Can you tell us briefly about the numerous prospects from the massive 67 kilometres gas transmission pipeline that is close to completion right now?
The pipeline in question is what is termed OB3 (Obiafun, Obrikom to Oben)gas transmission system. It is a pipeline that is meant and conceived to move gas from the Eastern flank of Nigeria to the West and North. It kicks off from OBOB which is Agip concession all the way to Oben which is Shell concession. One section goes to join the Escravos, to Lagos pipeline and another section goes all the way up North to Ajaokuta. Now, the aim of that is primarily to move a total of 2 billion standard cubic of gas at full capacity and that is meant to be able to add more capacity of gas to Lagos and the West; and to be able to feed the West African gas pipeline with more gas. The other one is to facilitate movement of gas to Ajaokuta, with a plan of doing the Ajaokuta to Kaduna, and to Kano pipeline.
At the Oloibiri lecture series recently, the PTDF DG fingered poor human capacity development as the bane of the oil and gas industry in Nigeria. Do you subscribe to this? If yes, how have you been able to address this challenge in your group of companies?
Yeah, he said it all.
The problem is poor human capacity building. The reason for this is that there has not been a concerted effort by all parties to address the issue holistically. There have been bits and pieces of activities towards that, of which one is the Nigerian Content initiative, which led to the NOGICD Act being managed by the NCDMB. I am sure you are aware that PETAN was the primary force behind the entire process. I remember clearly that the first time we had meeting with NAPIMS in 1992, not much was understood about it. We pushed it down the road and other stakeholders keyed into that and we finally had it. You may also be aware that the only entity that is a private organisation that sits on the board of the NCDMB is PETAN; and that is in recognition of what we’ve done. That is a way to build capacity.
Again, I’m glad to hear that PTDF is saying this and I would like PTDF to strive to add more effort in activities that will result in building more capacity. There are billions of Naira under the control of PTDF and I know they are trying to do something. We need to have them engaged in schemes and sustained effort to improve capacity.
Today, talk of training, and take what Oilserv and the likes are doing to improve capacity. Oilserv started in 1995 with just two persons; today, we have over 500 people working with us, apart from the fact that we have over a thousand indirect employees, a lot of contractors and suppliers. This is what called capacity building is and it can be aided if we have a system in place that guarantees us cheaper fund or ease of access to finance. Legislation can also be looked into to aid local content development. We still talk about local content law but I have not really seen in reality, any project I have gone for to tender against international companies that I won without being the lowest bidder. You can’t win if you are not the lowest bidder! The point I am making is that, we need to address this issue and be able to know that a local company that is operating in Nigeria will build up capacity, make revenue and retain the revenue in Nigeria. An IOC working in Nigeria, on the other hand, will have to send the money back to where it is coming from. This is natural and we can’t blame them. They are not concerned about capacity building, no matter what anybody says. So, we have to deliberately encourage capacity building by helping to build local companies the right way, not brief-case-carrying companies.
Back to OB3, can you give us in numbers, how many Nigerian local engineers this project has been able to give gainful employment?
Let me start by telling you how many engineers we have been able to train since OB3 started and in line with Oilserv training programme. We have what we call Graduate Training Programme (GTP). We have graduated 25 to 30 young engineers yearly, consistently for the last four years, and they started out without experience. We make them go through a one-year training programme and expose them to work experience. If you add that up, that is more than a hundred engineers already trained. Apart from the fact that this project is at its peak, look at the staff matrix, we have more than 200 out of which engineers are about 30 direct engineers working in there. If you look at it, you can tell the story. This is apart from the fact that we have operators, welders that we train and graduate every year. But that does not mean that we employ all of them after training. We give them certificates after absorbing those the project can take.
With a view to OB3, what challenges are peculiar to this project and how have you been able to surmount same?
Every project comes with its challenges and OB3 is not different. But generally, the challenges we faced that are not peculiar to OB3 have to do with being able to get the right quality of staff for certain category of work. Many times, we get them and train them for the task we have. Another thing you just alluded to is finance. Finance is a major challenge. It will interest you to know that banks in Nigeria hardly give loan facility. I can tell you that 90 per cent of the time, you will not get any loan facility from the banks. When you finally get them to look at your proposal, the annual interest rate in naira of about 30 per cent is what you have to pay back in addition to the principal. This is not feasible. It is a death knell. If you decide to keep the money for one year before repaying, you have lost 30 per cent of the value. Which project can you execute genuinely that is guaranteed to fetch you 30 per cent profit? So, it is a problem. It is so bad that that the dollar facility attracts between 16-18 per cent per annum in some cases. You can’t fund project on your own. What you do is project planning and financial model; you can then look at the gap as far as project funding is concerned. When you get that, you repay as soon as you get your revenue. The other one is the community management. It is getting worse because there is no rule of law. There is the issue of general insecurity and this translates to extra cost in running the projects.
This brings us to the issue of funding local content and local projects in the energy sector. As one of the champions of local content, have our expectations been met thus far?
The local content idea is very good. By and large, I think it has progressed in line with the original intent. The current management of NCDMB is quite competent. The current Executive Secretary, Engineer Simbi Wabote is quite knowledgeable and focused. But of course, he has a lot of work to do because the way to improve a system is not to sit and carry on with the same activities over and over. I believe he is doing a lot to tweak certain practices to enable us get better results. You may have heard him speak recently about how to ensure that the 1 percent deduction (NCF) is utilised to build capacity because, from inception, a lot of us that carriedout these projects had 1 percent of our revenues deducted. Apart from the ones deducted directly from the IOCs and the NOCs, the NCDMB have not done much previously to utilise this fund in building capacity. Today, we are seeing a turning point by the statements and actions of the Executive Secretary. There is no point collecting the money and not utilising same well for the intended purpose, while the Nigerian companies that need loans cannot access them. It is possible to fund companies and be able to get these monies repaid complete with interests.
Senator Lee Maeba stated at the NOG that banks are mandated by the Act to have 10 per cent of the IOCs revenue domiciled in Nigerian banks to fund local companies.
We hear all this but we don’t see that happen. Again, that is the preserve of the Central Bank of Nigeria (CBN) to implement. So, I think this is a question you have to raise with the CBN because if they are up to it, they will know the implication of implementing it. It will bring a lot of capacity into the country. The bottom line is that, it is beyond us because we cannot force the banks to do this. We don’t regulate the banks and neither does the NCDMB. It is the preserve of the CBN.
Please tell us about the Nano-technology drive that was launched in UNN last year. We were there to cover it. For us, it’s amazing to see an oil company championing that. What informed your decision?
It is the same story of capacity building and development of technology. You may not be aware that Oilserv has done so much in the development of technology that relates to oil and gas production and transportation in the past 15 years. Take for instance, Oilserv built the longest cofferdam for the repairs of 28 inch pipelines of 76 metres in the swamp. Prior to that, the only company that had done this was Wilbros. Wilbros had not done more than 30 metres; we did 76 metres, and it was delivered by100 per cent Nigerian workforce! This was done with our own equipment; with zero fatality, zero incidents and no safety issue. Today, Oilserv is the primary company that has perfected the horizontal directional drilling technology. Few other companies in Nigeria are also doing it but with great difficulties-they get stuck but we have perfected it. We just finished the second river crossing of 48-inch pipeline. For you to do this with HDD you have to drill and rim to 62 inches, more than 5 feet diameter for a kilometre under water; we have done that. Back to your question, it is in the same light that we looked at how we can develop capacity and development of capacity is not restricted to the industry, it is across board. We figured out clearly that working closely with the universities would make a lot of difference. We can help them build capacity. So, we decided to fund and sponsor activities in nano-technology. You may not be aware that nano-technology is still a young technology but its application in the oil and gas industry is vast. I give you an example! By using nano-technology, you can develop drilling bits that that can last 10 times longer. You can develop communication systems when you drill your well so that you can feed up from down hole certain information that you cannot do under normal circumstance. You can also use nano-technology to improve your mud system so that you can have mud that can sustain drilling programs as far as different formations are concerned down hole. So for the past 5 years, we have spent quite a lot of money to sponsor them, develop their departments. We help them go overseas to study in the universities and to learn what obtains there while being be able to have them develop that department and to build Nano-technology beyond the conceptual level, to applying the same in the industry.
Gas commercialization in the country is a big problem today. What specific recommendations would you want the country to adopt to arrest the situation?
There are no hard and fast rules, but we need to look at the general principles of gas production, transportation and utilization and put these side by side with our local situation. The bottom line is that Nigeria can never develop without building gas infrastructure to be able to provide source of energy that is available and affordable, and that is cleaner than oil. My understanding has always been that gas is not useful unless you build infrastructure to transport it. It is not like oil that you can store in containers, in tanks and what have you. You cannot store gas. As you produce, you transport and utilise. And if you cannot transport and utilise, you have to flare or you shutdown the wells if you cannot flare, in the case of associated gas. What this means is that we have gas being flared but we don’t have gas to use. It means there is a gap between gas production and utilisation and what constitutes this is the transport system, which is the pipeline system. If we can build the pipeline system with an eye for the future and not just what we need now, Nigeria will solve her problem.
(Cuts in)…What about virtual pipelines?
When I say pipelines, I don’t mean physical pipelines only. We are investing a lot in virtual pipelines, in macro LNG, in nano LNG, in mini LNG systems. You will see the result of that in the next two years. We will be able to process the gas, liquefy, transport it and inject it into pipelines or to the end users as it were. So, virtual pipeline is part of the whole process.
What is your model on host community and oil and gas company relationship? Which magic wand led to the security of your facilities in these communities?
The magic is being true to yourself and to others. You may not be aware that at the height of militancy from 2003 to 2009, Oilserv was the only pipeline company working in the Niger Delta. We maintained the entire Shell transportation system, the pipeline system from the whole Shell East, from Bayelsa, all the way to Akwa Ibom and up to Imo and Abia. We were able to do this without problems because we carried the communities along. They have genuine issues that have not been addressed by government across the land. What we do basically is to engage them and make them stakeholders, not by throwing money up in the air. You make them stakeholders by engaging them. They benefit from it but they work for it as well. Be truthful to them. If you make a deal with them, do not renege. Once you have that confidence, you can work in the Niger Delta region without problems.