Stakeholders in Nigeria’s oil and gas industry were pleased in October, when crude oil price rose from $70.00 to $85.00 per barrel for a reason. The rise in the price of oil was expected to boost investment, and by extension, local content development in the industry through improved funding of projects. The improved funding was also expected to culminate in award of new contracts and settlement of debts owed local contractors and others in the industry.
But the expectation was short-lived as the price soon dropped to $75.00, before sliding further to the current $59 per barrel. The relatively low price which is partly fuelled by excess supply has started to impact negatively on local content development, especially as operators found it difficult to do major projects and programmes.
Investigation showed that many indigenous operators, including service providers found it difficult to survive mainly as a result of low patronage by the majors, including the International Oil Companies (IOCs) and independents.
In a recent interview with Sweetcrude, the chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Bank-Anthony Okoroafor, said: “Oil is now under $60 a barrel, a drop of about one third which is as a result of excess supply in the USA (boom in shale supply), surge in Saudi and Russia supply and Chinese oil inventories rising quite significantly. We are barely walking a tight rope.”
Before then, Okoroafor had said in another interview: “The major problems in the nation’s oil and gas industry are many. For instance, there are very limited activities or jobs to keep service companies actively engaged. This is mainly as a result of the delay in passing PIB into law. There is insecurity. There is also corruption and lack of transparency which need to be addressed.”
Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC), has concluded plans to meet in Vienna, Austria, this week in order to review the market as well as adopt measures that could assist in achieving market stability. Many members, including Nigeria and Saudi Arabia have expressed commitment to achieving stability.
The Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al-Falih who visited Nigeria last week said: “As we meet in a week’s time, our focus again will be on fundamentals of supply, demand and inventories and trying to bring that back to a level that will show the market that we have been talking about. I think that would include American producers as well, who are quite troubled today as they prepare for their 2019 budget about continuous building inventories and lack of clarity on where the market is going in 2019.
“I think it is premature to say today. You just have to wait until December 7. But I think people know that leaving the market to its own devices; no clarity and no collective decision to balance the market is not helping. We have seen that in action in the last three weeks. I am confident that 25 countries will arrive in Vienna, wanting to agree to whatever makes sense, based on numbers. The numbers, we will see them after the technical committee meets, after we receive the analysis from our technical advisers and the OPEC secretariat.”
Nigeria’s Minister of State for Petroleum Resources, Dr. Emmanuel Kachikwu also said: “In terms of whether Nigeria will seek to have an exemption if the cuts are agreed upon; it is too early to answer that. All I will say is that Nigeria is very committed to working with OPEC. We have always been committed. Even when we had exemptions, it was carefully analysed. We will continue to work collaboratively with the monitoring group to ensure that we kept within the ceilings that we agreed upon.
“Let me just add to that to say that I have always taken the position that at the end of the day, OPEC production in the world oil supply environment is just about 30 per cent to 35 per cent, and the truth is that whenever there is some level of volatility, the whole world looks to OPEC, which is a good thing. It shows how strong the organisation has become.
Ultimately, everybody who produces oil will need to have an interest in contributing to the stabilisation of these fundamentals; it does not matter where they are.”
Despite the commitment of parties, it is not certain whether the expected action or inaction of OPEC would make instant impact on price, and by extension revenue, investment and local content development in the nation’s oil and gas industry.
Despite these issues, there are indications that Nigeria has recorded some feats in its local content development, especially after the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act in 2010. Consider Total as an example. The company’s $16 billion Egina Floating Production Storage Offloading (FPSO), project is expected to boost Nigeria’s oil production by 200,000 barrels of oil per day (approximately 10 per cent of the country’s total oil production).
Egina, which had a successful sail away, left the quayside at LADOL fabrication yard, for a three-day journey to the Egina Field in Oil Mining Lease (OML) 130, located about 150km offshore the Niger Delta. It is designed for 25 years of operations, and reputed as the deepest offshore development carried out so far in Nigeria, in water depths of over 1,500 meters.
Chairman/Managing Director, CNL, Mr. Jeff Ewing, stated: “At Chevron Nigeria Limited, we demonstrate our commitment to the socio-economic development of Nigeria by building mutually-beneficial partnerships, and supporting the policies of government on Nigerian content development. We have helped in building the capacities of several Nigerian businesses by allocating substantial scopes of our major capital projects to Nigerian companies. Chevron is also helping to grow the Nigerian economy by contributing to the development of communities in the areas of our operation. We do all this, not because it is required by the law, but because it is the right thing to do.”
Also, the Chairman, ExxonMobil, Mr. Paul McGrath had stated, “ExxonMobil gives first consideration to local produced companies in Nigeria. We have been at the forefront of local content development in Nigeria. Nigeria local content is a moral obligation and is good for business because in Nigeria we have highly and semi-skilled workforce which we give total support to at all categories. When we talk about practical Nigeria content and implementation of local content, ExxonMobil has been at the Vanguard.”
However, hope is not completely lost as stakeholders have concluded plans to review and adopt measures, capable of enhancing local content development at the 8th Practical Nigerian Content forum in Yenagoa, Bayelsa State from December 3-6, 2018.
The Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Mr. Simbi Wabote has called on indigenous companies in the industry to get their companies quoted in the stock market in order to attract adequate funds for expansion. He said listing on the stock market would change the operating model of the oil and gas industry and enable the pooling of funds for growth, empowerment and inclusion of Nigerians in the activities of the sector.