FG Mulls Low-Cost Price Environment

“This ceremony of the official launch of NOGEC – an integrated resource complex to drive Safety, Value and Cost efficiency in the Industry – is yet another milestone in the development of the oil and gas sector and the realisation of greater value for all stakeholders,” Buhari said while speaking at the inauguration of the centre.

While charging stakeholders in the industry to take full advantage of the centre, he said, “I therefore charge you all to rededicate yourselves to national duty and take full advantage of this Excellence Centre to meet the challenges confronting industry. On our part, we will spare no effort to ensure that every Nigerian gets the maximum benefit from the huge natural resources.

“We will continue to leverage oil and gas for development and pursue our economic diversification drive across all sectors. I urge all industry practitioners and stakeholders to join me in this task of nation building to realise the abundant opportunities in our country.”

Also speaking at the inauguration, the Minister of State for Petroleum Resources, Chief Sylva, said that

“Let me take a few moments to highlight the main elements of each of these centres to underscore its role in driving cost reduction, increasing production and enhance value for the Industry.

“Search, Rescue and Surveillance (SeRAS) is a flagship programme of the Centre designed to enhance safety management, emergency preparedness & response and routine transportation for bed space management. SeRAS will therefore drive cost reduction and improve operational efficiency across the Industry.

NOGEC will help the country to cut operations cost in both offshore and remote locations by 50 per cent, adding that the projected 50 per cent reduction will also lead to the realization of the $10 per barrel oil production cost target.

“Conservatively, it is projected that upon full implementation of SeRAS, the annual industry expenditure for offshore and remote locations flight logistics and emergency response will reduce by 50 per cent – a significant gain towards our target reduction of cost-per-barrel across our operations,” he said.

On his part, the Director of DPR, Engr. Sarki Auwalu, said, “Today, we have concluded the framework and implementation modalities for successful take-off of these Programmes within the National Oil and Gas Excellence Centre due for imminent commissioning.

“We have no doubt that the industry now has the resource and platform to interact, cooperate and collaborate on salient industry issues that remain impediments to cost reduction, safe operations and optimum value optimisation”.

Sarki Auwalu

PIB, Community Engagement and Cost Optimization

The importance of community engagement cannot be overemphasized, if the country must achieve its $10 per barrel production cost target. This is the reason a comprehensive effort must be made to ensure that the overall best interests of the host communities are enshrined in the proposed Petroleum Industry Bill (PIB), currently before the National Assembly.

The leaders of the oil rich communities under the aegis of the Host Communities of Nigeria Producing Oil and Gas (HOSTCOMS), in January at a public hearing, openly rejected the 2.5 per cent being proposed for them in the PIB, being considered by the joint Senate Committee on Petroleum Resources, (Downstream, Upstream and Gas), insisting that it is 10 percent or nothing.

But speaking with journalists after the end of the two-day public hearing on the proposed bill by the Senate panel in January, Chief Sylva said that 2.5 percent is fair enough.

The Punch quoted him as saying,

“The 2.5 per cent as proposed in the bill is fair and of course, I speak as a member of the host communities myself.

“If you have to look at it properly, you will see that 10 per cent in profit is different from 10 per cent of the OPEX (operating expenditure).

“Before now, you had a provision of 10 per cent of profit for the host communities but we discovered that if the oil firms do not declare it, host communities won’t have anything.

“But in this case, it is 2.5 per cent of the operating expenditure. So, at the end of the year we will calculate the operating cost and take the 2.5 per cent of that cost to the budget of the next year.

“Of course, I don’t like to discuss details of the bill at this point because these are just proposals before the National Assembly.

“Until it is passed, we cannot discuss it but since it came up here, I thought I should just mention it.

“As far as we are concerned, we have made a very fair proposal – fair to the host communities, fair to the country and fair to the oil companies.

“We have put this bill before the National Assembly and they have the competence to look at it and pass it the way they see fit.

“So, at this point I do not want to go into detailed aspect of the bill. The bill is before them and we are happy with the progress.

“As you heard the Senate President say yesterday, we expect that this bill would be passed at the end of this quarter or early next month.”

This disagreement raises a red flag that needs to be nipped in the bud. If the issue of percentage host communities are entitled to, is not addressed, the PIB may not be a success, especially in the area of reducing cost of production; as most of the host communities are likely going to be more antagonistic to the oil firms operating in their localities, leading to continued vandalization of assets and loss of investments.

While receiving a delegation of Oil Producers Trade Section (OPTS) in Abuja late January, the President of the Senate, Ahmad Lawan called for a reduction in the cost of crude oil production. He promised that the National Assembly will do everything possible to ensure that the host communities benefit from wherever they are supposed to benefit from. He noted that PIB would make provisions for reduction in the cost of crude oil production.

Lawan said, “The cost of production in Nigeria is a major concern in the oil industry, my colleagues in the committees that are oil and gas related know better.

“But from the little I understand,

while Saudi Arabia may spend 5 dollars to produce a barrel, we are spending about 30 dollars to produce same in some cases.

“In the last 20 years,

investments coming into Nigeria and this industry have been so dismal and so small

Ahmad Lawan

“The time has come for us to ensure that the cost of production is beaten down to a more meaningful and profitable production cost.

“We must do everything possible together to ensure that the host communities benefit from wherever they are supposed to benefit from.

“Not only the host community development fund, but in the Niger Delta Development Commission (NDDC) and other areas of government intervention, the Amnesty Programme and Ministry of Niger Delta Affairs.

“How do the host communities benefit, because we need to stabilise those areas so that we have cheaper production costs.”

On the importance of PIB, he said, compared to the size of what we have elsewhere, maybe due to lack of a legal framework – the PIB.

“So, we are very conscious of ensuring a balance and equilibrium between our interest as a people and a country, that we should have all the benefits accruing from your operations.

“We need to help you by creating that kind of environment where you’re able to argue and get the investments flow into Nigeria, instead of elsewhere. Let me also add, that at the end of the day, this is going to be a balanced legislation.

“For us as a country, we will not do anything that would jeopardise the chances of our oil industry competing favourably with other climes.

“So, I want to assure you that we would look into those issues of concern to you, and we would do exactly what we think will be in the best interest of Nigeria and also in the interest of the OPTS,” Lawan said.

Mike Sangster

Legor Idagbo

In his remarks, the leader of OPTS and Managing Director of Total Nigeria, Mr. Mike Sangster, who led the delegation, said the essence of the visit was to engage the National Assembly on areas that needed modification, to ensure its success when passed into law.

He said, “On behalf of all of the industry and my colleagues, I want to say that we duly support the government’s effort to drive through the Petroleum Industry Bill. We think it is really important that there’s an updated framework for the industry.

“In our view, we are looking for something that will contribute to Nigeria, which will bring investment to the country and growth to the economy, and obviously jobs to the Nigerian people.

“We are looking for something that will protect our existing investments, and also unlock opportunities so we can further grow our businesses and production.

“We need to find ways jointly to try and reduce what we see as the cost premium of operating in Nigeria, so we are looking at ways where the PIB can help there.”

Conclusion

For the country to achieve $10 per barrel crude oil production cost, a holistic approach much be adopted. One that clearly defines milestones in its execution.

This approach must cut across the entire value chain - upstream, midstream and downstream sub-sectors. It must look beyond personnel headcount reduction and encapsulate varying cost elements of its supply chain.

Addressing the big elephant in the room, a deliberate effort must be made towards improving security in the Niger Delta region. Effective protection of varying assets in the industry, as well as proper stakeholder engagement and management are key elements to driving the cost of security to a barest minimum within the region. A combination of industry regulating apparatus, as well as corporate self- regulation by IOC’s and their indigenous counterparts within the region is essential in driving a proper collaboration amongst all stakeholders in the value chain.

Speaking in 2019, the Chief Executive Officer, Seplat Petroleum Development Company, Mr. Roger Brown, emphasized the need for collaboration and deployment of Artificial Intelligence (AI) and technologies to achieve $10 target.

“Driving down the cost of production to $10 a barrel and below requires the active involvement of every player at every point. Realistic timelines need to be set. Delay costs, crude handling costs are key issues. Reducing costs also include exploring wells that give the best output. “ “New AI techniques and

technologies will help to address efficiencies and grow production. The industry needs collaboration to drive costs down.

The industry is one in the global context contributing 2mbpd and therefore needs to cooperate,” he said.

It is also noteworthy to recognize collaboration as recommended by experts is in the area of materials unitization and logistics. It is extremely vital to take inventory of varying equipment and to create material exchange portals for the industry by deploying big data, AI, IoT and other contemporary technologies.

Finally, the Federal Government and its relevant agencies must ensure that this laudable NOGEC program works. This, among other things, will help the country towards creating a $10 per barrel environment.

Roger Brown,

Buhari Approves Establishment of Trillion Naira Infrastructure Company

By Ikennqa Omeje

President Muhammadu Buhari has approved the establishment of a Public Private Partnership styled Infrastructure company named Infra-Co to address infrastructure deficit in the country.

The company, which will take off with an initial seed capital of N1 Trillion, is expected to grow to N15 Trillion in assets and capital over time, a release by the Senior Special Assistant to the President on Media & Publicity (Office of the Vice President), Laolu Akande has said.

“Infra-Co will be one of the premier infrastructure finance entities in Africa and will be wholly dedicated to Nigeria’s infrastructure development. The entity has been developed with concept designs from the National Economic Council (NEC) and the Central Bank of Nigeria. “The President had asked Vice President Yemi Osinbajo, SAN, to chair a Steering Committee tasked with setting up the company.

“The initial seed capital for the entity will come from the Central Bank of Nigeria, the Nigerian Sovereign Investment Authority, NSIA, and the Africa Finance Corporation,” the release stated.

According the release, the board of Infra-Co will be chaired by the Central Bank Governor and include the Managing Director of the Nigerian Sovereign Investment Authority, President of the Africa Finance Corporation, as well as representatives of the Nigerian Governors Forum, and the Ministry of Finance, Budget and National Planning. The Board will also have 3 independent directors from the private sector.

To address Nigeria’s infrastructure deficit, the Buhari Administration continues to explore innovative options, including through financing initiatives such as the Presidential Infrastructure Development Fund (PIDF) designed to cater for the 2nd Niger Bridge, the Abuja-KadunaZaria-Kano Expressway, and other projects.

There is also the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme which is being used for the funding of the Bodo-Bonny Bridges and Road (with the Nigeria Liquefied Natural Gas, NLNG), and the ApapaOshodi-Oworonshoki Expressway (with Dangote Group), among others.

Infra-Co will finance public asset development, rehabilitation and reconstruction as well as invest in cutting edge infrastructure projects for Roads, Rail, Power and other key sectors.

Govt says East-West Road for Completion, Commissioning Q1 2022

The Federal Government has announced that the East-West Road will be completed and commissioned in the first quarter of 2022.

The Minister of Niger Delta Affairs, Sen. Godswill Akpabio, disclosed this during a tripartite meeting among the Presidential Amnesty Programme, NDDC and ex-militant leaders in Okochiri, Okrika Local Government of Rivers State.

The meeting, according to the minister, was geared towards remodeling the Amnesty Programme on how repentant militants can be entrepreneurs instead of depending on stipends.

Sweetcrudereport reports that Akpabio said that the Niger Delta remains a priority in President Muhammadu Buhari’s agenda.

He stated that contractors have been mobilised to site and by August 2021, the East West road project would have gone far, as he has devoted three quarters of his ministry’s 2021 budget to the project.

The minister said: “We must find ways to move the Niger Delta region forward. We are hopeful the East-West road will be completed by December. Contractors have been mobilised to site, Setraco, RCC and Giito are back on site.

‘By August this year, the project must have gone far. I am also a part and parcel of the victims of East-West road, I ply that road almost daily. That’s why I went to Mr. President and told him I will take over the project.

“I have devoted one quarter of my ministry’s 2021 budget into the road. I also insisted that NDDC must make a contribution, even if it’s N25 billion and also the Federal Ministry of Finance is contributing about N25 billioj to make N100billion for the completion of that road.

“I am sure that by early 2022, between February and March, we will commission the entire section of the East West Road. The failed portions you see now, you will see them no more”.

Also speaking, Coordinator of the Presidential Amnesty Programme, Col. Miland Dikio Rtd., disclosed that the programme has been repositioned to empower exagitators to be competent and efficient in their chosen fields, so as to be independent of stipends.

“We have brokered truce with the major stakeholders. We inherited a lot of debts and we have started paying those debts sequentially from 2014 downwards.

“For students, we are also clearing backlogs of fees. There are students who had partial scholarships and we are working to ensure that such dichotomy does not exist anymore.

“For empowerment, we want to ensure that those powered can compete for any job anywhere, not because they are from the Niger Delta, but because they are competent and qualified,” he said.

At Least $10bn Infrastructural Investment Ongoing in Nigeria’s Energy Sector --- NNPC GMD

poverty level is very high, extremely

challenging. But so much is going on to see how we can reverse this trend. When you combine all these, you will see that as a country of focus today, many things are happening in the energy sector.

“For instance, we are seeing investment in our energy infrastructure, especially in the area of gas in excess of $10 billion; this is ongoing. There are a number of gas-based projects about $3 billion to $5 billion dollars and some of them are at the Final Investment Decision (FID) stage.”

According to him, Nigeria as a country is currently in transition and not necessarily in energy transition, adding that the country is not oblivious to the changes in the global oil and gas sector.

He explained that Nigeria is at the moment witnessing increased domestic gas demand in the industrial and power sectors, leading to increased production and reduced gas flaring.

Kyari added that the country is also witnessing increasing household access to gas networks and natural gas in the main cities, while there are deliberate plans to expand that access to rural areas.

He said the federal government’s recent plan aimed at deepening domestic gas consumption, led to the advent of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) and that it was part of the policy to deploy resources in the right places. According to him, “The best of forecasts have said that in 30 years we will still have at least 100 million bpd of oil consumption.

“So, oil and gas will still remain relevant in the near future, but the transition is real. What countries and nations are doing is to move towards much cleaner fuel and this cleaner fuel is clearly gas and that’s why we as a company are focused on gas resources, making sure to supply the domestic market and create opportunities for export.

“So, what we see as an energy resource-based country is to utilise the available resources of today to create the enabling environment for growth and prosperity in the country and that clearly aligns with the reality on the ground.

“We have significant goodwill and understanding across countries, nations and companies. For instance, we have significant engagement with the United States Department of Energy in the sense that we receive some support in our transition to cleaner fuels so that we can develop our gas infrastructure so that we move away from the liquids to gas ultimately.”

On whether or not Nigeria can survive without oil, especially given the current crisis in the global oil market, Kyari explained that Nigeria is gradually moving away from its dependence on oil.

“What does this mean for a country like ours which depends on oil for cash? Obviously, we have seen how we can transit to something better for our country, so we don’t depend on that today. You may be aware that today, the country’s resources are mostly coming from taxes and those taxes are growing because population and prosperity is growing and we want to get more work done.

“As a country, we are facing the new realities and we are moving towards the use of gas and also we are developing our resources as quickly as possible so that when the real transition comes in 30 to 40 years time, we will be in a position to say this is a developed country that has taken advantage of its resources,” he stated.

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has said that there is at least $10 billion worth of investments currently ongoing in the energy sector in a bid to delist Nigeria from one of the most energy impoverished nations in the world.

Kyari, who spoke on the second day of the Atlantic Council Global Energy Forum, 2021 on the topic “Delivering Energy Access in the Developing World,” noted that although the country aligns with the push for renewables, it is now focused on using its oil and gas resources in developing infrastructure till when the commodities become less relevant in about four decades.

He said Nigeria with significant gas reserves, has approximately $3 billion to $4 billion projects currently going on, some of which have reached advanced stages, in the country’s efforts to rev up production for domestic use and for export.

He said: “We are not a petroleum country in the real sense. It’s agreed that we have the 10th largest reserve of oil and a significant gas reserves. Of course, what everybody recognises is the oil. The reality today is that we have a country in excess of 200 million people. Seventy per cent of this population is well below 30, with a growing middle class and one of the fastest-growing economies in Africa.

“More importantly, for us today, an energy deficient country, over 60 per cent of our country is not electrified, the