October 26, 2023

Our problems with IOCs divestments of assets to Nigerians — PENGASSAN

Our problems with IOCs divestments of assets to Nigerians — PENGASSAN

By Victor AhiumaYoung

The second edition of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Energy and Labour Summit in Abuja, the Federal Capital Territory, FCT, was remarkably educative, informative and thought-provoking.

The three-day programme that was held a few days ago, had as  theme: ‘Petroleum Downstream Deregulation and Gas Utilisation for a Sustainable Energy Future in Nigeria’.

One interesting issue raised by PENGASSAN was the utilisation of divested assets of the International Oil Companies, IOCs, by indigenous oil companies.

Speaking on the sideline during the event, PENGASSAN President, Festus Osifo, expressed serious concerns over effective and value-added optimisation of divested assets of the IOCs to Nigerian business owners.

According to him:  “How have the assets that have been divested in the past been managed? In a situation where Shell Petroleum Development Company, SPDC, shut down and divested some of its Joint Venture, JV, assets, how have they been managed?

“Some of the companies that these assets have been divested to are bought by these companies, and we have realised that what a lot of them do is that they produce without a plan of how to develop the wells and increase production.

“It has been a problem. Initially, the wells were producing about 100,000 barrels, but today, none of the wells are producing close to 20,000 barrels. This is a real challenge.

“Another is the issue of financing. The IOCs could attract finances globally at concessionary interest rates, but the local companies in Nigeria cannot attract the level of finance that IOCs do and, therefore, cannot inject the necessary finance into companies that they have bought.

“They continuously produce and in the end, the well will run dry.

“We are also facing the challenge of Nigerian Agip Oil Company, NAOC, trying to exit the JV and selling assets to Oando. We ask what the financial arrangement is. We fear that Oando might be like others.

“From our investigations, we realised that a lot of these institutions that have bought into the JV owe counterpart funding up to billions of dollars and are not able to pay. Will they be able to take care of our members? These are real challenges and we must find a way to deal with them.”  

Sustainable energy future 

Meanwhile, stakeholders have stressed the need to chat about a brighter and more sustainable energy future for the nation.

There seems to be a consensus among the stakeholders that a major shift in the Nigerian Oil and Gas sector due to divestments of IOCs calls for a collective reflection on the implications for the industry, Nigeria and Nigerians.

In his welcome address, the PENGASSAN President noted that the programme was apt as “Nigeria navigates the multifaceted implications of deregulating its downstream petroleum sector and harnessing its vast gas potential.”

Osifo informed that the challenges of petrol subsidy removal and floating of the Naira and dollar exchange rate had inflicted untold hardship on Nigerians.

According to him, the overarching impact of these on Nigerians could better be imagined than experienced, saying the removal of the petrol subsidy and the current state of the refineries were critical challenges demanding comprehensive solutions, balancing economic viability and the wellbeing of the populace.With the government’s policy direction that had inflicted excruciating pains on Nigerians, Osifo said, had prompted calls for a salary benchmark for oil and gas workers, aligning with the instrument of trade of the oil and gas commodity.

Speaking on Regulatory Framework, Effective Policy Alignment and Implementation for a Transparent Mid and Downstream Market, the Chief Executive of Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, Farouk Ahmed, in his presentation said the implementation of effective policies and regulatory frameworks ensure transparency were critical drivers to developing a sector that would promote investment, deliver energy security and ensure sustainable economic development for Nigeria. 

Represented by the Authority’s Executive Director, Bashir Sadiq, Ahmed said a transparent mid and downstream market attracts investment and promotes efficiency, competition and sustainable development of the sector. 

According to him, achieving transparency required effective laws, clear sectoral policies and strategic objectives, sound regulatory frameworks, optimal enforcement and compliance of all regulatory requirements as key components.   

He said the mid and downstream sectors of the energy industry were vital components of the nation’s economy, and added that “the mid and downstream sector houses the nation’s hydrocarbon resources that can be obtained through the creation of employment, accelerated industrialisation of the country, security of energy and generation of revenue.”

In his presentation, Managing Director of Teno Energy Resources, Tim Okon, who spoke on Nigeria Gas Master Plan: Enforcing Stakeholders’ Accountability for Achieving Sustainable Energy Goals, said Nigeria had already missed the train, viz-a-viz Saudi Arabia and Qatar, in the last two decades when it sought to lay a framework for its gas-based industrial revolution.

He cited pipeline vandalism, access to small gas plays, domestic utilisation and framework for sector-based pricing as some of the challenges hampering gas development in Nigeria.

Similarly, speaking on Energy Security in Nigeria: Balancing Petroleum and Gas Contributions to the National Energy Mix, Executive Director, Production, Mobil Producing Nigeria Unlimited, Jagir Baxi, said with energy supply fundamentals, an evolving energy supply mix was required to meet growing demand.

With a projected share of 2050 energy supply, he said sustained investment in oil and natural gas was needed to meet global energy demand.

He listed fiscal and non-fiscal conditions, competitive cost of business, regulatory certainty and infrastructure as key enablers for energy security in Nigeria.