Oil, gas exploration below expectations

The Nigerian government has declared that 50 years of oil and gas exploration remains below expectations, a view which is supported by some participants who spoke at the ongoing Offshore Technology Conference (OTC) in Houston, Texas, USA.

Emmanuel Egbogah, the Special Adviser to the Nigerian President on Petroleum Matters, speaking on the reforms and the bill at a luncheon organised by the Petroleum Technology Association of Nigeria (PETAN) at the OTC in Houston said that the government's aspirations from the oil and gas industry have not been met; even in operations, the sector falls short of global standards.

Speakers at the OTC have argued that the unfulfilled aspirations, both of government and of the operators, underscores the need for the current reforms in the Nigerian petroleum industry, to protect their respective interests.

The centre point of oil and gas industry reform is the Petroleum Industry Bill, which is currently undergoing legislative scrutiny at the National Assembly. The bill has passed the second reading at the House of Representatives and is now awaiting presentation for public hearing.

Mr. Egbogah said that the public hearing will take place soon, without giving more detail on when.

International companies' concerns

The International Oil Companies (IOCs), operating in Nigeria have accepted the need for the reform. But they have expressed concerns about some provisions of the bill.

So far the IOCs, either individually or collectively under their trade association, Oil Producers Trade Section of the Lagos Chamber of Commerce, have refused to comment openly on the bill. Rather, they prefer to lobby government secretly to change some provisions, which they feel could hurt their investments in the sector.

Last week, Odein Ajumogobia, the Minister of State for Petroleum Resources, told NEXT that the government would review the IOCs requests as long as they do not reduce government's revenue from the petroleum industry.

None of the Nigerian affiliates of the multinational oil companies are participating in this year's OTC.

Representatives of three of the member companies-America's ExxonMobil, Anglo-Dutch Shell and French Total-who spoke at the luncheon were not specific about what they want from the petroleum reform process and from the industry bill.

Mr. Mark Ward, the Managing Director of ExxonMobil, said the reform comes at a time when the IOCs are seeking better funding for oil and gas projects, through joint ventures with the state-run Nigerian National Petroleum Corporation (NNPC).

Alek Musa of Total and Chike Onyejekwe of Shell also expressed hope for an end to the recurrent funding hiccups for joint venture projects.

Faithful Abiyesoku, the NNPC's group executive director of Engineering and Technical said that the reforms should have come earlier and hopes "Nigeria will get it right this time," a reference to previous attempts to reform the sector that have proved unsuccessful.

Indigenous companies' expectations

Wale Tinubu, Group Chief Executive Officer of Oando Plc, led Nigerian indigenous operators in commenting on the reforms and the bill. He said that while the reform was welcome, he hopes that it will incorporate concerns from indigenous operators.

He said, "There is an emerging class of local oil companies (LOCs) but world class organisations that use global best practices like the IOCs, some of which must be included in the reform committee."

He also hoped the reform would increase wealth creation and make provisions for the retention of majority of the wealth in Nigeria.

In view of the IOCs concerns on funding, a former Group Managing Director, NNPC, Mr. Chambers Oyibo, hoped the fiscal provisions in the bill will not be the same as the 1993 Production Sharing Contracts (PSC). He argued that the PSC regime cost Nigeria huge sums of money to the benefit of the operators because the executors were not properly schooled in the operations of the system.

In addition, Mr. Oyibo faulted the multiple regulatory agencies proposed by the petroleum bill, and argued that if they are allowed to sail through it could be counter-productive as some agencies might work against the interests of others, if their functions are not properly streamlined.

Eyo Ekpo, Special Adviser (Special Projects) to the Cross River State Government, said the reforms were needed for the growth of the industry.

He said that reforms are usually 95 percent politics and five percent economics, yet "what matters is the competence and expertise of those driving the said reform."

Mr. Ekpo noted that it is critical to effectively draw the boundaries of the emerging agencies, "because this is where those who do not support the reform would come in to sabotage it."

Government's reform

In his explanations of what the reforms entail, Mr. Egbogah said, they are for the long term sustainability of the oil and gas industry, which is the mainstay of the Nigerian economy.

He said, "To effectively address the challenges of the industry requires structural, legislative and operational reforms," adding, "the Petroleum Industry Bill is an all-encompassing legislation that seeks to foster long-term sustainability, greater efficiency and effectiveness of operations and ensure global competitiveness."

The presidential adviser further spoke of the new industry structure, which he insisted is in line with global best practices, saying, "The reform also provides for the conversion of all the existing joint ventures into incorporated joint ventures (IJVs). Each will be a corporate entity to be incorporated under the laws of the Federal Republic of Nigeria; and the incorporation process including capitalisation and restructuring will be carried out through negotiations with the respective international oil companies."