Importance of gas in Nigeria’s economic diversification programme, by Ene
Mr. Emeka C. Ene is the Chairman of Society of Petroleum Engineers (SPE) Nigeria Council. He is also the Chief Executive Officer of Oildata Energy Group and has served as the Chairman of the Petroleum Technology Association of Nigeria (PETAN). In this interview with Roseline Okere, he calls for optimal utilisation of gas resources and lists benefits of the SPE yearly conference on nation’s development. Excerpts.
What role do you think gas would play in the country’s quest to diversify the economy and what should be the contribution of the government to make the gas sector a revenue base for the country? Gas has a huge role to play in diversifying the economy.
Up until recently, emphasis has always been on oil with gas being the distant cousin from the point of view of the operators. With the unbundling of the power sector in Nigeria and the fact that the country currently suffers from energy poverty, the pressure is high on gas as a critical resource to drive the reforms required to grow the sector.
Government should provide incentives for mid-stream gas processors by introducing favorable policies to cushion the impact of the high capital investments required in the gas sector, shorten the investment cycle and accelerate ROI.
With the unbundling of the power sector in Nigeria and the fact that the country currently suffers from energy poverty, the pressure is high on gas as a critical resource to drive the reforms required to grow the sector. Government should provide incentives for mid-stream gas processors by introducing favorable policies to cushion the impact of the high capital investments required…
Tax holidays, duty waivers and other friendly money lending policies are a few areas that government can look into in order to encourage gas sector investments to boost the Nigerian economy.
Nigeria’s refineries have been comatose for years. How do will revive the country’s refineries and what role will they play in the country’s inability to sell its crude oil? There has to be an inward look into the activities (or inactivity) of the refineries as well as any efforts geared towards bringing them back to operational status.
The demand exists for domestic consumption of crude oil derivatives and it is important to use this as a driver for reviving the refineries. With all the oil (Iranian oil and shale oil) flooding the market, Nigeria is bound to suffer a reduced foreign demand of its crude and as such efforts should be geared towards picking up the slack domestically.
Furthermore, investments in mini refineries in-country should be encouraged, as such small footprint refineries located in relatively stranded areas would optimize the domestic consumption of Nigeria’s crude and create optional economic activity the country desperately needs.
What role do you think the Federal Government should play to revive the oil and gas sector? The Federal Government should commit more in meeting its cash-call obligations to finance its joint venture partnerships in the industry so that operators can adopt the current period of low oil prices as a critical “investment opportunity window” to engage in activities geared towards aggressively boosting oil production (e.g.drill more wells on the short term) so as to neutralize the impact of the oil price.
Do you see crude oil prices going below $40 per barrel and do you see it reaching $100 in the nearest future? The current situation with the oil price was brought about by a battle for supremacy between OPEC and the independent producer nations.
Contrary to what was anticipated, OPEC refused to drop their production quota in a bid to frustrate the shale producers who evidently have a price threshold below which it would be uneconomically reasonable to produce their oil.
There has to be an inward look into the activities (or inactivity) of the refineries as well as any efforts geared towards bringing them back to operational status. The demand exists for domestic consumption of crude oil derivatives and it is important to use this as a driver for reviving the refineries.
It is no longer news that the US has adopted innovative techniques to produce shale oil economically. In Nigeria, the expectation is that the situation would at best be short term and would likely see OPEC bending at a point that would see the price stabilize at the $65 – $70 mark but with Iran’s oil soon to flood the arena, this expectation may be a little stretched.
We have experienced this cyclical motion of oil price which appears to happen once every 8 years or thereabout and the feelers we are getting from the industry here is that it would be business as usual for some time yet meaning that we may not see oil going below $40 nor rising above the $100 mark.
What informed the choice of your theme ‘Natural Gas Development and exploitation in an emerging Economy – Strategies, Infrastructure and Policy Framework’ for the SPE 2015 conference? I think people would have preferred topic that has to do with Nigeria’s dwindling crude oil fortune.
SPE deliberates and selects its conference themes typically one year in advance of the conference and that was the case for the NAICE 2015 theme.
The theme we chose remains very valid for the industry in Nigeria today and quite aptly would remain relevant over the next few years and we at SPE are excited by the prospect that the conference would be providing the much needed direction for the industry as far as gas development strategies impact on the economy.
Having said this and in response to the second part of your question, SPE is equally sensitive to the issue of the dwindling oil price and this is reflected in the theme we adopted for our other flagship event – the Oloibiri Lecture and Energy Forum which took place in Abuja in March this year.
That forum was themed: Global Oil Price Dynamics: Impact and Strategic Solutions for Nigeria. That topic was very well debated and the outcome is contained in a communiqué that was subsequently issued.
How is this conference different from the several yearly conferences by SPE? What should visitors and exhibitors expect from this year’s conference? For the first time, the conference would be offering a dedicated WiFi zone along with a life streaming service that offers attendees access to topical sessions and panel discussions without having to be physically there.
This means that visitors can enjoy the privilege of accessing multiple sessions from their devices while attending other conference events or even from the comfort of their offices in the event that they need to drop in to the office to attend to a thing or two.
We have also partnered with several hotels and an airline operator to offer discounted pricing for attendees and this year, we plan to give our exhibitors a lot more privileges and attendee benefits than they have enjoyed in previous shows.
What impact is this conference going to have on the Nigeria’s economy? What are the plans by the association to ensure implementation of the communiqué from the conference?
To talk about the impact that the conference would have on the Nigerian economy is a little bit premature at this stage, but one key deliverable from the conference is the release of an official communiqué, which would highlight all the opinions coming out of the various panel discussions, topical sessions and technical presentations.
This would converge into key focus and recommendations emanating from the conference theme and our role at SPE would be to create that required sense of urgency by forcing this through all available communication channels – news and social media (print and electronic), industry journals, industry road shows, among others.
What is your take on the plans by the president to take over the management of the Nigeria’s oil and gas resources? The Federal Government takes key interest in the reform and development of the oil and gas industry. To give you some perspective, we know the oil price is now half of what it used to be.
It has happened so fast that some people still have the old price in their documentations. The challenge is: what do we do in this kind of scenario? In the Middle East, Kuwait to be precise, activities in the oil industry are at an all-time high.
The same is happening at the United Arab Emirates where they are going to spend about $36bn in their oil industry in the next two years. What that tells you is that if oil prices have fallen by half, you need to increase your production. In that respect, the resuscitation and growth of our industry should be the target.
We have to catch up and we have to play hard. We need to move our industry forward now by increasing the value of the product. But now, our production is falling, and there appears to be no money in the banks.
It is a challenge, and that is the reason the Federal Government has rightly taken a key interest in our industry. As an industry, we have to restructure, remodel and go back to build a more efficient industry to compete with other industries in this very low price oil regime.
Do you think increasing production now is right, considering that the country was said to be selling its crude at give-away prices some weeks ago? We have been in this industry for a while now.
The SPE has been here for close to four decades. The oil industry is like a cycle. There are ups and there are downs. We were here when oil price was $9 per barrel.
The prices go up and come down. When it is down, you are to prepare for the next up-cycle. When it is down, you should drill more wells because it will be cheaper to do so.
When it is up, you start to benefit from your investments. At that time, drilling for oil becomes very expensive. That is the mindset we need to have and not a panic mindset.
That is what the SPE does because at all times, there are strategic discussions going on among members, and insights like this are brought forward. Oil prices are down now, and this is the right time for Nigeria to invest.
Do you think existing oil fields in Nigeria have the capacity to spur significant growth in oil production? One thing that the SPE stands for is knowledge and knowledge sharing, and we appreciate that.
The petroleum industry is driven by know-how and by investment; so, if you look at the various levels of progress in the country from the onshore basin to the shallow offshore basin to the deep water basin, it has always been driven by knowledge and investments.
With that in mind, the need to unlock the potential of the petroleum industry has become very necessary. All this is built on collaboration. There is no single person or organisation that can claim to have it all.
We have built the industry on collaboration and technology; hence, the SPE is working towards bringing together everybody in that knowledge space in such a way that they are applied to real life problems for the benefit of the industry and the economy. If you look at our industry, there is the tendency that we have different solutions for the same problem.
The SPE allows people to come and challenge the problems and provide solutions. That peer interaction is critical in the sharing of knowledge, and it is our expectation thata we will continue to explore more avenues to strengthen the industry.
What are your plans for SPE in the next few years? SPE is going to see the take off of its corporate governance structure with the hiring of a full time Executive Secretary who would drive day to day activity and take charge of strategy implementation.
Further, SPE has partnered with industry and academia and we recently witnessed the ground breaking of the SPE Energy Center in Port Harcourt, which is a building project to be developed in a modularized form and featuring a Digital Library, Digital Oil & Gas Museum and Energy R&D Centre.
Other supporting facilities would include auditoriums, an entertainment center, food court, admin offices and a hotel. Overall SPE would remain the reference point for industry professionals and stakeholders and would continue to take the lead in positively impacting the industry from the point of view of policy formulation and direction.
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