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ERGP: Global investors leverage petroleum summit to unlock Nigeria’s potential

ERGP: Global investors leverage petroleum summit to unlock Nigeria’s potential

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Uche Usim, Abuja

Nigeria and indeed the African continent recorded yet another milestone last week when it hosted the first ever International Petroleum Summit (NIPS) in Abuja. For the Muhammadu Buhari administration, it was a dream come true giving some conscious and deliberate efforts to diversify the nation’s fledgling economy still struggling to reclaim its position as Africa’s number 1.

To get a foothold on the recovery process, both the    government and economy experts seemed convinced that strengthening the economy’s local content could be a plausible strategy to diversification through exporting various home-grown oil and non-oil products to reduce pressure on foreign exchange reserves. 

This, perhaps, explains government’s hosting of the Nigerian International Petroleum Summit (NIPS) said the Minister of State, Petroleum Resources, Dr. Ibe Kachikwu, who also regretted the millions of dollars spent annually by Nigerian delegates (about 500) attending the Offshore Technology Conference (OTC) in Houston, Texas, USA annually.

Kachikwu lamented that despite the huge forex spending on such frivious trips, the country was yet to harvest any meaningful dividend because majority of the delegates were mainly pleasure seekers accompanied by few technocrats.

According to Kachikwu, NIPS’ idea was sold to the Federal Executive Council (FEC) in 2016 as an African version of the OTC and an expanded version of the Nigerian Oil and Gas Conference.

With FEC’s endorsement, the Minister said he then marketed NIPS to global investors and relevant stakeholders in the oil and gas sector as a way of ensuring Nigeria occupies its leading position in the sector and galvanise solutions to several issues agitating the minds of the business community and developing partnerships to deal with the numerous challenges stifling the petroleum industry.

As expected, the maiden edition of NIPS held last week in Abuja, having in attendance an array of stakeholders from all segments of the oil and gas sector.

Participants from Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC countries were adequately represented too. Multinationals like Shell, Total, Mobil, state governments, Federal Government agencies, extractive industry players and many more were not left out in the four-day event.

From all indications, the summit afforded attendees the opportunities to seal deals, deepen existing relationships, explore fresh investment windows and see first hand what the country has to offer. 

For President Muhammadu Buhari who was represented by the Secretary to the Government of the Federation, Boss Mustapha, NIPS was in total alignment with the government’s Economic Recovery and Growth Plan (ERGP) that seeks to diversify the economy, through partnering with reputable global investors to deepen local production and exports, create employment and earn foreign exchange.

He described Nigeria and Africa in general as an investment haven, especially for oil and gas investors who have an array of opportunities to plough their resources into. He noted that Europe and Asia were largely saturated, thereby making Africa as the new economic frontier for global business.

Buhari assured local and foreign investors in Nigeria of a friendly investment climate that would guarantee excellent returns on investments.

The President described the summit as a good platform to market the rich petroleum and gas resources of the country, pointing out that his administration would continue to deploy new measures to grow the economy via foreign partnerships.

He applauded the organisers of the summit for modelling it after the popular OTC but localising it as the African Petroleum Technology and Business Conference (APTC).

“It is very significant and has full government backing. As a major component of ERGP 2017-2020, the summit is designed to be Africa’s largest and most important platform and linkage to the world where technological breakthroughs will be unveiled.

“The summit will afford Nigeria a unique opportunity to showcase to the international community policy direction and efforts of government in the petroleum sector especially the new oil and gas exploration and markets, new measures to sanitise the sector, the expansion of investment opportunities to boost investors’ confidence, technological advancement, Nigerian content development, the institutionalisation of reforms in the country’s oil and gas industry and the galvanisation of Nigeria’s position as the leading oil producer in the continent of Africa,” he said.

He added: “Nigeria is open to private sector investments in the downstream sector and pursuing vigorously a programme for the rehabilitation of existing refineries to enhance capacity to supply locally refined petroleum products in Nigeria and West Africa.”

While acknowledging that the sector was neck deep in corruption and his plans to deal with the monster, the President said, “corruption in this industry must not be allowed in any form. On our part, we will not stop the fight until a new image is created where transparency will be the watchword in all our transactions.

“So, the war against corruption is continuing until there is a new image of the country. Part of NIPS is to provide leadership for Africa an to make it one of the most important annual oil and gas summits, we’ll generate revenue and jobs. This will show Nigeria’s focus on oil, boost investors’ confidence, institutionalise reforms and galvanise Nigeria as leading oil player,” the President said.

He said his administration was committed to cleaner energy that is gas based, while urging participants to ensure the successful implementation of resolutions reached at the summit.

Kachikwu who also spoke at the summit said NIPS will ensure Nigeria grows local investments and shareholdings of its oil and gas industry to 50 per cent within the next 10 years.

The Minister explained that current realities in the international oil market show that unless the country boldly moves away from just exploring and mining crude oil to processing it completely and exporting the products, taking the economy to the next level would remain a tall order.

“On this basis, the country would be looking to grow its local grip on the industry from the current 10 per cent to 50 per cent in 10 years. We also target that a Floating Production Storage and Offloading (FPSO) oil platform would be wholly built in the country among other in-country based innovations in the sector.

“The reality is that today, if you cannot produce cheap cost oil, if you cannot diversify the processing of your oil, if you cannot look to internalising and externalising investment in the sector, if you cannot capture the requisite technical skills that are essential to help you operate efficiently, you are lost before you start.

“The challenges for oil companies have changed. Oil has got to provide the resources to power this country, jobs for our people and the operational environment that is transparent enough for others to take Nigeria seriously. Oil has got to provide the technical and advanced skills sets that are essential for us to export people out to other African countries, and to become investors in other African countries. Something the banking sector has tried to do successfully over the last six to seven years.

“My target is that over the next 10 years, Nigeria would produce an FPSO and that is not too much to ask. My target over the next 10 years is that Nigeria would become self-sufficient in its own power provision. And over the same period, from crude oil, Nigeria would gravitate, as it were, to very refined, clean provision of fossils.

“Over that same period, investment in the sector, in the sense that Nigerian companies, Nigerian entities and Nigerian shareholders, would begin to move from the minuscule 10 per cent today, to between 40 and 50 per cent of local investments,” the Minister said.

He said there are major plans to achieve these objectives using the ‘Seven Big Wins’ oil policy of the government, and that the oil sector has robust opportunities to make these happen.

“What have we achieved since the launch of the Seven Big Wins two years ago? We have been able to, through a lot of struggle, changed the funding capacity for the upstream and that had sort of energised investors in the upstream sector. Now, we are beginning to see projects like Egina, $15 billion, Zabazaba – potential $10 billion, Bonga – potential $10 billion and the likes.

“So many other investments put at over $40 billion potential investments over the next five years. If we do the right thing, set the right models and set the right policies, that is very key and that is coming from a country where investments had run away for nearly seven to 10 years,” he added.

The Minister, at a breakout session, also revealed that multinational oil companies operating in Nigeria might be compelled by the Federal Government to build refinery facilities in Nigeria to ensure the country fully maximises its hydrocarbon resources and move away from just exporting crude oil.

He revealed that in few years to come, multinational oil firms would no longer be allowed to ship out all the crude oil they produce in Nigeria, adding that emphasis would then shift to local processing of a substantial amount of crude produced from oil fields in Nigeria.

The Minister explained that Nigeria’s average in-country refining capacity was 14 per cent and would need to be upgraded to meet the demands of its rising population.

Kachikwu stated: “We would get to a point where Nigeria, definitely, would be a major supplier of refined petroleum products. It just has to happen. Nothing else makes sense. We are also saying directly to oil companies that a time would also come when we would not be open to see them move around all the crude oil they produce in Nigeria.

“We will like to see integrated refining and integrated processing here. It gives us more jobs and creates more investments,” he said.

The Minister explained that the challenges for oil companies have changed, noting that henceforth, oil has got to provide the resources to power the country, provide jobs for Nigerians and also provide the operational environment that is transparent enough for others to take Nigeria seriously.

The United States Ambassador to Nigeria, Mr. Stuart Symington, who also spoke at the session said NIPS remains a welcome development that would allow Nigerian experts brainstorm with others from across the globe in an effort to deepen the African oil and gas sector.

Minister of Petroleum of Chad, Mr. Bechir Madet, as well as the Secretary General of the International Energy Forum (IEF), Dr. Sun Xiansheng, also lauded the NIPS and urged the government to sustain it.

They said Nigeria having such a robust gathering will save African nations the hassles and funds of attending such an event overseas.

The Secretary General of OPEC, Dr. Mohammed Barkindo, in his remarks at the summit, hailed President Buhari for giving the petroleum sector all the needed support to come up with NIPS.

He noted that having investors and global players in the sector under one roof in Nigeria would bring about harvest of mutual alliance for all present, adding that the programme would afford investors opportunity of having, first hand, on ground experience of what the country has to offer without having to read them up in publications.

He urged participants to harvest all the fruits such a rich gathering has to offer. However, dwelling on OPEC, Barkindo stated that countries’ compliance levels to the production cap agreement the international oil cartel and non-OPEC members reached in 2017 and later rolled over to rebalance the oil market recorded a collective 133 per cent in the first month of 2018 – January.

While calling for conducive operational conditions for member countries to continue to stabilise the market, he explained that the cooperation between OPEC and non-OPEC members had become a force to reckon with in the global oil market. He also lauded Nigeria’s contributions to the success of the cooperation.

He said: “OPEC has embarked on one of the most innovative enterprises ever known in the history of oil – the declaration of cooperation. This innovation was a response to an unprecedented market turbulence which had a devastating effect not only in the industry but in the economies of OPEC member countries.

“Price cycles are not new in the history of oil, OPEC has identified six since the early 1970s. However, this price cycle should be considered unique for several reasons: it is the most overwhelming supply-driven of all the cycles we have seen in this exercise. Secondly, the magnitude of the price drop is the highest; thirdly, the recent oil price drop has been considerably sharper with the decline in prices for other commodities, which is in sharp contrast to the oil price collapse of 1985/1986 when all commodity prices declined in a similarly steep manner.

“Thankfully, a breakthrough came in the form of the declaration of cooperation. This was the culmination of an extensive consultation undertaken throughout 2016 with the aim of gaining consensus about the strategic urgency of bringing this market back to balance in a collective manner.

“If one word was to be used to describe the impact of the declaration, it would be ‘transformative’, a new player has emerged on the global oil scene – the OPEC and non-OPEC strategic partnership. Many didn’t think it would get off the ground. However, we have registered conformity in 2017 of 107 per cent across all the participating countries and I would like to use this platform to also announce our January figures of 133 per cent that would be released in a couple of hours in the OPEC secretariat,”  he added.

In his speech at a session, the Chairman, Shell Companies in Nigeria, Osagie Okunbor, said NIPS was a good initiative that allows the company to show its partners the peculiarities of the Nigerian operating environment especially with regards to insecurity in the Niger Delta region. “The standing view we have in Shell is that if we feel the asset is not safe, then we shut it down. Sometimes it comes at great economic cost that requires great discussions with our partners but we will shut it down.

“Through the years, we have invested quite a bit in pipeline replacements; huge spending on asset integrity. On oil spills, you and I living in that part of the world know that when you look at it, it is actually less than 10 per cent, maybe 5 per cent of these spills are as a result of operational failures. Well over 90 per cent of what we are seeing is a result of theft and sabotage to facilities.

“This is the biggest issue that confronts us in the Delta today. In 2016, many of us in this country saw what happened in the Western Delta, when our export line was sabotaged.

“This is one of the biggest reasons this country went into recession; close to 300,000 barrels per day of oil was taken out at time when oil prices were at historic lows and it cost us well over $100 million to replace that line. This problem is real and we will not hide as operators in ensuring that we continue to operate in the  best international standards,” Okunbor said.

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