Fatona: Nigeria’s Oil Industry Will Face Drought if Militancy Continues

Layi Fatona

Layi Fatona

The founding Managing Director of Niger Delta Exploration and Production (NDEP) Plc, Dr. Layi Fatona, shares his over 40 years Experience in the oil and gas industry with Peter Uzoho and Esther Oluku, as part of preparations for his 70th birthday ceremony coming up in June. Excerpts:

You have been in the oil and gas industry for over 40 years. You started with the Shell Petroleum Development Company (SPDC) as a geologist. But you left SPDC after spending seven years. What really motivated you then to leave such a plum job at SPDC – leaving the known for the unknown?
Actually, each time people ask me that question these days and I think backwards. I think the reason is just stupidity, and if you don’t know the consequences of failure you can do some really stupid things. So, I was totally oblivious of what would happen if I failed and I think that removed the common sense of determining whether to leave or not to leave from my mind. So sometimes, people’s ignorance is blaze. I think it has been so with my case. I was totally ignorant of the consequences of failure. I think that removed the fear. Because if I had known what the punishment could be; if I didn’t do well, the worry and the fear of them would have possibly constrained my urge or my ability to think about leaving but that fear didn’t exist. So ignorance is blaze.

Was there any point in your life that the challenges became enormous that you regretted leaving SPDC and you felt like going back to the company?

That also was always there because I was told when I was leaving that if I ever thought of wanting to come back that I could always come back. But, instead of going back, real life occurred because I had a very strong support in my wife and she was always there to support me. Of course, I had very unsteady and bad times, but I think my wife was very much the anchor then. It did not make any difference because during that difficult time anything that was hers was for me to live on.

We understand that you and your friends had initially set up Geotrex Systems Limited to consult for exploration and production (E & P) companies. What motivated you to set up Niger Delta Exploration and Production (NDEP) Plc and went into full E & P business?
Let me quickly correct something and put it in right perspective. I did not with my friends to conceive or form Geotrex Systems. In fact, they are not my colleagues – they are my extremely high-level superiors who formed Geotrex and I happen to be their first guinea pig of an employee. So, I was employed when I left Shell to come into Geotrex as the first staff. So, if anybody said I told my friends to form Georex, it was an arrogation of a capability that did not exist. The late Mr. Eddy Iyamu and the late Alhaji Okoli who were top senior Shell retirees – they took early retirement from Shell in those days in 1980s.

They left in 1984. They formed the company thereafter and came out to hire me as their first employee. I joined the company as number one employee. They did not tell me anything about what I needed to do because there was really nothing to do; it was just to run with their vision and their ideas. They wanted to form a truly Nigerian exploration and producing consulting outfit and they had in their mind that such a company would combine the ability to think and deliver services, pure and simple.

We went on, built a company and in January, 1987, I wrote a memo to the management of the company. This was like one or two year after I left Shell and I said I had a dream of forming a Nigerian oil company. I was very lucky that mine was to think of ideas, theirs was to let me fly with my ideas. So, I would say, I am lucky to have been in the hands of such very matured minds who saw things in me. Later with the late Chief Aret Adams, it got much bigger. However, in all ramifications, they were all my very senior superiors. So, I was like a spoilt child eating with very old and mature hands and they just let me blossom. It was an idea that was allowed to flourish simply because they believed and supported it. You do not get that these days. I was like a free bird.

It appears you have a history of taking risks, because when about 22 private investors collected licenses from the federal government to build private refineries, none of them built any refinery and some of the licenses were revoked. But your company broke the record in 2010 when it commissioned a 1,000 barrels per day refinery for the production of diesel (Automotive Gas Oil) or AGO at the Ogbele oil field, thus emerging as the first private refinery in Nigeria to receive a License to Operate (LTO) from the federal government. How did you achieve this feat?

First of all, the idea was driven by the fact that there is really no reason why Nigeria should not have one. The founders of the original Geotrex had all passed away but the board of the company had fallen into very good hands. Mr. Osunor, who was the former director of Directorate of Petroleum Resources (DPR), was now the chairman of the company. These were forthright professionals in the industry who knew what needed to be done and they were just there as my guide. So, here was I, energy, ideas, there they were, always believing that anything I said that we wanted to do made sense and that it was good. They just supported me. Yes, it was risky but I think the risk component of it was the conviction that those people who were my superiors believe that we could do it. Not that I could do, we could do it, the company could do it. There was that absolute trust that I would not be reckless with the resources of the company and there was the conviction that I knew what I was doing. Again, this just went on and on, and like I told you, they just let me be.

You have been in the industry for over 40 years. What has been your staying power all these years?
I would say my training. I am a geologist. I cannot be a doctor or an engineer, building houses, and the Nigerian petroleum industry is a very interesting place to be. We could never do enough for this country even as an industry. Let us forget the fact that as an industry we have not achieved anything. But in the context of the bigger set up of Nigeria, the industry that could do so much has so much space. Therefore, if you are somebody like me, thirsty and energetic, you would go from one thing to another. You would go from oil production then, you would think about gas production and to processing oil and gas. And you would still look around and realise that there is still so much to do. So, I think the staying power is already entrenched in the system. Today, I feel that I could still spend another 20 years. There is still so much to do.

You had an ambitious target to raise the capacity of the refinery. How far were you able to implement this plan before your glorious exit from the management of the company?

The refinery is almost ready today. We are increasing the capacity from 1,000 to 11,000 barrels per day. The first phase of it, which will see a first tranche addition of 5,000 barrels, the facility is completed now. I believe that immediately after my birthday, the facility will be up and running. A couple of months after that, the additional 5,000 barrels which is already in the country would be ploughed in and hopefully by this time next year, we would have a fully functioning refinery owned by the company.

What is your take on the issue of gas flaring in Nigeria?
Gas flaring again, is one of the things that you would say, how come we did it? As a company, we eliminated gas flaring in our small field when nobody would agree that it was possible. There is absolutely no excuse for gas flaring in Nigeria. The rule to stop gas flaring exists but it is not enforced. There is a regulator and there is a government that is supposed to drive enforcement. It is a very complex dynamics. Basically I think there has not been a will on the part of government to enforce the rules that have been established. It is what you see in Nigeria every day.

There is a rule that you cannot drive against traffic but go to Admiralty or Ademola now, you would see people driving against traffic. It is part of us not to enforce the rules that we make. And I think that if there is self -discipline that rules are meant to be enforced in this particular instance of gas flaring. But as a company, we took that rule, we looked at it, we knew we could comply with it and we were much more worried about the consequences of punishment holding it as a deterrent. Each time we thought about the punishment, the fear of it made us comply with the rule. So imagine if that punishment is implemented all across I think this country would be a lot better than it is today.

You were one of the leading champions of the indigenous participation in Nigeria’s oil and gas industry. Your efforts led to the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, known as the local content law. Your efforts also led to the sale of producing assets by the international oil companies (IOCs) to the Nigerian independents. Considering where we are coming from, can you beat your chest and say that indigenous players have arrived or do we still have a long way to go?

Well, to answer that question, you have to look at the entire oil and gas industry, not just in Nigeria but in the entire Africa. In the case of Nigeria, Nigeria has been producing for over 65 years. And I would say that this is the only place in Africa where you see not one, two, three or four five indigenous companies that are able to take the processes of oil exploration, production into its logical conclusion. So, to answer your question, Nigerian indigenous participation and rights, yes, we landed on the shore safely. Are we sufficient in terms of numbers? No. I strongly believe that there is still much more space for businesses, producers. But, I want to caution that during the just concluded Oil Commerce Association of Indigenous Producers, there got to be indigenous producers who are committed to doing things properly, safely, in the context of obeying the rules and regulations of that industry. But there is so much space still for indigenous producers to join the enterprise. And I personally would say to you that Nigeria has arrived when about 60 per cent of our daily production, mark my words, 60, or even more of our daily production, is attributable to Nigerian indigenous producers. Today, between all of us, maybe we do like 20 per cent. So there is still a long way to go.

In recognition of your contributions to the growth of Nigeria’s oil and gas industry, you have won several awards and recognitions over the past 40 years. You are a President and Fellow of the Nigerian Association of Petroleum Explorationists (NAPE), a Certified Petroleum Geologist of the American Association of Petroleum Geologist (AAPG), the 6th and 2010 recipient of the prestigious highest ranking “Aret Adams Award” of the Nigerian Association of Petroleum Explorationists, the 2012 recipient of the Nigerian Mining and Geosciences Society (NMGS) NMGS/DPR/Chief M.O. Feyide Award, and a “Master Class Finalist” in the 2011 Ernst & Young – Entrepreneur of the Year Award series. Do you fill fulfilled at 70?
Partially, because there is no end to fulfillment. I feel there is still much I can do. I feel a certain sense of wanting to take young people, like my personal assistant, and making him on a path that puts him better than I am. So, in terms of fulfillment as a person, I do not think there is anything extraordinary about what I have achieved. Anybody who has had the same exposure that I have had, the same opportunities that I have had, may easily have done a lot more things than I have done and that moderates my sense of accomplishment. But, have I felt satisfied? I think it is other people who would make that assessment not myself. As far as I am concerned, I am just my ordinary self. There is nothing extraordinary about me.

For some years now Nigeria has not made remarkable progress in the discovery of new oil fields. Have the explorationists gone to sleep? What is really responsible for that?
To make new discoveries, which by implication of your question, brings about additional reserves for the country, you have to invest in exploration activities. To invest in exploration activities, you need to have substantial risk capital which does not exist. So, the reason why we have not been able to discover new fields is simply because the size of exploration activities has shrunken over time. And the reason why that has happened is because, nobody is spending risk capital. In the days when I worked in Shell, there was a very substantial budget for exploration year in year out because you must find oil to increase reserves. If you do not and you are just developing the reserves that you have, you will be depleting your reserve. And I think somewhere along the line, it has greatly become a guiding principle that this country is not spending enough on oil and gas exploration. There has to be a specific and deliberate dispensation that if you find new reserves then you would be incentivised further to do other things. That used to be in the past.

What is your advice to young Nigerian oil and gas professionals?
Very simply, be focused, be determined to succeed, and whenever you have the opportunity, do things properly.

Where do you see the Nigerian oil and gas industry in the next 50 years?
In the next 50 years, if militancy continues, there is only one thing that can happen, the industry becomes drought and I take the case of Ogoni land as example. See what has happened to Ogoni land. In the last 20, 30 years, nothing has happened. So imagine a spread of Ogoni land in Nigeria. In terms of my prediction for the future, the government has to create an enabling environment for business and ideas to flourish. If that happens, then I would say in the next 20 to 50 years, the sector should grow faster than it is today.

What I expect to find in the next 20 to 50 years is an energy independent Nigeria. A country where we produce all our oil and gas, we refine it locally and we would not have to export one single barrel of crude oil a day. That is the country that I am hoping to see and that should be the case until we can give products to everybody in the country after which, we can go back to our old way of producing and exporting, and that is the Nigeria that I hope to see, an energy independent country. Is it possible? My answer is yes.

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