Engr. SIMBI Wabote, Executive Secretary, Nigerian Content Development and Monitoring Board, NCDMB, in this interview, spoke on topical issues affecting the oil and gas sector in an era of coronavirus pandemic. He aired his thoughts on the decade of gas in Nigeria, what should be done to boost investment inflow in the sector; consequences of delay in passing petroleum industry bill; what coronavirus robbed the industry and what NCDMB is doing to see that the Nigerian Upstream Cost Optimisation programme, NUCOP, is achieved. The scintillating interview is a must read for all Nigerians interested in what is happening in the oil and gas sector, which is the cash cow for revenue generation in the country.
Below are excerpts.
Question: May we formally congratulate you on your reappointment as executive secretary of the NCDMB. Your second tenure in office began when the coronavirus, COVID-19, pandemic has caused a lot of havoc in the global economy. Would you say that the oil and gas sector is the worst hit of all sectors of the economy and why?
Wabote: I would say the health sector was the worst hit when you consider that the COVID-19 was novel with no ready answer on treatment or prevention of the infection. The health system of most countries in the world were stretched beyond limits and the loss of lives across the globe was just saddening. Of course, the oil and gas industry and other sectors like aviation, tourism, trade, and others were impacted. Sectors that are largely, or to some extent, reliant on technology such as the oil and gas sector were able to adapt swiftly to the challenges posed by the pandemic as most operations migrated to the virtual space. However, the demand side of the industry was severely impacted because sectors that demand its products were heavily also highly impacted, which resulted in the record low prices of crude oil at the peak of the pandemic.
Question: Could you estimate what the pandemic has robbed the sector?
Wabote: The pandemic robbed the sector most of the new projects lined up for implementation. Several new projects worth billions of dollars were postponed, and we needed those projects to grow local content. This means in-country capacities and capabilities could not be utilized with the attendant job losses, inability to service loans, sectorial decline, and lack of new investments. The pandemic also brought greater focus on energy transition. It is remarkable, however, that in the Nigerian Oil & Gas industry, we had reasons to be happy because we signed the US$12bn E&P Contract for NLNG Train 7 project at the height of the COVID-19 pandemic and we sustained the operations of the oil industry during the period using local personnel and service companies. We are upbeat that some projects will soon commence now that COVID 19 vaccines are being rolled out.
Question: Could you compare the adverse effect of the pandemic on the sector with the inability of Nigeria to pass the Petroleum Industry Bill, PIB? Which of the two – COVID-19 and PIB has done more damage to the oil and gas sector and revenue generation in the country?
Wabote: It would be wrong to compare the impact of COVID-19 and PIB. This is because COVID-19 was a bolt from the blues, and it hit everybody across the globe and left a devastating impact on mankind. On the other hand, the Petroleum Industry Bill is a legislation that has been caught up in getting alignment amongst the various stakeholders. I’m certain that once these multi sectors concerns are addressed, it would be enacted. Fortunately, with the renewed vigor I see between the Ministry of Petroleum Resources and the leadership of the National Assembly, I believe that the bill will soon be passed into law.
Question: Is there any special thing NCDMB is doing to encourage the passage of the PIB in the country?
Wabote: We submitted our inputs into the draft PIB through the Minister of State for Petroleum Resources, Timipre Sylva, and we are supporting the minister to provide required clarifications to the National Assembly. We’re keenly monitoring legislative development around the PIB and upbeat that it comes out soon enough in acceptance form and shape to re-energize the industry.
Question: What damage has been done to the oil and gas sector with the non-passage of PIB?
Wabote: The non-passage has been a major concern to industry stakeholders in the last 15 years or more. Obviously, investors are worried of uncertainties and the non-passage of the PIB has created some degree of uncertainty leading to delays in investment decisions. From my experience, I know quite well that the industry does not like uncertainties. There have been some figures mentioned by the international operating companies and other stakeholders as to what Nigeria has lost, but most of these are in the realm of estimates.
Question: How has the pandemic affected the implementation of the NCDMB’s 10-year Strategic Roadmap?
Wabote: COVID-19 affected everybody and everything world over and NCDMB was not insulated from the impact. For instance, some projects and programmes got differed because of COVID and you needed those projects to support the attainment of the 10-year roadmap. However, we were lucky because we had already implemented the roadmap for three years before the pandemic and we had made substantial progress on several of the key initiatives. When we conducted a roadmap checkpoint review in Q4 last year, we found that we were on track by 62 percent on the short-term initiatives; we were also on track ahead of schedule by 67 percent for the midterm initiatives and on track ahead of schedule by 40 percent for the long-term initiatives.
Even during the pandemic, we pressed on with some of our major projects that are key to the Roadmap. For examples, our Oil and Gas Parks at Emeyal 1 in Bayelsa State and at Odukpani in Cross River State will be ready in Q4 2022. We have also invested in some other strategic projects like modular refineries and gas projects. Some of these projects are key to achieving our 10-year roadmap.
We’re able to keep the momentum because we activated our Crisis Management Team at the onset of Covid-19 with myself as the incident commander. The Crisis Management Team met virtually every work day throughout the lockdown period and later, we started meeting two times every week. Our goal was to ensure staff welfare and business continuity. On staff welfare, we tracked our staff wellbeing and encouraged compliance with all the NCDC protocols. Under our business continuity strategy, we rolled out measures to mitigate the impact of COVID on the industry stakeholders.
First, we moved our approval processes online and ensured that there were no delays in the delivery of our commitments to the industry. Then we slashed the interest rates on the Nigerian Content Intervention Fund, NCI Fund, from 8% to 6%. We approved that all running loans with outstanding tenor within three years be extended by six months, while all running loan facilities with a tenor above three years will get extra 12 months tenor. We took these decisions to reduce the impact of COVID-19 on the repayment of the loans by service companies.
Nigeria is still Nigeria attractive and rewarding for Oil and Gas Investments
Question: Investments in the oil and gas sector has been drying up over the years in Nigeria? How bad is the situation and what can be done to help?
Wabote: The situation is quite concerning because after EGINA Deepwater project in 2018, the next big Final Investment Decision, FID, in our oil and gas landscape is the NLNG Train 7, which happened last year. This industry needs big projects to keep the economy vibrant and create opportunities for services companies, generate employment and grow local capacities. In my recent meeting with the Managing Director of Total Exploration & Production Company, I challenged international oil companies to emulate Total E & P, which despite concerns in the oil and gas industry, had continued to invest in Nigeria. They need to show faith in Nigeria, our Oil and Gas Industry and the economy because Nigeria is still attractive and rewarding for Oil and Gas Investments.
Question: The international oil companies like Shell and Chevron have been selling their assets locally. Is this a good development or ominous signs of worst things to come?
Wabote: Divestment is a global phenomenon. Globally some big international oil companies have been shedding weight and realigning their business portfolios because of energy transition and the need to embrace cleaner and renewable energy projects. So it is not unique to Nigeria. All over the globe, the big IOCs are reviewing their decisions so as to stay competitive. Ultimately, some of the divested assets will be taken over by other international companies and even indigenous companies. The likes of SEPLAT, EROTON, AITEO, First E & P and other indigenous producers already contribute 15% of our oil production and 60% of our domestic gas supply and they are well positioned to do more if given the opportunity.
Crude oil production at $10 per barrel is achievable in Nigeria – NCDMB boss
Question: You were at the launch of the Nigerian Upstream Cost Optimisation Programme, NUCOP, which held at the NNPC Towers. Is the proposed $10 per barrel cost achievable?
Wabote: This is a bold and purposeful move by the Minister of State for Petroleum Resources, Chief Timipri Sylva and the NNPC to drive down the cost of production and enhance our competitiveness. NCDMB is supporting this laudable move and I believe that the $10 per barrel target is achievable and the use of local vendors will help in this regard.
Question: What role will NCDMB play to make that cost reduction achievable?
Wabote: We are supporting this move through the reduction of the duration of our processing of bids and tenders to 30 days. One of the key escalators of project cost is long contracting cycle. Thus, we automated all our approval processes to reduce our turnaround time, drive efficiency and ultimately reduce cost. The patronage of local vendors and establishment of manufacturing hubs for oil and gas components locally are key to cutting costs. A good example is the EPC contract for NLNG Train 7, where a company that is well established in Nigeria quoted US$2 billion lower than its competitor that was coming from outside for the same job. That was huge savings for the economy and evidence that Local Content can lower the cost of projects. Also, the use of indigenous human resources would also be cheaper than reliance on expatriates.
Oil and gas sector recovery from Covid-19 may take years – Wabote
Question: As a corollary to the previous question, the global energy transition and demand erosion occasioned by the Covid-19 pandemic has made cost optimization imperative. How soon will the oil and sector in Nigeria recover from the adverse effect of the pandemic? And Why?
Wabote: Full recovery would take some time, if not years. But as we have seen in the last few months that the crude oil price has started to climb up between $50 and $70 per barrel. That range has encouraged producers to award maintenance contracts for existing operations and keep their fields flowing. This will have a direct impact on the services. I earnestly believe that the roll out of different COVID vaccines would also inspire key sectors like hospitality and aviation to open more, which will drive more demand for crude.
Question: One of the key functions of the NCDMB is to set guidelines and minimum content levels for project related activities across the oil and gas value chain. Could you tell us with evidence based information how far the board has realized this function after more than 10 years in existence?
Wabote: Minimum Nigerian Content levels for various industry activities were set in the schedule of the NOGICD Act. In several areas like Engineering where we had 90% target, we have surpassed the target and we are doing 95% and even 100% in some areas. In the Low voltage electric cables production, we have also surpassed what the Act prescribed. Similarly, there are some areas where we have not met the set target. One of such areas is LNG, which uses specialized and proprietary technology for something like the pressure vessels and the funding are often tied to the technology.
However, I want to clarify that NCDMB is not advocating for 100% Nigerian Content in the oil and gas industry. If we are to implement the Nigerian Content Law 100 percent, we will have to stop oil production in Nigeria, develop non-existing capacity, and then start production again. Take for example Section 53 of the NOGICD Act, which mandates that all fabrication and welding activities must be carried out in Nigeria. But there are not enough dock yards in-country where the hull of big vessels such as the Egina FPSO could have been fabricated from scratch. Ninety-five percent of our construction in the oil industry is steel, yet we do not have a functional steel mill in Nigeria. The oil and gas industry depends on sectoral linkages, including the power sector to deliver and some of those sectors are not well developed. More so, Local Content is a marathon race and not a sprint. This is why we enforce the law with pragmatism.
Question: Can you avail us information on how the Nigerian Content Development Fund has grown over the years and how it has been used to help the industry?
Wabote: Over the years, we have deployed the NCDF to develop key infrastructure, implement Human Capacity Development programmes, fund loans schemes for industry stakeholders, and provide equity investments in furtherance of government policies and programmes. Within the last three years, we have deployed the NCDF to support the oil and gas industry, in the total sum of US$732 million split into US$350 million Nigerian Content Intervention Fund being managed by the Bank of Industry; US$50 million Research and Development Fund, and US$332 million as equity investments in various partnerships. In 2019, we deployed forensic audit and it helped us to &&&increase remittance into the NCDF by US$75 from 285 contributors. %%%
We started the NCI Fund with US$200m in 2017 and we had different products, including Manufacturing, Refinancing, Contract Financing and Asset Acquisition, each at single obligor limit of US$10 million and interest rate of percent. We also had the Community Contractor Financing as the only naira denominated product line and we kept it at a single obligor limit of N20 million, with an interest rate of 5 percent.
By 2020, we had exhausted the entire US$200 million and needed to increase the size of the NCI Fund because the number of applicants were over a hundred. Our Governing Council under the leadership of the Minister of State for Petroleum Resources, Timipre Sylva, approved an increase in the size of the fund by US$150 million, so the NCI Fund increased from $200 million to $350 million to meet the increasing demands for the funds.
We also created two additional products which are the Working Capital Fund for PETAN companies and Women in Oil and Gas Intervention Fund. We also got approval for the $50 million Research and Development Fund.
We have used the NCI Fund to support several services in the acquisition of assets and execution of contracts. In fact, the NCI Fund is one of the most successful loan schemes. About 98 percent of the borrowers are paying back because we go through a very rigorous process.
NCDMB is key promoter of businesses in oil and gas sector – Wabote
Question: How far has the NCDMB gone in achieving its mission of being a catalyst for the industrialization of the Nigerian oil and gas industry and its linkage sectors?
Wabote: We have gone a long way in actualizing this vision. One key evidence is that through our partnerships with key project promoters, we have enabled investments of over $3 billion covering modular refineries, manufacturing of LPG cylinders, LPG Depots, gas processing facilities, lube oil production plant, and a methanol plant using gas as feed stock.
Question: Is the recent increase the price of crude to $60 per barrel, a signal that the worse is over and that better days are coming for the sector?
Wabote: One can say that we have overcome the darkest days when oil prices entered the negative territory and producers begged for takers of their cargoes. However, my experience in the oil and gas industry tells me that the price of crude oil will continue to oscillate. One can only hope that it maintains a price that is high enough to continue to incentivize investors.
Question: It appears emphasis is shifting to sustainable renewable energy. Is this a threat to exploitation of the oil and gas in the country and Africa in general, especially with discoveries of crude oil in the continent?
Wabote: Indeed, there is a growing emphasis on energy transition and the big IOCs have been committing funds to renewal energy. This is a big threat to oil producing nations like Nigeria that depend on oil for the bulk of their foreign exchange earnings. However, we are also aware of latest data from the International Energy Forum, IEF, the Organization of Petroleum Exporting Countries, OPEC, and some other reliable sources that suggest that fossil fuels would continue to remain a significant part of the global energy mix in the coming decades despite the rise of renewables.
But rather than worrying about the impact of energy transition, oil producing countries should maximize hydrocarbon extraction now that oil and gas resources still has value. The other strategic thing to do is to key into the energy transition and develop projects that will sustain your economy under this phase.
Question: How does the mandate of NCDMB relate to development of sustainable renewable energy?
Wabote: The mandate of NCDMB does not relate directly to sustainable renewable energy. However, Section 70 of the NOGICD Act mandates the Board to assist local contractors and Nigerian companies to develop their capabilities and capacities to further the attainment of the goal of developing Nigerian Content in the Nigerian oil and gas industry. This provision of the law empowered us to go into partnerships with select project promoters to catalyse the realization of Federal Government’s policy pronouncements in the energy sector.
In order words, if the Federal Government makes a policy pronouncement in the development of renewable energy, NCDMB would be obliged to support promoters to grow Local Content in that regard.
Effects of the delay in passing the PIB on investments in the oil, gas sector
Question: As an industry chieftain with a lot of experience, could you with facts and figure allay fears that investment inflows into the country is not dwindling and that renewable energy is not a threat to crude oil exploration in the country?
Wabote: The drought of new investments in the Nigerian oil and gas industry in the last few years had little to do with the threat from renewable energy. The emphasis on renewable in relation to investment is just beginning to gain momentum. The truth is that many international operators sat on the fence waiting for PIB to be passed. Others got attracted to new regions where they felt they had more attractive terms and returns. Some others delayed based on other considerations. But I believe that when the PIB is finally passed, some of those investments would begin to flow.
Major gas investments/projects in Nigeria
Question: How is Nigeria doing with gas infrastructure development? Is gas really the future of the industry and why?
Wabote: Nigeria is doing exceedingly well with regards to infrastructure development. Gas is not just the future of the industry, it is already in focus. A few days ago, President Muhammadu Buhari launched a decade of gas to show the total commitment of the administration to gas-based projects, especially now that energy transition has become a reality and we have launched several big ticket and bankable projects to show that Nigeria wants to play big in this transition.
The focus on gas began in 2020 when Minister of State for Petroleum Resources, Timipre Sylva, declared 2020 as the Year of Gas. The initiatives rolled out that year included the National Gas Expansion Programme, Gas Network Code, Flares Commercialisation programme.
In January 2021, NCDMB, NNPC, Brass Fertilizer and Petrochemical Company and other partners took the Final Investment Decision and signed agreements for the construction of a methanol plant using 500MMscfd of gas as feedstock in Brass. The project is a 10,000tonnes/day methanol plant and will bring Nigeria onto the world map as one of the top-10 producers of methanol.
In February this year, the Federal Government and the Kingdom of Morocco signed five strategic Memorandum of Understandings, MOUs, that would see Nigeria import phosphate from the Kingdom of Morocco and blend it with gas to produce blended fertiliser for the local market and export. Nigeria will also produce Ammonia and export to Morocco.
Question: Is gas pricing in the country okay enough to attract investments into the sector?
Wabote: This is an area where the Nigerian National Petroleum Corporation, NNPC, has been working seriously on. I know there are concerted efforts to arrive at willing buyer-willing seller scenario.
Strategies adopted to overcome the challenges of refining of crude oil locally
Question: How do you view the inability of Nigeria to have a functional refinery? How can the country overcome this challenge?
Wabote: A few years ago, the Federal Government launched the refining roadmap and proposed three strategies for addressing the perennial challenge refining in Nigeria. One is the development of Greenfield refineries like the 650 barrels a day Dangote refinery, which all Nigerians are celebrating and cannot wait for it to start production. The second strategy is the maintenance of existing refineries like the turn-around maintenance that was recently approved by the Federal Executive Council for the Port Harcourt Refinery. The third strategy is the development of modular refineries. This is where we come in as NCDMB. We are working with four investors to develop modular refineries and we believe firmly that it would contribute to meet the refining needs of Nigerians. We have shown proof of concept with the 5000 barrels per day Waltersmith Modular Refinery in Imo State, which was commissioned last year and is even unable to meet the huge demand for its products. We are working with two partners in Bayelsa State and one in Edo State. We believe that these three strategies will help Nigeria overcome the refining challenge.
Question: What should happen to the four moribund refineries in the country?
Wabote: At the right time, the Federal Government would take the right decision on them. But you can see from the approval that was recently granted by the Federal Executive Council for Turn Around Maintenance of the Port Harcourt Refinery that government does not want to give up completely on those assets.
Question: Is the downstream oil and gas sector fully deregulated? If so, how?
Wabote: The federal government is committed to a fully deregulated downstream market and this is necessary to attract huge investments into the downstream and create certainty in the market. A few days ago, the NNPC announced the amount of resources it was losing while selling refined petroleum below the market price. Those kinds of losses are unsustainable for the NNPC and the economy. However, government is also determined to cushion the effects of deregulation on the poor masses. It is a delicate scenario because the government President Muhammadu Buhari is very sensitive to the plight of the masses. But I trust in the experience of the minister to navigate the challenge.
Tackling the issue of bridging of petroleum products
Question: How can the country stop bridging of fuel products?
Wabote: One way we can stop bridging of products is by adopting full deregulation of the downstream. Under a fully deregulated market, major marketers in up north might find it cost effective to buy refined products from Niger Republic or any other neighboring country rather than trucking products from Lagos to far flung destinations at great costs. Another strategy to stop bridging is the repair of our vast network of products pipelines. Transporting petroleum products through pipelines would also help to eliminate the costs that come with bridging,
Gas projects being promoted by NCDMB
Question: What role is NCDMB playing to enhance gas exploitation and utilization in Nigeria?
Wabote: We have done a lot to enhance gas exploitation and utilization. In fact, more than 70% of our partnership investments are devoted to the gas sector. These include: (a.) Partnership with NEDO Gas Processing Company in Kwale, Delta State, for the establishment of 80MMscfd of Gas Processing Plant and a 300MMscfd Kwale Gas Gathering hub; (b) Partnership with Triansel Gas Limited in Koko, Delta State, for the 5,000MT LPG Storage and Loading Terminal Facility; (c) Partnership with Duport Midstream for the construction of Energy Park inclusive of a modular refinery, power plant and CNG mother station in Egbokor, Edo State; (d) Partnership with Brass Fertiliser for the development of a 10,000MT/day Methanol Plant and 500MMscfd gas processing plant at Odiama in Brass; (e) Partnership with Rungas Group for the manufacturing of 1.2million composite LPG cylinders every year; (f) Partnership with Butane Energy to roll out LPG Bottling Plants and Depots in Abuja and ten (10) Northern States of Kano, Kaduna, Katsina, Bauchi, Nassarawa, Zamfara, Niger, Plateau, Gombe, and Jigawa states.
Question: How do you see the new race for hydrogen production? Will is outshine the drive for gas optimization in the country?
Wabote: We need to watch the space closely, but for us in Nigeria all emphasis has to be on gas development and utilization. As our HMSPR has asserted repeatedly, we are in the decade of gas and for us in Nigeria, gas is our transition energy.
Question: Please provide any other information you would like Nigerians to have about NCDMB in particular and the oil and gas sector in general?
Wabote: We will continue to uphold our mandate as it regards the growth and sustenance of Nigerian Content in the oil and gas industry and enforce the provisions of the NOGICD Act in a pragmatic manner.
– April 19, 2021 @ 18:59 GMT /
Source: Realnews
