Nigeria’s untapped potentialJune 13, 2018
Andrew Ejayeriese, president of Nigerian Association of Petroleum Explorationists (NAPE), talks to TOGY about the untapped potential for gas in Nigeria, how the country fares compared to neighbouring markets and what the government needs to do to bolster local hydrocarbons activity. Formed in 1975, the group promotes the continued success of Nigeria’s oil and gas industry through conferences and training.
• On outlook: “Nigeria is one of the few locations in the world that, in spite of the years of exploration and production we have had, still has huge potential we have not touched. Even in the Niger Delta there are more hydrocarbons in deeper places that we have not explored. There are huge untapped reserves.”
• On natural gas: “What we need is an aggressive gas exploration strategy. Once we get to that stage, we are going to find more. However, because we do not have a fiscal policy related to gas in the country, people have not been paying attention to it.”
• On competition: “If the fiscal policy here is not conducive, people will go elsewhere. At least the government is starting to realise this. The change in fiscal policies is being done now. We hope that some of those necessary changes will be made so that we will be more competitive as a country.”
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of our interview with Andrew Ejayeriese below.
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What are the untapped opportunities for exploration in the country?
Nigeria is one of the few locations in the world that, in spite of the years of exploration and production we have had, still has huge potential we have not touched. Even in the Niger Delta there are more hydrocarbons in deeper places that we have not explored. There are huge untapped reserves. Additionally, more work could be done on producing fields.
Some of the basins in this country are virgin basins. Although some business entities may not see the prospectivity of some of those locations, the government has a responsibility to do the initial exploration work in those locations. When you make a discovery, you open up a window. The government needs to continue to strategically explore these untapped prospects.
One of the things we have as an advantage is our security. However, security is not cheap. If you don’t have it, costs will come down, but security must still be paid for. Additionally, we need to make sure we have a reliable supply of electricity. If power is reliable, the majority of the huge generators will go away. There are huge costs to run and maintain them.
How attractive is gas for upstream companies in Nigeria?
About 70-80% of the gas reserves we have today were found while drilling for oil. There are huge gas reserves out there. Most of the big gas discoveries were made when they were drilling for oil, not on purpose. What we need is an aggressive gas exploration strategy. Once we get to that stage, we are going to find more.
However, because we do not have a fiscal policy related to gas in the country, people have not been paying attention to it. There is no written document saying how to prospect, bid, develop and sell gas to make money. We need that so people can look for gas. Once that is in place, you will see a boom in that industry. We are waiting for the government.
There is still huge potential for exploration in Nigeria, but the fiscals are challenging. Ghana and Mozambique don’t have as much infrastructure as Nigeria does, but they have better conditions and that is why explorations are happening there and not here. We need the government to recognise that.
How does the Nigerian oil and gas market compare to its regional counterparts?
The fiscal conditions need to be more competitive. Right now, I do not think it is competitive. If it was competitive, people would not be going to the neighbouring countries. We need to compare our countries side by side and see how much the government takes and what the taxes are. It is the responsibility of the government to make things competitive.
We have had a lot of regional competitors. Ghana is producing, for example, as is Zimbabwe and Mozambique. That is happening because their governments are doing things to make their countries attractive to investors. We have to tell the government to look at their policies. Companies are in business to make profits. If the fiscal policy here is not conducive, people will go elsewhere. At least the government is starting to realise this. The change in fiscal policies is being done now. We hope that some of those necessary changes will be made so that we will be more competitive as a country.
Everyone is looking for survival. The big projects are not there anymore. If the price of the projects are too high, they will not be developed and the money will move to where it will make more money. There is money, but if the environment in the country is such that investors will not be able to make money, they will look elsewhere.
Nigeria still has a lot of oil to be discovered, but the conditions have to be right for companies to put in their money. Right now, conditions are not right. What we have now has served its purpose, but the paradigms have changed. There is competition in West Africa; there is oil being discovered in places where it had not been discovered before. We have to look at how we can make conditions more favourable for exploration.
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