Shell Offers Advice on How to Enhance Efficiency in Nigeria’s Oil Sector

Chineme Okafor in Abuja
International Oil Company (IOC), Shell, has offered a number of actions it said would help Nigeria’s oil and gas sector recover its operational efficiency.

It said the list of activities it proposed could help the sector get back to being competitive having largely declined in this regard and lately struggling with attracting steady investment inflows.

In a presentation made by Mr. Sam Ezugworie, Shell’s Development Manager for Nigeria, recently at the Society of Petroleum Engineers (SPE) annual Oloibiri Lecture Series and Energy Forum (OLEF), the IOC explained that embedding operational excellence as a way of life with full organisational weight, prioritising low oil cost production, renegotiating contracts and assigning capital based on values and adopting a data-driven system of decision-making to improve production and reduce cost could help the sector regain its declining efficiency level.
It also noted that ensuring fiscal and regulatory clarity in the sector through the passage of the Petroleum Industry Bill (PIB),

encouraging strategic partnerships for policy co-creation, innovation and Research and Development (R&D), as well as building a diversified, resilient and competitive portfolio for a sustainable future were essential to keep the sector competitive.

Shell stated that at $28 per barrel cost of oil production, Nigeria remained an expensive and unsustainable jurisdiction. It added that Britain and Brazil with $44 and $38 per barrel respectively were the others ahead of Nigeria in this regard while Saudi Arabia, Iran and Iraq have low rates of $9, $9 and $11 respectively.

However, the Group Managing Director (GMD) of Aiteo Eastern E&P, Mr. Victor Okoronkwo explained that the impacts of the COVID-19 pandemic on the global oil market have forced Nigeria and other producers to adopt new paradigms in their oil business.

“The oil and gas industry is still grappling with the aftermath of the twin tragedies of the dramatic crash in oil price on one hand, and the collapse in demand on the other hand, both tragedies triggered by the COVID-19 Black Swan.

“This phenomenon has accelerated new paradigms in portfolio optimisation and supply chain balance in the industry. With the price volatility, geo-political tussle between Russia and Saudi Arabia experienced during the first wave of global COVID lock down, financial leadership and liquidity risk management will remain major areas of focus for upstream oil and gas companies,” Okoronkwo said.

He explained that digitalisation and big data have also become key tools for success in the industry and will gain even more prominence in a post COVID-19 era.

According to him: “The industry is not out of the woods yet, despite the promising trends in price being influenced by OPEC+ production cuts. The unprecedented discovery, approvals and now application of COVID-19 vaccines hopefully should help contain the pandemic and economies will start opening again.”

Emphasising the growing role of digitisation in the industry, Okoronkwo stated that: “The lock down has demonstrated that with increasing speed and capacity in connectivity (like 5G), digital tools are no longer just enabling communication.

“They are providing and indeed accelerating opportunities for value creation and value capture through enterprise integration, communication across multiple social media, remote monitoring, and task automation, all to enhance operational efficiency, integrity, and process safety.

“So today digitalisation is no longer an option but a fundamental requirement for companies to go leaner and to remain competitive particularly in this era of energy transition.”
However, he said that a successful implementation of digitalisation in the industry will require amongst other things, collaboration across multiple industry stakeholders including investors, leaders and even policy makers.