Value in collaboration

Nigeria

Olatunji Akinwunmi, chairman of SPE Nigeria Council, talks to The Energy Year about the importance of collaboration in Nigeria’s hydrocarbons industry and the nature of Nigeria’s energy transition. SPE Nigeria Council, a technical association of professionals in the Nigerian oil and gas industry, is the national affiliate of the international Society of Petroleum Engineers.

What measures did the Nigerian industry take to mitigate the effects of the crisis?
The pandemic had unprecedented effects on the hydrocarbons sector. Industries and governments were shut down and there was significantly lower demand for oil and gas. At the same time, we were also subjected to a clash between two giants, Saudi Arabia and Russia, which exacerbated the problem of net oversupply, which brought the price of crude oil very low. The impact was severe in every corner of the world. Nevertheless, the industry in Nigeria proved resilient, as industry players at all levels started to talk about digital transformation and about cutting operating and production costs. For instance, the NNPC set a benchmark of USD 10 per barrel. That is the way forward for sustainability: first you control your costs and then you hope for the best price – which now stands at around USD 70-75.

How important is industry collaboration in the post-pandemic era?
The upstream sector has always been a capital-intensive industry and, therefore, a risky one. This combination has made it historically imperative for companies to collaborate. Competition, however, has always existed, as the industry is by nature one in which each player aims to secure the best contracts from the host governments. There is no doubt that competition is essential as it brings about innovation, which helps the industry over time.
However, in times like these, collaboration among industry players has turned out to be indispensable. Host governments, regulatory agencies, service providers and others must realise that they are all interdependent: for me to stay afloat, others too must keep their heads above water. Deeper collaboration and interdependence are now common practice in the “new normal” and will happen more often.

What form and shape will the energy transition take in Nigeria?
There is no doubt that the energy transition is real. However, it will proceed at different speeds in different parts of the world. In the so-called “developed world” there will be a faster transition, with renewable sources becoming much more important in its energy mix.
In Nigeria, we are at a different stage of transition. Our task now is to improve energy efficiency and reduce CO2 emissions, making our oil and gas operations more efficient and cleaner. The reality is that we have abundant reserves that need to be developed to develop the nation and jump-start our economy. We cannot afford to let this potential go to waste. Our gas reserves top 206 tcf [5.83 tcm]. This means we have a lot to do in this space: gas will be an important lever of our energy transition.
There is also a lot of potential in the area of crude oil. It will not be “business as usual” here, because oil seems to have been stigmatised. But oil will continue to be pivotal for the petrochemical industry, as well as heavy-duty transportation and we must realise that there is no quick replacement for it.
So, there has to be a “middle way.” That means we must recognise that oil will still be important moving forward, while at the same time taking cautious steps to comply with the Paris Agreement and to reduce carbon emissions. It’s all about finding the right balance. Thus, an oil and gas project will not only have to be profitable but will also have to be cleaner, aligned with CO2 reduction standards. Carbon capture and sequestration technologies also need to be developed and matured to contribute their part in overall emissions reduction.

What is needed to establish the foundations of the country’s Decade of Gas?
Exploration for gas needs to be incentivised. So far, practically all discoveries of gas – whether associated or non-associated – have occurred “accidentally” in the course of oil exploration. There has to be more gas exploration and a massive co-ordinated programme of infrastructure development. We need not only infrastructure but also the development of an industrial base, which is where Nigerian content comes in. We don’t have a problem with exporting gas; but, at the same time, we also need our domestic gas capacity to serve our own industries, electricity generation, fertiliser production, etc.
Gas is a hydrocarbon, but it is fundamentally different from oil because one needs to know the full chain of its exploitation down to the offtakers. It is not like oil, which can be stored and offloaded at intervals. Gas is more complex, in the sense that it must be known from beginning to end how it will be traded. Upstream activities have to be complemented and incentivised by downstream and midstream activities: the gas value chain is an integrated one that creates potential in each of its links – at every stage of the production, transportation, distribution and utilisation process.

What impact will the PIB have, for deepwater in particular?
The passing of the PIB is essential to the restoration of investor confidence. Its delay has red-flagged Nigeria’s business environment and made it somewhat inhospitable to investment. For years we have needed a stable fiscal regime and a modern governance that is able to solve the problems of today. The passing of the PIB is without doubt a game-changer and will set a precedent in the industry.
In the upstream sector in particular, there are plenty of plays that will benefit from it, for instance the development of some deepwater fields, among many others. The PIB creates a lot of hope for deepwater plays, defining clear fiscal terms and fostering a more investor-friendly environment, which will be a big relief for major oil companies and IOCs. It will also benefit local players, having a holistic and positive effect on the entire industry.

What importance does SPE have for the industry and what message do you want to convey?
SPE is a professional non-profit organisation with a presence in over 140 countries. Our main mission is to collect, disseminate and exchange technical knowledge concerning the exploration, development and production of oil and gas resources, as well as related technologies, for the public benefit. We provide the platform for industry players to enhance their technical and professional competence.
In Nigeria, we have over 10,000 members, comprising both professionals and students. Through our seminars, conferences and papers we bring knowledge and innovation to the table, aiming to better the industry and its performance.
As for my key message, it would be this. The largest exploration potential in sub-Saharan Africa is probably to be found in the Niger Delta Basin. There’s an urgent need to create an environment for the successful and low-cost extraction of these resources, while significantly minimising emissions. And this has to be done in a timely manner because the energy transition seems to be pressing.
Thus, we need to push the government to create a good environment for the players who want to invest. Nigeria can, in the very near future, become the most advantageous destination for securing oil and gas profits in an environmentally friendly manner.

Read our latest insights on:

• Nigeria
• Russia
• Saudi Arabia