Kachikwu: Nigeria Will Protect, Utilise Africa’s Market for Her Oil Industry

• •Aims at indigenous producers growing output to 25% in five years

Chineme Okafor in Abuja

Nigeria will quickly move to protect and utilise existing and expanding opportunities in Africa’s energy market for the benefits of operators in her oil and gas industry, and perhaps become the leading energy supplier of the continent, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, disclosed on Thursday.

Speaking before the Vice President, Prof. Yemi Osinbajo, declared the inaugural edition of the Nigerian International Petroleum Summit (NIPS) closed in Abuja, Kachikwu, explained that with the shrinking of energy market opportunities across the globe and countries or regions becoming protective of their market, Nigeria would be launching a forceful push to secure the continent’s market for itself and other African oil producers.

The minister also disclosed that the country would be providing more incentives to its indigenous oil producers to allow them to grow their oil production levels from the current 10 per cent which he said they contribute to the national production volumes, to 25 per cent within the next five years.

He, however, explained that for the country to upgrade and launch out a competitive oil industry that could hold down a good share of the continent’s energy market, an estimated $100 billion would have to be invested over a period of time in gas projects, petroleum pipeline replacements and other oil facilities needed.
Kachikwu, equally stated that the country would need to get her regulatory processes in the industry right, in addition to improving on transparency to give investors enough confidence to put in their monies in the industry.
He reiterated that reducing the cost of producing a barrel of oil from Nigeria’s oil fields was still essential, and that in the wake of the production limitation agreed by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members, Nigeria may likely place greater emphasis on allowing least-produced barrels of oil to be sold ahead of those that come in more expensively.

“Africa and African market are very key for us, as we begin to get into the way regional markets becomes very protected – the Gulf coming together, America begins to pursue becoming self-sufficient, the African market holds the potential for us, whether in refined petroleum products or transfer of technology and skillsets, whether it is in taking advantage of by local Nigerian companies, we need to begin to protect the African market and utilise it to its full potential,” said Kachikwu.

He explained as regards what needs to be done that: “We must very quickly establish regulatory and legislative certainty. Whatever it is you do with the PIB (Petroleum Industry Bill), various arms of it should be done and dusted with so that investors can have clarity in terms of where they can underpin their investments.”
“Transparency is key. We continue to have the negative vibe in transparency despite all that has been done in the oil industry. What it says to us is that something must still be missing. Every average Nigerian says the oil industry is not transparent. Given the fact that the cardinal focus of this administration is anti-corruption, we must ensure that whatever we do, we must give serious attention to transparency.

“We need to look at our processes, we need to look at our contractual terms, we need to review our patronage culture, we need to diversify the opportunities. When we are transparent, investors get a lot of confidence and are able to come in droves,” he stated.

He noted that what the government had done in the last two years had improved the investment portfolio of the industry, but that more needs to be done in this regards.

“Suddenly we are looking at investment portfolios over the next two to three years of close to $40 billion which includes the coming back onstream of a lot of the FIDs that have been postponed, but $40 billion is not enough to drive this industry.

“Our estimate is that you need about $100 billion worth of investment to drive this sector. Those investments will go into gas projects, they will go into pipelines that have to be replaced, they will go into new plants, they will go into the flare policy of the government, they will go into the development of LPGs and CNGs. We need to begin to convert our petrol consumption cars to gas and electricity-driven cars so we can avoid some of the embarrassments we have in terms of our supply needs,” he added.

He said: “Cost is key. We have all agreed that there is a need to address the cost. The Federation is worried about the fact that whilst countries like Saudi Arabia are targeting cost per barrel below $10, we are still oscillating in the mid $20s. I am happy that one or two IOCs have been able to achieve production cost of about $15, we still need to get everybody else to take that model.

“One of the things that we are going to be seeing is how to incentivise those who have the least cost production and not to penalise but quite frankly pull the ears of those who want to continue to run a high-cost profile. In an era in which OPEC quotas are going to be obviously in place over the next two years, I will not be surprised if we get to a point where those who give us the least cost of oil will get the first preference in terms of the barrels that we will put in the market. Cost is very important and we have to look at it.

“Major Nigerian oil companies, I will like to see them excitedly come on board. We have about 10 per cent of the contribution in production today, we need to do more. I am targeting over that five-year period that they move to at least 25 per cent which means that we need to see what incentives are essential for them to take some of the blocks that the IOCs are dropping and begin to bring them back into contributions in very realistic manners.”
In his remarks, Osinbajo stated that the increasing number of African countries joining the league of oil producing states called for greater cooperation amongst producers in the continent.

He noted that Nigeria could become the rallying point for African oil producers, and urged them to take advantage of the experience the country has in oil and gas production.

“With the largest proven gas reserves in Africa and the seventh largest in the world, with over 38 billion barrels of oil reserves and a daily production in excess of two million barrels, and the continent’s largest concentration of skilled manpower for the oil and gas industry built over 30 years, naturally Nigeria’s experiences can be useful to other African countries.

“I believe the NIPS, therefore, provides a good opportunity for the exchange of experiences amongst the large and small, the old and the new, and the potential oil-producing states in Africa. Furthermore, this summit has laid a solid foundation for encouraging the growth of local content in the African oil and gas industry, and to provide a forum for the display of the progress that Africa is making in the field of oil and gas technology,” said the Vice President.

He noted that: “The challenge for Africa is certainly enormous. Many of the traditional markets for oil in Europe and Asia are, of course, developing alternatives. This, at the same time, coincides with some African countries just making finds. The volatility of the oil market is another serious challenge. These are not challenges that can be addressed successfully solely by countries. Taking independent decisions. Collaborations, synergies and knowledge sharing are critical.”

“For us in Africa, we have to work hard to make the best of our God-given resources before it is too late. Together we can surmount our hurdles faster, not if we try to do so individually. I should like to assure our oil and gas operators of the federal government of Nigeria’s commitment to creating the enabling environment for the industry to achieve its destiny in Africa.”