Okwuosa: Funding Constraint, Infrastructural Deficit, Others Deprive Indigenous Firms of IOCs’ Divested Assets

 Peter Uzoho

In the wake of divestments by the international oil companies (IOCs) operating in Nigeria, the Group Chief Executive Officer of Oliserv Group of Companies, Mr. Emeka Okwuosa, has stated that indigenous firms are being encumbered in securing the divested assets due to a number of factors.

Okwuosa listed the major constraints depriving local firms the opportunity to secure the divested IOCs’ upstream assets as lack of requisite finance, infrastructure deficit and lack of the needed skilled human capital to run the assets similar to the way the oil majors were operating them efficiently.
The Oilserv boss made the observations in a presentation tagged: ‘Financing Africa’s Energy Companies’, which he delivered at the just-concluded 8th Sub-Saharan Africa International Petroleum Exhibition and Conference (SAIPEC), held in Lagos.

The conference organised by the Petroleum Technology Association of Nigeria (PETAN) had the theme: ‘The Next Steps: Accelerating African Content’.
Represented at the event by the Managing Director of Oilserv, Mr. Nnanna Anyanwu, Okwuosa identified financial constraints as a major challenge.
“Securing divested assets often involves significant financial resources, upfront payments, investment commitments, and operating expenditure.
“This has been a constant hindrance to acquiring those assets. A sizable number of indigenous companies lack the financial capacity to compete or access financing on favorable terms,” he said.

He stressed that limited access to capital remains a huge challenge to indigenous oil firms, given the difficulty of accessing capital from traditional sources such as banks, private equity firms, or capital markets, whom he said, prefer green energy investments.

“Limited access to capital has drastically affected ability to fund acquisitions, exploration, development, and operational activities.

“Of note, the acquisition of IOC assets often involves a significant technical and operational capacity to effectively optimize fields, facilities, and infrastructure,” Okwuosa pointed out.

He expressed displeasure over the regulation and compliance issues in the Nigerian oil and gas industry, which he said, may have inadvertently added complexity to acquiring and operating divested assets.

In order to make a success of this labyrinth, he advised indigenous companies to come out with a mechanism to navigate these frameworks effectively in order to secure and maintain ownership of divested assets.

The Oilserv GCEO also identified political and security risks which have the potential to affect indigenous companies seeking to acquire divested assets as part of the challenges encountered by the local operators.

He further explained, “These risks deter potential investors, delay project approvals, increase operational costs, and disrupt development and production.

“Others are Inadequate infrastructure, including transportation networks, power supply, and port facilities.

“Another thorny issue is that of social responsibility. There is need to maintain the balance in the complex community relations and social responsibility issues associated with acquiring and operating divested assets.

“Indigenous players should have significant exposure in terms of engagement and security, owing to the historical/legacy matters and socioeconomic challenges. There is need for due diligence and risk management skills, especially ones associated with acquiring divested assets requiring robust processes, and access to reliable data.”

According to him, some of these indigenous companies lack capabilities and resources to perform comprehensive due diligence, assess risks effectively, and implement risk mitigation.

Okwuosa, however, challenged indigenous operators on the need to build value and promote investment through capacity building, charging them to embrace new trends.

He added, “There is need to change research and Innovation, certification and compliance as well as training and mentorship programmes.

“There is need for NOC (national oil company and government to establish an initiative that will empower and enhance competitiveness, recommending some approaches such as Nigerian Content Development and Monitoring Board (NCDMB).

“Other programmes involve promoting the participation of Nigerians and indigenous companies in the oil and gas industry, in order to implement policies and programmes aimed at increasing local content in the sector.”