. This is how that fund is generated. I expect NCDMB to yearly bring out 200 million dollars to build the capacity of some selected companies (say four as the case may be). They should not give companies money, the equipment they (companies) need should be paid for and capacities built. They should also invest in our Polytechnics and Universities; we should not be condemning the higher institutions, we should invest there. Many Nigerian youths are smart and intelligent, but what affects them is the standard of equipment they are being trained with. Students in Nigeria can compete with students from any part of the world. Therefore, we should spend more on stepping up the game in terms of equipment and capacity building.
How much impact will the disbursement make in the industry within a short term frame?
There has to be a deliberate policy to create champions. For instance, a company that has two sets of equipment, if it has like four or five sets of equipment, it will be easier for it to work in many platforms at the same time. Then you build the company’s capacity by financing the remaining sets of equipment not by giving them money, then, you have created a champion in that area. This creates a lot of employment opportunities because they will hire more sets of crews, but when you keep that money and it is not being used for anything, something is wrong. There is a bill going to the National Assembly, there must be an account of the amount of money that came into that fund, that what it is used for should be published quarterly in the major newspapers.
What is the function of the Petroleum Technology Development Fund (PTDF)?
The aim of the PTDF is to build capacity. What it has been doing over the years is to send people to institutions around the world. We need to look more in house, majority of our people are in the polytechnics and the universities. It is possible that the PTDF has been supporting, but we want visible support. What creates great institutions is investment, for instance an institution like Harvard, it has an endowment fund of $60 billion; and it can afford the best professors and equipment. Why can’t we transform our universities and polytechnics in the same way, so that a child must not hail from a wealthy background to have quality education.
Infrastructural challenge is a major concern for this new government because it is slowing Nigeria’s economic development. How best can poor access to electricity be address?
Let me state here that the kilometre of Nigeria’s pipeline is only five kilometer, with a population of over 160 million. In the United Kingdom, the kilometre of pipeline is 700 with a population of 62 million; in the United States, the Kilometre is 1.5 million and the population is 310 million. What this implies is that our infrastructure gap is huge, we need a lot more pipelines, more gathering points, and this requires a lot investment. Government needs money to carry out some of these investments. As Nigerians, when we want to site projects, we need to site them optimally. When we site them optimally, access to resources will not have issues.
We must install gas plants where they would have access to gas, this is the way countries develop. If we have a power plant that goes to gas, the issue of supply going to that power plant has been solved. Then, we start worrying about evacuation of the power that becomes another issue. The infrastructure in the power sector, though we are not yet there, the government is doing its best. I know that there is a major pipeline that is in progress now, which is being constructed by one the PETAN members and that particular pipeline is one of the key elements of the power sector.
What is your assessment of the Nigerian Oil and gas industry? As a guru in the industry what advice do you have for operators and the government?
First, we must pass the PIB bill; we must have a fiscal policy that is investment friendly; also, we must honour the sanity of contracts; we must enshrine transparency, openness and consistency in all that we do. We must honour our JV cash calls. Going forward, we must move away from these cash calls to a system where each company can source their funds and carry their jobs in transparent manner. We must also leverage on proven Nigerian companies.
That will be part of our security for the future and create jobs for all our children. We must have proper ways of managing our acreages, if you cannot develop your acreage, then we should relinquish it to people who can develop it. Therefore it is the policy of drill or drop. It is very important that we look forward. Government should focus on regulations and collects their taxes, royalties. Private enterprise should drive the business; investment capital goes to investment friendly areas. We must create a secure environment for investment to thrive in our place. The policies have to be investment friendly; we must eliminate above the ground risks in operating in our industry. We must create an energy corridor in the Niger Delta; develop entrepreneurs in that area, people will see positive development. When people see positive development in their area, it will bring down the tension. Creating an energy corridor creates so much jobs and opportunities. For instance in Bonny town, where is there is steady light, there is hardly a case of militancy there and there are several service companies. Therefore let us replicate this model through Niger Delta, let there be dignity in labour.
Tell us about yourself and your company, how long you’ve been in the industry, the serves you provide for the oil industry etc
I left Schlumberger in 2000 and set up my oil and Gas service companies – CB Geophysical Solutions Ltd and Vhelbherg International. We do seismic acquisition, processing and interpretation. We also do studies and field development plans. Vhelbherg (Leak Repairs Specialists) repairs pipelines, flowlines and facility leaks. We also provide early production facilities. I have been in the industry for 27 years.