Bet on Nigerian expertiseAugust 27, 2020
Chidi Egonu, CFO of Energia Limited, talks to The Energy Year about the new normal for business operations during the Covid-19 pandemic and expectations for Nigeria’s coming marginal fields bid round. Energia is an indigenous E&P company that operates the Ebendo and Obodeti fields in the Niger Delta in a joint venture with Oando.
How has the Covid-19 pandemic affected your business?
A significant impact has been seen in the price of oil. As well, a bit of opex has been spent on moving people in the Covid-19 environment. Another impact is in the need to ensure a safe environment without contamination for workers during a crew change. It is not a regular crew change where people can move freely without any concerns. Additionally, we need to restrict access to the field and not compromise what we have already put in place.
In Nigeria, states have decided to lock down geographical areas to stop the spread of Covid-19. One cannot move from one state to another without required permits. The oil industry has come together with joint efforts to operate in the current environment, but it is still an additional challenge.
A lot of work we used to do from the office we now do from home. A lot of things are happening virtually. We must sign documents electronically before we can send them out, which involves taking additional measures. There is also a certain psychological element when you are quarantined and cannot go out to socialise.
However efficient your system is, there is always room for improvement. It is key to constantly pay attention to details. Regarding our production, we managed to maintain some level of consistency and remain within the government quota. We do our best to do the math and make sure we do not lose any barrels beyond the tolerated limits.
How can the Nigerian hydrocarbons community react to unprecedented disruption caused by the pandemic and the oil price collapse?
There is never a truly bad time to make necessary changes. There will always be difficulties and situations. What is lacking is the will power. The oil industry is known for carrying on as if nothing is happening. Oil flows 24 hours a day. No matter what is happening, production continues.
Covid-19 has presented us with generational challenges, but we cannot allow Covid-19 to define us. The government is doing what it can within this environment. Passing the Petroleum Industry Bill is something that requires a lot of courage and we must move forward with this.
What are your expectations for the coming marginal fields bidding round in Nigeria?
We are interested in bidding in the new round. A lot of companies will look at their strengths and where they think they will play best. In addition, some will form joint ventures and try to bid together to operate a field.
When one looks at the history of the Nigerian oil industry, one can see that knowledge and experience have indeed been transferred. Nigerians have proven themselves in the industry, even when they work for multinationals. Those that work globally have come together in some cases and bid for a field to operate. The same thing will happen in this instance. Many more locals have joined this experienced set of people since 2003 when the last bidding round happened.
Do you think local players will make bids on offshore plays?
When you look at offshore, you have shallow and deep waters. Most of the staff you have at these locations are Nigerians. If a Nigerian company decides to bid for an offshore block, I will definitely bet on their ability to successfully develop that block. These people have gained an impressive amount of experience over the years. I am confident that if a local company decides to go that route, it will make a big impact.
How do you view the attractiveness of Nigeria’s downstream sector to investors?
The refinery business is an opportunity on its own. However, companies look carefully before investing. From the outside one might think that every type of crude has the same characteristics and the same yield when it is refined. The reality is quite different. Each promoter wants to study its feedstock before making any decisions. There are huge opportunities in this space. A few refineries will come on line in the next few years. Presently, Nigeria imports a lot of refined products.
Nigeria is a huge opportunity for international investors. We have major international oil companies in the country for this reason. The margins are healthy, and you have a government that listens and does what is possible to make the business environment friendly.