Explorationists Advocate Creation of Energy Bank for Oil Sector
Petroleum explorationists in Nigerian have advocated for the creation of an energy bank in the mold of Bank of Industry (BOI) for the Nigerian oil and gas industry that will provide funding to help equip and raise the funding capacity of indigenous oil firms to enable them execute high profile projects like the international oil companies (IOCs).
The President of the Nigerian Association of Petroleum Explorationists (NAPE), Mrs Patricia Ochogbu, made the call at a parley with journalists in Lagos.
He said such bank with lower interest rates was needed to tackle the issue of funding challenge faced by operators in the Nigerian oil and gas industry especially the independents and marginal field operators.
Ochogbu’s proposal came on the heel of the emerging transition from the IOCs to indigenous companies as seen by the former’s ongoing divestment from Nigeria and the need to equip local oil companies to be able to take over from them and replicate the capacity and capability being displayed by the IOCs in the country’s oil sector.
Funding continues to be a major constraint in the Nigerian oil and gas industry as the local banks have become allergic to lending to them because of the volatility of the industry and when they do, it comes with high interest rates with short term repayment period.
That has resulted in the drop in investments in field development projects as most oil and gas assets’ development take close to 10 years and beyond to execute, and the IOCs whose funding capacity is stronger than the local independents and marginal field operators take advantage of the situation.
“Where government can come in is to make sure that there is funding, that is the advantage that an IOC has over a marginal field operator. We strongly advocate that the government puts something like an energy fund or an energy bank like we have bank of industry so that funds could be made available to people who want to work. Not the kind of loans you get in the bank now at over 20 per cent interest and you cannot get it for more than five years.
“If you listened to First E&P story, they worked for almost eight years before they sold their oil. But you know, if you go to the bank to get a loan, even mortgage, you can’t get. So, if government is able to do that, that would help a lot,” Ochogbu said.
Apart from the need to establish an energy bank for the industry, the NAPE president also called on the government to find a way to address the multi-level taxation existing in the oil and gas industry where operators are charged left, right and centre by the federal, states, local governments and host communities.
She pointed out that the high multiple taxes being paid by operators constituted a major funding challenge to the operators as they increase the operating cost and discourage further investments in the sector.
She said government needed to create an enabling environment so that those with viable ideas could come in and invest such ideas and resources in the development of the sector without having to face funding challenge as a result of multiple taxation.
“What I can say to government is that they should create an enabling environment. One of the things that people don’t talk so much about is the amount of taxes, there is multi-level taxation that this industry faces. So, as you are looking for funding to do this, you know that the federal government will take, the state governments will take, councils will take, even in your operating community.
“So, if government can help us in that area, like streamlining the taxes and making the environment friendly. A lot of people have ideas, a lot of people have what it takes to make something happen in the industry but if they don’t have access to funds or if a big chunk of the fund will go into non-production type cost, then it becomes a problem. Although I will say that the government doesn’t have money but they can create policies, they can look at taxes and just make things a bit easier for the industry,” she stated.
The NAPE henchman further stressed the need for the government to ensure that data was made available for the operators in the nation’s industry, pointing out that data availability was another area of critical importance in the industry.
Admitting that the Department of Petroleum Resources (DPR) has such in place as the National Data Repository, Ochogbu however advised that such could be strengthened to make data available, stressing that if the available data could be freely shared at least for scientific discourse and for scientific research, it would help the whole country.
On energy transition and the prospects for Nigeria, the NAPE boss argued that it was expected as change is a constant thing in life, allaying the fear that petroleum products would become irrelevant in the next 20 to 30 years.
She said Nigeria has a bright prospect in oil and gas with its over 200 million people as a large market for petroleum products, thus justifying the need to continue investing in oil and gas exploration and production.
Ochogbu tackled the campaigners of energy transition, saying, “other countries are talking about renewables but what they are not telling us is the environmental cost and the other hidden cost that we do not know yet, because right now, we see that electrical vehicles, is still starting.”