President of Nigerian Association of Petroleum Explorationists, Mr. Nosa Omorodion spoke to Ejiofor Alike on the challenges facing Nigeria’s oil and gas industry and identified fiscal instability and uncertainties in regulating policies as some of the factors that led to the loss of investor confidence in the sector. Excerpts:
With the drop in oil prices and the attendant cut in budget and staff of many oil companies, what is NAPE doing to prepare its membership for this current reality?
NAPE is the umbrella association for persons involved in the professional application of geosciences and related disciplines to the exploration and production of oil and gas in the country. We have over 7, 000 members. It has been our practice to hone the professional skills of our members so that they deliver exceptional service at their work places. Periodically we organize seminars and sessions to prepare to navigate through situations like this. We also have a programme for Young Professionals where they are mentored by older colleagues in the industry. Specifically on the issues of job losses, we set up a number of palliatives and options for our membership. We have set up a Career Centre to help with job postings, subsidized training and sponsorship for members, working on a Graduated dues scheme for unemployed members, as one of our initiatives aimed at retaining members. We have also commenced an Online Training Platform to help retool the professional careers of members. Members, associates, and staff of NAPE and their dependents can now access excellent quality healthcare comparable to what is the industry standard through our recently launched Health Management Insurance scheme.
Nigeria’s oil and gas industry has suffered loss of investments in recent years as operators cite the uncertainty in the operating environment to suspend or relocate investments to other countries where they consider the fiscal regimes as predictable. How critical in your opinion is the impact of fluctuating fiscal regimes in the oil and gas?
Thank you for your question. Last year when this present administration assumed office, NAPE proactively organized a special workshop titled “Positioning the Oil and Gas Industry for enhanced Performance in a New Dispensation ‘’The thinking behind organizing the workshop was to produce a document that would serve as a roadmap to guide the new administration on issues relating to the oil and gas industry. At the end of the workshop a communiqué was issued and transmitted to the Presidency. One of the topics discussed at that workshop was the issue of fiscal regimes. As you know, the fiscal regime of a country is a set of laws, regulations and agreements which governs the economic benefits derived from petroleum exploration and production. The regime regulates the transactions between government and the oil companies. The Nigerian upstream fiscal regime consists of a combination of taxes, bonuses (signature and production), rents, fees and royalties, as well as, in the case of PSCs, production sharing arrangements. Fiscal instability, significant gaps and uncertainties in oil and gas regulating policies and laws in Nigeria have resulted in the loss of investor confidence in the past. Not only that, it has led to preferential investment in other countries in Africa and other regions by international oil companies. The lingering PIB situation has not helped matters either. It has become the easiest alibi for inactivity whether right or wrong. I must also mention here that the insecurity and pipeline vandalism being experienced in the Niger delta have been major contributory factors. It is heartwarming though to see that concerted efforts are ongoing by the administration but more can be done. The Niger Delta situation needs to be addressed and more focused solutions targeted.
It is most unfortunate that Nigeria has perhaps the longest contracting cycles in the world, some times as long as 36months. This long procurement and contracting cycle has lead to high levels of uncertainties in costing and planning. I am in alignment with NAPE’s recommendation that the length of contracting cycles be shortened by optimizing the functions of NIPEX. The contracting cycles for services and projects should be shortened to 3 months and 9 months respectively. Fluctuating fiscal regimes also impacts on Foreign Direct Investment which is promoted by the size of the domestic markets, fiscal stability, fiscal returns and high levels of transparency in government and government agencies. I believe that the regulatory framework should be enhanced. The DPR should be empowered, made more independent and renamed Petroleum Directorate to reflect its new status and function. Finally, the PIB should be unbundled to meet the exigencies of current realities. I will appreciate it if the reading public can take time to visit the NAPE website to read the communique on this workshop.
In these challenging times for the oil and gas industry, do you see technology playing a key role on the road to recovery?
Well, yes for over a century now new technologies have changed the way reserves are identified, developed and produced. New technology has improved the quantity and quality of information available about different geological structures and this has enhanced the likelihood of finding oil and gas. I will give an example, today many new tools enable us to find deeper and harder to reach fields. As a matter of fact, it was technology that literally extended the reach of the industry in grilling into frontier fields and deeper depths. Additionally technology also helps to unlock new oil in old fields. I must commend the federal government’s intensified and intentional efforts in finding hydrocarbon in frontier basins. Finding more oil from these other fields will improve our reserves base and mitigate the short fall in production arising from disruptions in the Niger Delta. I will like to say that our Pre- Conference Workshop this year will be focusing Stimulating Investment opportunities in Nigerian Frontier basins. One other way technology has helped is in transforming resources once thought to be unconventional into conventional ones. Don’t forget that only forty years ago, all offshore oil was considered unconventional. Today, this portion of total global oil supply accounts for 30%. Improved technology has improved recovery rates and extended the life of existing fields and some fields feared to be depleted have been brought back to life.
The federal government recently pronounced Lagos State officially, as an oil producing state; what are your thoughts on this development?
Our business as explorationists is to find oil and gas. In that regard I am elated. In one of our Monthly Technical Meetings, we invited the Folawiyo Group, the company that spearheaded the search for hydrocarbon in the Dahomey basin, to tell the story of their journey to striking oil. It was a narrative of tenacity, grit and foresightedness. I am happy that the federal government has stepped up its endeavors in the search for oil in any region where prospective finds exist. In our conference this year, we also have the CEO of Lekoil who will be sharing the company’s experience and strides in Dahomey basin.
Lagos state is just one new state to join the league of oil producing states; certainly more states will be joining this elite league. The prospects for successful hydrocarbon campaign in other sedimentary basins are high. Anambra Basin has proven to also be relatively successful. Benue and Chad have potentials. There are mini-frontiers within the Niger Delta yet to be explored. It was such thoughts that informed the theme for our Management Session 2, for this year’s conference which focuses on Exploring Ultra Deep Reservoirs – a precursor to reserves replacement. We have the 6thlargest bitumen deposits in the world and yet this remains highly under explored. We have done very well finding oil theoretically and on the pages of newspapers, about time we match this zeal with practical enabling fiscal and political environment. E&P does not have to be exploration and production only. It also means environment and politics, economics and profitability, enhancement and professionalism, etc. We need to get into the other E&P. Our ideas find oil and gas but for the ideas to nurture everyone has a part to play.
It is about time we stepped up to exploit and maximize the potentials we have been bequeathed by God. Many will crave to be so blessed. Non hydrocarbon resources and the agricultural sector are also begging to be exploited.
The youth hold the keys to the future. What plans are in place by NAPE to ensure the gene pool for the production of professionally competent individuals is sustained?
It has been said that success without a successor is failure in disguise. NAPE as an association is very conscious of that maxim, and has put in place a comprehensive and robust agenda for the production of professionally competent individuals’ right from tertiary institutions to through to the industry. NAPE has Students’ Chapter in most of the tertiary institutions offering geosciences courses in Nigeria. There is a programme called the University Assistance Programme (UAP).The objective of the UAP programme is to support and supplement academic knowledge with industry experience and expertise mainly in the geosciences as well as career management in the oil and gas industry. The program was designed to be implemented through 5 key initiatives: A conference hosted for Nigerian geosciences students biennially;, a Leadership Forum that provides interaction and collaboration between industry practitioners and academics on finding ways to advance and improve the study of geosciences education in Nigeria; Grants-in-Aid award programme, supported by individual or corporate donors to deserving beneficiary students and schools and the Visiting Geosciences Program that supports the presentation of seminars/ workshops in geosciences and career management in Nigerian tertiary institutions. NAPE also has a Young Professionals (YP) committee specially conceived for rookies in the industry to interact share lessons, knowledge and life experiences with older and more seasoned industry leaders. We birthed the Young Professionals (YP) Leadership forum last year and it proved to be an instant success. This year we have created a leadership and recognition award scheme aimed generally at sustaining the YPS, on the growth path in the industry.
Finally as you step aside as NAPE president come end of this ongoing conference, what will you like to be remembered for?
Tough question. I have done my bit, contributed my best and have been able to sustain the membership’s enthusiasm for our association despite the turbulent times. We were able to put in place programs that speak to the concerns of the industry, we engaged at the right levels like never before, we maintained a quarterly communication with the membership on the state of the industry, we reinvigorated , set and enforced new milestones. We set up templates for the recognition of long standing membership. We launched a Special Business publication that chronicles the positions and conversations we have had on very topical government and business issues…above all we initiated and launched a local Medicare program we christened the NAPE HMO scheme for the benefit of our members