$100m Oilfield Chemical Investments Face Extinction

Yemisi Izuora

Former President, Nigerian Society of Chemical Engineers (NSChE), Dr. John Erinne, has raised concern that the over $100 million investments in oilfield chemical sub-sector of the Nigeria’s oil and gas industry is seriously challenged.

Erinne, who spoke at the Second National Oil and Gas Production/Process Treatment Chemical Seminar in Lagos, maintained that contracting cycle in Nigeria is extremely frustrating and has subjected these huge investments to an atmosphere of uncertainty.

Stakeholders in sub-sector, he said, are rising against this major threat to business worsened by longer-than-necessary tendering cycle in Nigeria, which is six time longer than that of its rival oil producer in Africa, Angola.

“Investments in the industry are in the excess of $80million and $100 million. So if you work that back into Nigeria it depends on the exchange rate you are using because we are in regime of multiple exchange rates.

“When you are in one tender waste up to five years, it is extremely frustrating. It makes you operate in an atmosphere of uncertainty. But if you know that the tender starts today and in six months it will be decided who is successful and who is not then I helps you to plan; it helps you to chat your course and determine where you are heading to,” he said.

His view was corroborated by Managing Director of Blue Sea Company, Mr. Doyle Edeni; Chairman of event, Dr. Innocent Akuvue and representative of Baker Hughes, Mrs. Tine Unachukwu at the seminar.

A number of companies, Akuvue said, are springing up and are active in the treatment chemical industry and to be effective in doing that, many are investing in blending plants for blending chemicals, which they use for work. They are also associated with ancillary facilities such as laboratories and logistics.

The pervasive influence of Government in the oil industry is one of the major causes of delay in oil contracting time, which is costing Nigerian companies operating in the sector loss of up to $700 million annually.

It takes 36 months (three years) to get an oil contract signed in Nigeria, as against six months in Angola.”The delay in contracting time is mainly caused by overwhelming operational and bureaucratic bottlenecks, fuelled by government involvement in the sector,” Doyle added.

Stating requirements to improve Nigerian content by practitioners and professionals in the treatment chemical arm of the midstream sector, Dr. Erinne who doubles as the Chief Executive Officer of Matrix Petro-Chemical said; “What is most important for us is for the government to maintain a well-balanced regulatory regime; workable and beneficial to all.”

He continue; you have to note that those regulations meant to protect people and businesses don’t end up strangulating them. This makes you to lose the entire essence. So you have to balance it somewhere in order to get the desired result. So, that is the most important thing we desire from government and that is key in creating the enabling environment for businesses to thrive.”

One other area the seminar was focused on is that many of the stakeholders are interested in infrastructure and facilities but access to funding is difficult.

“Commercial banks don’t have the kind of funds that are suitable for that kind of investments and where they have, interest rates are extremely unfavourable to the investors, so we need government to assist in ensuring that investors in productive ventures so as we are involved in can have access to reasonable funding,” Erinne said.

What is comforting to hear is that the representative of Nigerian Content Development and Monitoring Board (NCDMB) had expressed the government’s enthusiasm to dialogue with society of Chemical Engineers on way forward to challenges facing the chemical industry, he added.

Earlier, guest leturer at the seminar, Engineer Ese Otakoro said in a lecture entitled: “Peculiarity of compliance with NOGIC Act with particular reference to oilfield chemicals,” that the global trends show that there is a focus on industrialisation as a mean of development.

Calling on the government to follow the Norwegian model, Norway, Otakoro maintained, has the most outstanding success in Local content with one of most successful content act implementation; enacted in 1985 after the Royal petroleum Act of 1972.

He added that the local content act in Nigeria expects 90 per cent spend is in Drilling, process and maintenance in oilfield chemicals industry.

“Chemical is the life wire of modern oilfield operations – From drilling through production to shipping. There is a need however to separate drilling from production chemicals. Though some overlap do occur.

“Lumping drilling and production Investments in manufacturing are huge and requires substantial incentives, availability of market and transparency.

“On reality of 90 per cent chemical spend Bank loans at 25 to 30 per cent  interest rates cannot be used for setting up blend plants as such investments are not likely to be viable.”

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