INTERVIEW : The divestment of expatriate companies underscores the necessity for Nigeria’s oil (and energy) independence.
- Wole Ogunsanya, PETAN Chairman
By Jerome Okojokwu-Idu
Introduction:
Sequel to the recent Executive Orders and drive by Nigeria’s President Bola Ahmed Tinubu-led administration to attract investments into Nigeria’s oil and gas industry, the chairman of the Petroleum Technology Association of Nigeria (PETAN), Engr. Wole Ogunsanya, clears the air on the position of indigenous companies as regards high production costs, Local Content, capacity building, and the readiness of indigenous companies to take over assets from the divesting multinational companies.
Excerpts from interview with the Majorwaves team:
Q: Considering the recent Executive Orders by the Presidency on Local Content, can you share your thoughts?
As PETAN, we have carefully reviewed the presidential directives as published in the gazette and provided our response through the appropriate channels. Recognizing the office of the presidency’s ongoing efforts to enhance the economy, we are confident that our feedback will be considered.
Firstly, we must acknowledge the significant challenges we face in meeting our Organisation of Petroleum Exporting Countries (OPEC) production quota. Beyond the OPEC targets, we need to generate the desired revenue to bolster the Nigerian economy, which is undoubtedly a key agenda for Mr. President and the intent behind these gazettes. The President’s intervention aims to stimulate the interest of multinational oil and gas companies and indigenous producers in increasing production. This is the primary objective of the gazettes.
We appreciate these efforts. However, we are concerned about any perception that links local content with increased production costs or the current low levels of national production. In our response, we identified evacuation as the foremost challenge hindering production increases in Nigeria. Evacuation is critical because monetizing the produced oil or gas is only possible with it. Evacuation issues prevent us from maximizing investments, conducting workovers on existing wells, drilling new wells, and increasing field production.
Efforts to enhance production within the field are only possible if the evacuation infrastructure is adequate. Without effective midstream solutions, such as functional pipelines, any additional volume produced cannot be monetized, leading to potential well shut-ins due to evacuation constraints.
At PETAN, we see evacuation as the primary barrier to boosting oil and gas production in Nigeria. While there are other concerns, our focus remains on the full implementation and compliance with the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, ensuring that indigenous companies execute activities in land and swamp oil fields. PETAN is at the forefront of this initiative, so we have developed substantial capacity over the past 30 years. This capacity surpasses that of all multinational service companies in Nigeria combined, which is a milestone worth celebrating. We provide significant employment to Nigerians, and the country must achieve self-sufficiency in oil production.
The divestment of expatriate companies underscores this necessity. Shell and ExxonMobil are divesting, and several multinational companies are scaling back their operations, reducing capacity, shutting down departments, and relocating equipment to more profitable regions. Thus, PETAN’s role is crucial to the survival of Nigeria’s oil and gas industry. Even if multinational service companies attempt to build capacity, they face limitations. With European nations shifting to renewable energy in the next ten to fifteen years, relying on foreign expertise to sustain our oil and gas production will become increasingly untenable.
We recognize that these countries’ push for renewable energy aims primarily at achieving energy independence within their borders and reducing their reliance on imported energy.
In Nigeria, I advocate, and PETAN firmly believes, that oil and gas are pivotal to our energy independence. Nigeria must prioritize increasing oil and gas production and maximizing its utilization within the country. With the Dangote Refinery now operational and fired up, our challenge is to supply enough crude oil to fully utilize its capacity. While other countries are advancing their energy independence through technology, we must rely on something other than external assistance to produce our oil. We must take ownership of the entire oil and gas value chain—from asset ownership to service provision, extraction, midstream processing, and refining.
We should focus on processing oil into diesel, kerosene, jet fuel, petrol, and other by-products at our refineries. We should enhance our pipeline infrastructure for gas to generate electricity for all Nigerians. I advocate that Nigeria can consume nearly 1.5 million barrels per day domestically. Now, add that to meeting the demands of neighboring African markets with refined products and processed gas.
Local content is central to this vision. PETAN and Nigeria must champion local content and continue building capacity. We must increase our local content capacity as multinational companies scale back their investments in Nigeria, whether due to better opportunities elsewhere or a shift towards renewable energy in their home countries. Any obstacles to this would jeopardize the future of the oil and gas industry and the revenue it generates for the federal government and all stakeholders.
Q: You said local content is not the challenge, but evacuation is. Now that PETAN has identified evacuation as a challenge what would you suggest as a solution?
Evacuation is a significant challenge closely tied to investment. It’s a classic case of putting the cart before the horse—without effective evacuation, investment is hard to attract, and overcoming this hurdle is impossible without investment. One must precede the other. We must critically examine our current evacuation facilities and assets within the industry. The state of our pipelines for evacuating liquids and gas is well known. Additionally, the government must enhance the security environment to protect these assets. Regulators should also be more open to allowing alternative evacuation measures to address this critical issue.
Q: Can you confidently predict that in the next 10 to 15 years, PETAN will cover Nigeria’s entire value chain of oil and gas activities?
The positive development is that PETAN already spans the entire value chain. Notably, the most critical pipeline under construction in Nigeria today is being built by two PETAN companies. In terms of rig access and well drilling, several PETAN companies possess the requisite expertise. Our presence is substantial across well services, processing facilities, refineries, and gas plants. Some PETAN companies are even advancing beyond gas plant facilities to produce LPGs for the local market. We have already established a comprehensive coverage of the entire value chain.
What we need now is to increase our capacity. For instance, if PETAN companies operate ten land rigs and the industry demands 20, we must double our capacity. If only two jack-up rigs are available but seven are required, we need to expand from two to seven. The crucial element is that we have the full spectrum of the value chain covered; now, it’s about scaling up our existing capacity to meet market and business environmental demands.
As multinational companies in the exploration and production (E&P) sector divest, acquiring these licenses, owning the fields, raising funds, and maintaining inherited production becomes imperative. We must also focus on workovers and drilling new wells, as the number of barrels produced daily will naturally decline over time.
Provided we continue to evacuate efficiently and scale up PETAN member companies’ capacities, we will not face significant challenges. Our ability to raise funds independently is robust, thanks to Nigerian banks. Many PETAN members with proven track records can confidently demonstrate how they will utilize new assets to enhance their existing operations.
Q: I’m aware that PETAN has formed some sort of consortia to handle some of these complex E&P solutions. How many consortia do you have now in PETAN, and what is your vision for the association?
In PETAN, we refer to our consortia as Technical Interest Groups (TIGs). These strategic groups are designed to cluster companies providing similar services to build capacity collectively. Currently, we have about 15 TIGs, with plans to expand as new PETAN members diversify the value chain. The primary purpose of these TIGs is to aggregate capacity efficiently. For instance, if a project requires four rigs, and one PETAN member has two while another has three, the TIG can ensure that the combined capacity meets the demand.
Our vision is clear: PETAN remains the capacity builder for Nigeria’s oil and gas industry, covering all necessary services for oil and gas production. This vision, passed down from our predecessors, continues to guide us. Our immediate and medium-term goals focus on supporting the federal government in increasing oil and gas production in Nigeria. We aim to develop a model demonstrating our full capacity to produce domestically oil and gas. We have communicated these goals to the Minister of Petroleum, the Nigerian Content Development and Monitoring Board (NCDMB), and the NNPC Limited, all of whom have expressed their support.
It would be reassuring to see several indigenous companies poised and ready to take over the servicing of any assets whenever a multinational service company departs. Multinational service companies will likely downsize and relocate equipment from Nigeria whenever E&P companies announce divestments. Our indigenous firms demonstrate their savvy by always being prepared to step in. This ensures that no molecule of gas or drop of oil is lost due to a lack of expertise or inadequate preparation. Fortunately, we have built sufficient capacity to step in, maintain, and enhance production. We have seen this with onshore assets and offshore jack-up environments, such as the recent Shell and ExxonMobil divestments. PETAN is ready to demonstrate that we can service assets from start to finish—drilling, completing wells, producing, evacuating, and monetizing the output. That way, the country maintains its production level and relevant streams of income accruable from those assets.
We are committed to this mission, and industry stakeholders support us. Following our initiative with Abia State, other states are approaching PETAN for collaboration. We also plan to approach the NUPRC for a marginal field, not to become an E&P company, but to showcase our service capabilities in extracting oil and gas for the nation’s benefit. We aim to create a model that can be fully disclosed to NNPCL and the government, demonstrating how Nigeria can independently produce its oil and gas.
As a developing country, elevating every economic sector, including oil and gas, to world-class standards is crucial. Globally, Nigerians are recognized among the top oil and gas professionals, closely behind the Americans, Chinese, and Indians. Our expertise is well regarded, and we have significant domestic and international experience. PETAN members have worked across various global assets, including the North Sea and North America, demonstrating our comprehensive capacity and expertise.
Therefore, it is evident that PETAN is not merely ambitious—we are equipped and ready. By harnessing our resources, we will prove that Nigerians can independently produce Nigeria’s oil
Q: How many more joint venture partnerships will we likely see now that you’ve kicked off with Abia State, where you identified 53 existing oil wells?
It is crucial to ensure success and demonstrate to the state and federal governments that this approach is viable. We are committed to taking the necessary time and are open to collaboration with any state government interested in working with PETAN. Once we validate this model, we believe it will be straightforward to scale our efforts. With over 100 member companies, PETAN has the capacity to manage multiple projects simultaneously, even if it means undertaking three projects at once.
