TOGY talks to
Nigeria’s DPR on upstream progress, gas-to-powerDecember 12, 2018
Mordecai Ladan, the director of the Department of Petroleum Resources (DPR), talks to TOGY about, about the increasing capacity of Nigeria’s oil and gas industry, the entrance of local companies into the upstream sector and government reforms to hydrocarbons policy. The DPR oversees the activities of petroleum companies awarded licences in Nigeria.
• On Nigeria‘s downstream: “The inclusion of energy self-sufficiency as one of the critical enablers of the Economic Recovery and Growth Plan reinforced the strategic importance of downstream sector optimisation to facilitate efficient supply, distribution and sustainable availability of petroleum products.”
• On gas to power: “The focus on energy self-sufficiency also re-echoed the dire need to enhance gas supply to the domestic market to facilitate linkage with other sectors of the economy such as power and manufacturing to enhance sectoral GDP contribution and facilitate economic diversification for sustainable development.”
• On indigenous upstream companies: “It has been a successful initiative that contributed in developing the technical capability of Nigerians to run upstream businesses. It is delightful to state that today, we have about 14 marginal field producers that have commenced production and are at various stages of ramping up production.”
• On risks: “The uncertain certain nature of oil price movement is the biggest risk the industry is facing, in addition to disruptive technology issues. Changing energy policy of consuming nations and the renewed role of the US as a leading producer are some of the risks associated with oil and gas production.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Mordecai Ladan below.
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What is your assessment of the evolution of Nigeria’s oil and gas production capabilities?
The upstream industry used to be a space for international oil companies only, but their divestment programme in 2014-2015 brought an opportunity that transferred 25 assets with more than 10 billion barrels of 2P reserves to indigenous companies. This also brought new dynamics in the production space, where we have indigenous independents that are small but innovative and aggressive in terms of ramping up production to create value.
A unique value proposition they have brought into the E&P space has brought renewed excitement: different host community relationship management hinged on shared prosperity. This has resulted in decreased community unrest in their areas of operations thereby stabilising the Niger Delta environment.
It has been a successful initiative that contributed in developing the technical capability of Nigerians to run upstream businesses. It is delightful to state that today, we have about 14 marginal field producers that have commenced production and are at various stages of ramping up production. Niger Delta Producing was the first marginal operator to commence production, but today it is a vertically integrated company in the oil and gas industry.
In terms of risks and challenges, the uncertain certain nature of oil price movement is the biggest risk the industry is facing, in addition to disruptive technology issues. Changing energy policy of consuming nations and the renewed role of the US as a leading producer are some of the risks associated with oil and gas production. However, some of the challenges militating against sustainable production growth include low exploration investment to drive reserves growth that can support future production, socio-political issues to do with host communities and growing regional competition, just to mention a few.
What are the key drivers of growth for the Nigerian upstream sector?
The drivers for growth of the upstream sector are the conducive regulatory environment, investment influx and technological developments, oil price stability, reduction in barriers to entry and enhancement of the DPR’s capacity. The Department of Petroleum Resources has implemented several far-reaching initiatives to optimise the regulatory environment to support sustainable development of the industry in an efficient manner.
Notable amongst them are internal process automation to reduce man-to-man interface and enhance ease of doing business in the industry, issuance of reviewed and updated regulatory guidelines and introduction of new ones to provide clarity to industry players, enhanced collaboration with other government agencies that have responsibilities in the oil and gas industry, engagement with industry players, continuous capacity and competence development of the DPR by the provision of latest and adequate working tools and training to deepen the technical and managerial skills of staff.
Which of the core mandates and roles of the DPR are most relevant in the current oil and gas industry scenario?
As a matter of fact, all the regulatory mandates and roles of the DPR across the oil and gas industry value chain are quite relevant given the critical role the oil and gas sector plays as the mainstay of the economy and enabler of facilitating the attainment of the federal government’s economic growth aspirations. However, the inclusion of energy self-sufficiency as one of the critical enablers of the Economic Recovery and Growth Plan reinforced the strategic importance of downstream sector optimisation to facilitate efficient supply, distribution and sustainable availability of petroleum products.
Similarly, the focus on energy self-sufficiency also re-echoed the dire need to enhance gas supply to the domestic market to facilitate linkage with other sectors of the economy such as power and manufacturing to enhance sectoral GDP contribution and facilitate economic diversification for sustainable development.
What has been the role of the Department of Petroleum Resources in advising the government on oil and gas reforms?
The DPR performs a central and pivotal role in advising the government on issues requiring reforms in the oil and gas industry or supporting the government’s reform initiatives. From the inception of this administration, we have actively been part of the initiation, formulation, development and implementation of all government reforms for the industry, starting with the Seven Big Wins launched by Mr President [Muhammadu Buhari] to the Federal Executive Council, the approved National Gas Policy and National Petroleum Policy respectively, the drafted National Petroleum Fiscal Policy and the recently approved gas flare regulation on waste and pollution prevention.
This regulation provides the regulatory framework for the implementation of the Nigeria Gas Flare Commercialisation Programme [NGFCP]. The NGFCP is an initiative that seeks to leverage on the provisions of the Petroleum Act that allows the federal government free access to flares at stack by allowing third parties with requisite technical capability and commercial capacity to take the flares and monetise the gas for domestic market utilisation. This will facilitate the attainment of zero gas flaring in Nigeria by 2020, much earlier than the 2030 target set by the UN.
How has the impact of DPR’s online regulatory digital programmes evolved in the past year?
To put it in context, the DPR’s digitalisation programmes are hinged on the implementation of the Ease of Doing Business policy of this administration and targeted towards achieving a critical component of the Seven Big Wins on transparency and accountability. The initiatives are designed to enhance transparency and accountability in our operations, eliminate corrupt practices, reduce regulatory transaction cost, fast track approval processes, enhance ease of entry for industry players and ensure efficient operations across the oil and gas industry value chain.
The National Production Monitoring System [NPMS] is a novel idea conceived to enhance transparency and accountability in hydrocarbon accounting and crude oil production reporting. There has been this fallacy and negative perception that nobody knows how much Nigeria produces. I stand bold to say that it’s a misconception and unfounded. The Department of Petroleum Resources knows the quantity of crude oil produced and exported on daily basis. Our engineers who are present at all export terminals and FPSOs in Nigeria working 24 hours and 365 days a year are the only Nigerians authorised to unlock the crude oil export valve that allows flow of crude from storage tank to export tanker at the terminals and FPSOs.
In terms of optimising distribution of petroleum products, we are presently testing a tanker-based technology that will optimise the administration of petroleum tanker trucks to prevent proliferation of accidents and enhance quantity and quality assurance of loaded white products. It is designed such that once it is installed on a truck, anytime the tanker commences loading of products, it changes to an intelligent system that transmits quality, quantity and location data in real time to us. Once loading is completed, a digital code will be generated via SMS or email with which the compartments can be remotely locked by the product owner or any authorised person and the contents of each compartment can only be accessed at the destination point by authorisation from the same person. The vehicle continues to remotely send data to the National Data Repository about its location and other relevant parameters as defined till all the products are unloaded.
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