June 15, 2009

Nigeria needs efficient database to develop oil sector -Norwegian envoy

By Oscarline Onwuemenyi
AMONG countries   operating in the extractive industry, Norway is a model on transparency and has been trying to assist Nigeria in this regard.

*Oil rig offshore Norway

*Oil rig offshore Norway

After spending years in Nigeria, the outgoing Petroleum Cooperation Coordinator of the Norwegian Embassy, Mr. Halvor Musaeus gives his opinion on the Nigerian oil and gas industry in an interview with some journalists in Abuja, Oscarline Onwuemenyi was there.

From your experience in Nigeria, in what ways do you think our oil and gas industry can  learn from Norway?
I am convinced that there is a wealth of experience in the oil and gas operations in Norway that can be of benefit to Nigeria . Of course, the conditions in Norway are very different from what you have here, so it is always a challenge if you want to give advice. It is important to understand the situation in the country if you must give effective advice.

We have a very efficient petroleum directorate in Norway and they have been working very closely with the Department of Petroleum Resources in Lagos in the past five to six years towards creating efficiency in the operations of the DPR. One of the main issues they have been working on, which has been very successful is the establishment of a database in DPR which would include reservoir data, geological data, as well as data on what is being produced and what is being exported, among other things. Without having a database, it is very difficult to monitor and regulate activities in the oil and gas sector. So, this database management system is now in place and looks so much like what we have in Norway.

We are also very concerned about the environment. Therefore, we are keen on working closely with Nigerian authorities within the environment sector. We have an agenda, although we have been a bit slow to get it started, but that does not mean that the interest and the intention are not there. One other reason things have been a bit slow in our cooperation in the last couple of years is because of the oil sector reforms that is going on. A lot of the people we have been dealing with do not know if their responsibilities will remain with them after the reforms.

But we are on the verge of renewing the cooperation agreement that we have with Nigeria. We are looking at another five years of cooperation, so I think we will be able to wrap up the things that have not been completed within that period.

What is your view on the ongoing reforms in the oil and gas industry and the opposition being mounted by the multinational oil companies operating in Nigeria?

I understand the Petroleum Industry Bill is facing a lot of opposition from the oil companies. It’s difficult for me now to say anything concrete, but it is very important to have a legislation in place, which works for both parties. I think the oil companies have to be prepared for changes because the industry is dynamic. Oil prices change, business environment changes and climatic conditions change.

I believe that this is an opportunity for the country to have a new law in place to better manage the industry. However, it is important to give enough time in the development of that legislation, to get all the views of the parties involved, so that everything can be taken care of, but I realise it is a very challenging one for the administration because the oil companies are strong; they can afford to pay the big lawyers. Therefore, the government would require some backing to bring about the changes it desires and to protect those things that need protecting in the industry. But I think dialogue is important.

What do you think about the restiveness in the Niger-Delta and the allegations that governments of the area mismanaged huge allocations given to them which could have been enough to make serious developmental impact in the region?

We read papers and hear everything that is said. Some of them may be true, while some may not be. But we do not have a valid experience with regards to some of these issues.

But we believe there is a lot that can be done at the state levels and first of all, in the Niger-Delta states where oil is being produced.

We have been working with Nigeria Extractive Industry Transparency Initiative, but it only applies to the Federal Government and certain things needed to be done in the states particularly the Niger-Delta states where so much oil is being produced.

We need transparency to develop in the Niger-Delta and we want more contributions to be made and more non-governmental organisations to get involved.

Being that you are interested in the environment and knowing that most of the crisis experienced in the Niger- Delta stemmed from pollution and environmental degradation by the oil companies; what do you think could have been done differently?

In the Niger-Delta, there is a vicious circle because you have some oil exploration companies that have been there for a long time that may not have done things correctly, and that has caused a lot of the aggravation that is currently witnessed. And now you see that a lot of oil pipelines and other oil facilities are being attacked and that in itself is causing a lot of environmental pollution. Therefore, it is very hard to say today who is responsible for the pollution that is happening in that region. I think the companies would admit that historically, things could have been done a lot better. But from what we see happening these days, it is very difficult to say the companies are totally at fault because some of them have very limited access to the Niger-Delta where the pipelines are being damaged and it is very difficult to come in and repair and they have to stop production in many instances. This has resulted into big economic losses for the country.

Things are so complicated right now in the Niger-Delta. Of course, a lot of people want to see things done better to make life better for those living there, but there are so many other interests involved. There are people who would not want things to be done right because they are making a lot of profit from the complicated situation of things down there.
How does Norway relate with the international oil companies within its shores and are there tips Nigeria can learn especially now that we are in the process of implementing reforms?
We only have offshore oil development in Norway; there is no oil found on land and nothing will be found on land. Everything is offshore, which makes the control and monitoring of production much easier. Of course, we have a highly developed oil and gas infrastructure which has made it easy for effective monitoring and regulation. Nothing is hidden.

The exploration and movement of oil in Norway from these offshore installations is done using ships mainly and these can be easily monitored to know what is produced and how much of that is exported. Even where pipelines are used to move the product, it is very easy to keep records of what’s going into the pipeline. So, we do not have the same problems that Nigeria has with regards to effective monitoring and regulation of the industry.

In Norway, what is the sharing formula of oil revenue proceeds between government and oil companies?
Ours is different from what you have. Here you have extensive use of the Production Sharing Agreements. Here the companies recover their expenses through oil and there is a key for dividing the excess oil while in Norway, the companies get all the oil, sell it and then they have a very high tax they pay to the state. They pay 78 per cent of profit as tax.

They deduct operating costs and of course what is being deducted is also scrutinized. After the proceeds, they pay 78 per cent tax. And then in addition, the state has its own share in quite a number of blocks. The state finances its share and take the revenues from them. It is called Direct State Participation and that is part of the income sources for the state.

How can Nigeria learn from this model you’ve presented?
What is very important now in Nigeria is to increase the capacity of operators, at least, that of those who make the official records to indicate how much is being produced, how much is being exported.

Norway is prepared to assist Nigeria in designing the right metering systems to monitor oil exploration activities. We think that metering systems are needed at all the locations where oil is exploited.

There are too many wells, and not far from the wells you have flow stations that gather the flows from the wells. You can have meters there, and you can have meters at the export terminals. Effective metering systems at these various points, especially at the terminals can help in gathering exact information about what the country produces and what it disposes. We would be holding a seminar on some of these issues and systems in Abuja in mid-August.