Incentives for Nigerian oil and gas playersMarch 8, 2023
Funmi Ogbue, managing director of Zigma, talks to The Energy Year about challenges the energy industry faces and the company’s plans to enter all areas of the oil and gas value chain. Zigma provides engineering, procurement and construction management (EPCM) services to the upstream sector of the oil and gas industry.
What challenges does the industry now face after the adoption of the Petroleum Industry Act (PIA)?
In Nigeria, we waited almost 20 years for the adoption of the PIA, which I believe is the root cause of the delay of a significant number of projects. It passed in 2021, but we do not yet have major projects, as these things take time to ramp up.
On a positive note, the PIA focuses heavily on the community issues that have plagued our industry for years. We have now a clear framework for how host communities can engage progressively with other stakeholders. This will bring clarity and confidence to investors in the sector.
Some exceptional conditions drive the oil and gas industry forward. We live in ups and downs and are constantly called to show long-term resiliency. The oil and gas sector is very technology-oriented and leans on ever-growing innovation. Nonetheless, it requires lots of funding that must be channelled into cost-effective and timed investments. However, timed investments only come in an enabling and fostering regulatory environment where ROIs are safeguarded.
How would you summarise Zigma’s footprint in the Nigerian energy industry?
We operate in the EPCM and asset integrity and optimisation service segments. Our clients include NPDC and TotalEnergies. We provide maintenance and optimisation services for Agip’s pipelines, and we have an ESP contract with them as well. We also work for Shell by providing cementing services. Zigma aims to become a strong player in the EPCM space. Additionally, we have some investment in marginal fields.
What steps has the company taken to join upstream operations?
The PIA addresses fiscal terms in the upstream space by incentivising the participation of local players. This is related to the most recent marginal field bidding round, where Nigerian energy entrepreneurs have an opportunity to get involved and invest. Marginal fields are small and easier to manage for small-sized operators.
Smaller companies have been given the chance to demonstrate that they are capable of stepping up and participating in larger projects. IOCs are divesting, and local players need to be ready to take over their assets. Zigma went through the bidding process successfully; we are one of the top players planning to become an integrated energy company. We were awarded a field which we are now working on. We plan to acquire more marginal fields as time passes.
Our biggest challenge will be funding. Nigerian banks do not look positively at the oil and gas sector. The previous IOC divestments have discouraged them. We do hope this outlook changes.
We are firm about our future success because we have a pragmatic approach to business. We are aware that we do not have the same financial capacity as an international company, but our team is assembled in an efficient and lean manner. We will acquire the best technology and know-how in the market.
How is Zigma supporting Nigeria’s energy transition?
Gas is considered our transition fuel for a greener and more prosperous country and is the primary source of an industrialised Nigeria. We have therefore decided to invest in the gas business by establishing a new company called Zigma Gas. We want to first understand the terrain by providing services to players in the industry. The plan is to focus on the safety side of the gas business with Zigma Gas.
We are also providing the ANOH Gas Processing Company with fire trucks, and we have signed a contract with LPG distribution company Asiko Energy to provide them with LPG trucks.
What is the company’s strategy regarding its procurement services?
There are currently challenges in the procurement sector of Nigeria. Customers are looking for on-time delivery and a wide selection of operation materials that could be selected on an as-needed basis. They do not want to store much inventory because it would be inefficient. We hope to establish a logistics yard to link Nigerian companies and OEMs directly. We could fund, ship, buy, source and store items efficiently using a single facility.
What is necessary to foster greater participation of women in the Nigerian energy sector?
Companies need to realise that women bring a unique set of capabilities to the table; a more inclusive environment will increase performance and extract value. Nigeria’s oil and gas industry is severely undermined by systemic issues such as pipeline vandalism and crude theft that undercut our contribution to the national GDP. Women can bring a fresh perspective and methodical capabilities; companies should include more of us. We welcome NNPC’s decision to appoint women to the board and to key management positions. However, I would also encourage more women to be more risk-inclined by venturing more into the industry to pave the way for future generations.