NOGOF 2019: Project Cost to Determine Future Approvals — Kachikwu

-By Yange Ikyaa

At the just concluded Nigeria Oil and Gas Opportunity Fair (NOGOF), Dr. Ibe Kachikwu, Nigeria’s Minister of State for Petroleum Resources, told the gathering of oil and gas industry that approval for projects in the Nigerian petroleum industry would henceforth be based on the cost of producing oil and gas by participating companies.

He also said that the government, on its part, had reduced the cost of crude oil production to 23 dollars per barrel from an upward of about 32 dollars per barrel, adding that some companies in Joint Ventures (JVs) with NNPC had already driven the cost of crude oil production down to as low as 15 dollars per barrel.

Kachikwu urged oil and gas production, as well as service companies present at the fair that efforts to bring down the cost of production should not be made only by the government or through policies, but should also be driven by the private sector.

“Approval for projects in the petroleum industry would be based on the cost of producing oil and gas, and efforts are currently on to further ensure that the cost was brought down to below 15 dollars per barrel,” the Minister assured.

The Ministry, he said, is going to come up with a benchmark to analyse and compare companies who do business in Nigeria and what cost of production they are running.

This is because any unbelievable cost of production basically impacts negatively on the revenue stream of the country.

According to the Minister, “we need to start finding out how companies awarded recognition are doing, and why are the others not going in that direction. However, excuses of the environment being different or absent infrastructure can no longer hold water, because there are a lot of countries with peculiar situation as ours that are producing oil at relatively lower cost.

“One of the mandates that I am giving the Department of Petroleum Resources (DPR) is that as we begin to look at new projects, the cost at which we are going to produce is going to become critical to our ability to approve those projects for you.”

The NOGOF 2019 from where the minister was speaking held in Yenagoa, Bayelsa State, from April 4 to 5 at the instance of the Nigerian Content Development and Monitoring Board (NCDMB) and within the premises of the Board’s state of the art multibillion naira headquarters, a 17 storey architectural structure.

Tagged “Maximizing Oil and Gas Industry for the Benefit of Nigerian People,” the NOGOF 2019 event attracted about 1,500 participants to its credit.

Kachikwu seized the opportunity and tasked indigenous operators in the Nigerian oil and gas sector to step up their investments and take over major operations from international oil companies (IOCs).

The minister said such a call for a new but heightened local investment drive in the nation’s oil and gas assets became urgent and important, especially considering the fact that many of the IOCs were considering divesting and charting new paths to other places.

According to him, changes in the global oil and gas industry are presently challenging the current exploration and investment strategies. This, he said, was because, “oil is fast becoming a degenerating asset, with alternative sources of energy taking over and attracting new investments.”

Kachikwu lamented that, while the world was moving on from fossil fuels, Nigeria has not yet taken advantage of the opportunities in the sector and designed strategies to harness advantages of renewables.

The minister urged indigenous firms to take over and stop playing safe if they would benefit from the opportunities availed through new trends in the industry.

Speaking further, he said, “this has brought us to another milestone in the industry where the crude oil loading and export can be effectively monitored from my office, and it is becoming a major front burner item.”

He assured that government had invested tremendously in the oil and gas sector towards building capacity and investing in human development.

According to the minister, government had also ensured increase in production activities, and completion of Egina Project and AKK Pipeline, among others, and was also working towards ensuring zero gas flare by 2020.

While delivering his welcome address, the Executive Secretary NCDMB, Engr. Simbi Kesiye Wabote, said the Board had identified over 80 oil and gas opportunities that would be developed by major international and indigenous operating companies in the short and long term.

Wabote put the estimated cumulative value of the projects in excess of $100 billion, even as the 80 projects are contained in the Compendium of Nigerian Content Opportunities in the Oil and Gas Industry that was launched at the NOGOF event in Yenagoa.

The projects and opportunities cover the upstream, midstream and downstream sectors of the Nigerian oil and gas economy and were collated from presentations by various oil and gas companies at the first edition of NOGOF in 2017 and updated at workshops organized by NCDMB in October 2018.

Wabote explained that “the compendium was intended to create a database of Nigerian Content opportunities and help indigenous and potential investors prepare, improve their capacities and capabilities to participate in available and upcoming contracts and projects.”

He added that the compendium gives the industry a five-year outlook and enables stakeholders to key into those opportunities.

“Two years ago, when we held this workshop, we talked about ExxonMobil’s Ibot, Total’s Ikike and NLNG Train 7. Today, they are going through the funnel and within the next few weeks, they would take Final Investment Decisions (FIDs) on Ikike and Ibot and, before the end of the year, they would take FID on Train 7. We focus and follow through on those opportunities. Every two years we roll on new opportunities and add to the compendium.”

Shedding more light on the subject, Kachikwu maintained that the speedy development of the identified $100 billion opportunities would require the roles and contributions of various entities, including the Department of Petroleum Resources (DPR) for approvals, Nigerian National Petroleum Corporation (NNPC) for negotiations, and the oil companies, that would take the FIDs, among others.

He promised that the Ministry of Petroleum Resources would midwife a special arrangement that would involve every agency of government and the entity that has the role to play in the approval and development of the identified projects. “We must avoid a situation whereby NCDMB might work very fast and get to the goal post and others will just be taking off. We would create an arrangement that involves everybody and be clear about the deliverables, timelines and opportunities and bring out something which everyone can join in to drive.”

On the government’s support for modular refineries as a strategy for ending crude oil theft, vandalism and environmental degradation, Kachikwu hinted that the Ministry of Petroleum Resources would develop a policy that would encourage persons living in oil producing communities to form cooperatives with which they can set up and own modular refineries.

He said, “We would have some agreements with them to stop the sabotage. We can work with NCDMB to put in a bit of funding. Then we put in technical know-how, the business structure around it and have a major shareholder who is an entrepreneur. That way the locals get to participate, get jobs, and polish their skills sets. Crude is paid for and not stolen and the environment is better dealt with.”

The hugely successful NOGOF 2019 event was organized on behalf of NCDMB by Jake Riley, an international consultancy that helps leading companies, public sector bodies and social sector organizations in Nigeria and beyond to build and improve their performance, as well as tackle other challenges they face.

NOGOF 2019 also served as an avenue for NCDMB to celebrate companies with the most impactful local content development initiatives in the Nigerian oil and gas industry.

The NOGOF Gala Dinner and Awards held on the 4th of April, 2019 at the Royal Tulip Castle, Government House, Yenogoa, where stakeholders in the various subsectors in the industry who have supported Nigerian Content programs of the Nigerian Content Development and Monitoring Board (NCDMB) were recognized and given awards.

Opportunity Presenters Awardees during the night included Chevron Nigeria Limited, ExxonMobil Nigeria, Nigeria Agip Oil Company, Shell Petroleum Development Company, Nigeria National Petroleum Company, Dangote Group, and First E&P Development Company Ltd. Others were Midwestern Oil and Gas Company Limited, Nigeria Gas Processing and Transportation Company (NGPTC), Frontier Oil and Gas, as well as Pinnacle Oil and Gas.

National Operating Company with the most impactful Local Content Development Initiative(s) award was won by the Nigerian National Petroleum Corporation (NNPC), while the Award to International Upstream Operating Company with the most impactful Local Content Development Initiative(s) went to Shell, with Total and Exxon Mobil clinching the first and second runner up positions respectively.

Then, the award to Independent or Indigenous Upstream Operating Company with the most impactful Local Content Development Initiative(s) executed was won by Seplat, while the first and second runner up positions went to FIRST E& P and AMNI accordingly.

Dangote won the award for Downstream Operating Company with the most impactful Local Content Development Initiative(s) executed, Petrolex was first runner up and Pinnacle was second runner up.

The award to Gas Processing Company with the most impactful Local Content Development Initiative(s) went to NLNG, Nigerian Agip Oil Company was first runner up and Nigerian Gas Processing and Transportation Company (NGPTC) was second runner up.

Award to Multinational Service Provider with the most impactful contribution to Local Content Development (within the period of 2017 to date) was won by Samsung Heavy Industries Nigeria Ltd, while Baker Hughes, A GE Company, took the first runner up position and Nigerstar was the second runner up.

Then, Marine Platforms Ltd won the award for Nigerian Indigenous Service Provider with the most impactful contribution to Local Content Development (within the period of 2017 to date), with Global Process and Pipeline Services Limited being the first runner up and Coleman the second runner up.

Finally, the award for the Most Supportive Financial Institution to Local Content was claimed by United Bank of Africa (UBA).