In this interview with selected journalists Chairman of the Independent Petroleum Producers Group (IPPG) Abdulrazaq Isa, speaks on oil theft in Nigeria, Energy Transition among other industry issues. YEMISI IZUORA was there for ORIENTAL NEWS NIGERIA
What are the implications of oil theft to independent operators, national economy and possible solutions?
The situation we find ourselves in is fast becoming unsustainable and a major threat to our businesses. The sheer level of theft is unprecedented. In 2021 alone, producers in certain parts of the Niger Delta suffered losses between 15 per cent to as high as 90 per cent. Such monumental losses attributable to theft are a major threat to our businesses, revenues to government as well as to national security.
The huge cost incurred on security is also adversely affecting Unit Operating Cost (UOC) targets of $10 per barrel. The escalating security and repair costs due to vandalization of key oil & gas assets is a major concern.
A concerted effort is required to address these challenges (the Government, security apparatus, operators, communities, etc must all be involved in finding a sustainable resolution to the issue) – some initiatives or steps that can be undertaken include: executing private sector driven pipeline security initiatives (such as the IPPG championed TFP Security Surveillance Initiative); deploying surveillance technology – e.g. Drone Technology to identify illegal crude oil theft points; introduction of HDD technology to secure crude pipeline from vandalism; providing enhanced security for strategic installations and assets across the region (major pipelines, trunk lines and terminals); minimizing operational disruptions due to communal restiveness and promoting collaboration amongst host communities, operators and relevant.
We are aware of efforts being undertaken by the government to address this issue by championing, mobilising and coordinating all stakeholders, in a bid to ensure a lasting solution is reached, we commend the government on these efforts being undertaken to address these challenges.
Do you think the independent oil and gas producers in Nigeria are ready to take over as IOCs are divesting?
Independent oil & gas companies are ready and very capable in this regard; they have a proven track record and have demonstrated technical, operational and financial capacity to manage previously divested IOC assets.
Since the major IOCs divestment in 2009, over 15 indigenous independents acquired divested assets enabling contributions from indigenous companies to significantly grow from about 3 per cent to 18 per cent.
Our aim in the short to medium term should be on increasing our contribution to 30 per cent – 50 per cent level at 3 million barrels of oil a day, MMBOPD (national target for crude oil production).
With the next round of IOC divestments, we forecast in the next 2- 3 years, the on-shore and much of the shallow water assets will be dominated by indigenous companies.
This next wave of IOC divestment also offers the opportunity for us to expand and deepen our capabilities and spearhead the country’s energy security drive.
Indigenous players remain best placed to guarantee a steady flow and incremental investments in adding value to these assets with over $11billion and $13 billion spent on acquisition and CAPEX cost respectively even in the face of the energy transition drive.
I have no doubt that independent companies, particularly our members, are more than ready and capable to step into the shoes of the IOCs.
Moreover, across the onshore and shallow water acreages, we have been successful in managing the perennial community restiveness issues through the following: Creating direct and indirect employment and effective engagement of host communities; Adoption of successful model to effectively engage host communities across areas of operation. The result has been minimal disruptions in operations.
What is your take on energy transition and what are the options for Nigeria?
First and foremost, the IPPG is fully aligned to global decarbonization initiatives and adoption of renewable energy. However, in the face of energy poverty and economic stagnation, Sub-Saharan Africa (SSA) decarbonization effort cannot be at the expense of growth and development. It is noteworthy that SSA generates the lowest carbon emissions in the world, less than 2% of global emissions, and a blanket financing ban on all fossil fuel project is detrimental to the growth of SSA economies.
Nigeria’s (and much of Africa) focus will remain on providing affordable and reliable energy to its population using its hydrocarbon resources in the short to medium term. With the current global de-carboinsation drive, there is an urgent need to focus on gas as a transition fuel and to power our economy (promoting the country’s industrialisation drive, addressing energy poverty, etc.) and ensuring Nigeria remains on a path of low-carbon growth whilst rapidly transforming its economy.
Energy self-sufficiency should be our short to medium term priority and as our energy mix evolves over time in line with the global energy transition drive, we need to ensure the fundamental thrust of our energy policies are geared towards our energy security and growth of our economy.
We applaud the Federal Government for the declaration of 2021 – 2030 as the ‘Decade of Gas’ to fully utilize and commercialize the nation’s abundant gas resources. Significant progress has been made to promote domestic gas utilization and end gas flaring (e.g. AKK pipeline and FID on Nigeria LNG Train 7, etc). Our members are also positioning to support the government in this effort of making gas a viable and scalable transition fuel for Nigeria.
So far how will you rate the implementation of the Petroleum Industry Act (PIA)?
The implementation of the PIA has taken off at a reasonable pace and I must commend the Federal Government for this implementation drive. The PIA was signed into law in August 2021 and the President was quick to inaugurate the PIA Steering Committee also in August 2021. The important role of this Steering Committee in ensuring the effective and timely implementation of the PIA cannot be over-emphasised.
We are pleased with the progress made, particularly in setting up and appointing the leadership team for the newly established industry regulators; the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Nigeria Midstream & Downstream Petroleum Regulatory Authority (NMDPRA). The timely set-up of these regulators will facilitate the implementation of critical aspects of the PIA and address grey areas in the Act, thus facilitating a smooth transition with minimal operational disruptions.
It is imperative that with the enactment of the act, we need to move swiftly and ensure the
implementation momentum is sustained to ensure we reap full value from the PIA. As a key industry stakeholder, IPPG seeks continuous engagement by the PIA Steering Committee and the newly created entities, particularly and the Regulators in the formulation of industry regulations to support the seamless implementation of the PIA.
How can we harness the potentials of natural gas, which is being positioned as transition fuel?
Two critical issues need to be addressed in the gas sector in order to unlock the investment potentials of the sector; Gas Pricing: The current downward price trend for gas is a disincentive to potential; investors (domestic supply Price of $2.50/million standard cubic feet of gas daily Mscfd to $2.18/Mscfd and even lower at $1.75/Mscf for Gas Based Industries); Legacy Debts: Huge outstanding arrears owed to gas suppliers (gas to power) constrains additional investment for Gas Projects.
Transition to a market driven pricing regime is a key imperative for the growth of the gas sector, this guarantees rapid and sustained investments required to develop our gas resources; Significant investment required to meet the 10Bcf/d of gas (i.e. 50 GW approx.) – $150billion to deliver 50 GW. With over 206 TCF of gas reserves, Nigeria has no business experiencing energy poverty.
Can the current architecture in the downstream segment of the nation’s petroleum industry deliver energy security?
Over the years there has been under investment in the downstream sector – this has resulted in the sad situation of Nigeria depending on imported petroleum products. This is a threat to our energy security.
Until full deregulation of the downstream sector is undertaken, the sector will continue to be underdeveloped and be a drain to the Government’s resources. Complete deregulation will bring about significant increase in investment in critical infrastructure that will transform the midstream and downstream sector thereby unlocking the country’s true potential of being a global energy powerhouse. The sector remains highly susceptible to various shocks across the global market and the time for targeted policies that will translate today’s oil and gas industry from “commodity exporting” into a “broader value-enhanced midstream and downstream industry”. We must add value to the crude and gas in-country thereby creating the much-needed jobs, growing the oil & gas sector and ultimately supporting the growth of our economy.
Despite the unfavourable investment climate, a few of our members, notably NDPR &
Waltersmith have invested in refinery assets and expanded capacity over the last decade. It is our belief that we have role to play in supporting the Federal Government in delivering the nation’s energy security aspirations.