‘Marginal Field Companies Should be Restructured as E & P Companies to Attract Investors’ – Amieyeofori
Since the emergence of marginal fields in Nigeria after they were awarded in March 2003, some operators have not been finding it easy owing to seemingly challenges in the oil industry.
Due to lack of production, the government gave warning signals to operators that their licenses will be revoked while the fields would be taken over. Respite came however after the new government provided a leeway to operators as they are currently in talks with the Department of Petroleum Resources (DPR).
Felix Valentine Amieyeofori is the Managing Director and Chief Executive Officer of Energia Limited, a forefront successful marginal field, oil and Gas Company in Nigeria. Amieyeofori spoke to orient Energy Review at the annual event of the Society of Petroleum Engineers (SPE) in Lagos that dormant fields cannot produce optimally due to distance and logistics hitches.
However, marginal fields companies can only be supported by investors if viable corporate structures are in place. He argues that partnership is key to survival of a marginal field, urging government and oil companies to do more to tackle terrorism and militancy in the Niger Delta given the country’s huge loss of 600, 000 to 700,000 barrels per day. Excerpts!
Briefly, what can you say about our marginal fields today? Is there any improvement with what we are seeing on ground considering the low oil price and other challenges currently being witnessed in the oil industry?
I think we should remove marginal field because it has stigmatized the people. It is an Exploration and Production business (E&P), and purely innovation. The oil industry is full of ups and downs, and what this is creating is to make the players innovative and creative. Operators are looking for solutions and sustainability because we cannot run away as Nigerians and locals. This is where God has placed us and what we are doing is to create solutions to mitigate the crisis, so there is hope.
You mean there is hope for the marginal field industry?
Yes, there is hope
But, the last administration made us to understand that, by March 2015, which was last year that any dormant field not producing will be taken over by government. Is this still sacrosanct?
There are regulatory and practical issues. What is in the book is one thing and what is doable is quite another. The issues are environmental and funding. How do the people attract funding to an unstable environment? It is collaboration. Right now, DPR and marginal fields groups yet to begin production are talking. But we need to really say what it is because first of all, people need to understand that some of these marginal fields are isolated and far off and this is costly. For some of us who have been in production, we are trying to tell them the different models of financing. It does not have to be the banks. There are service companies that are ready to finance marginal field companies and then get paid on production. There are people that are off takers who can give money to develop these fields and there is a guarantee to lift up the crude. The models are coming in to encourage the marginal field groups to first restructure and become a company because these people are foreign investors. They cannot work with a company that is solely controlled by a family. They want to work with corporate structures where they can put their money on the table, develop the asset, lift the crude and get paid. For some of us that are producing, we make contact with investors. Now I choose who I can work with.
Are you saying that those dormant fields that have not produced should not be blamed?
There are lots of other issues which because of time I may not want to delve into. There are lots of co-ventures and partnership issues. There are technology and experience gap and rather than use local or foreign experts, some of the marginal fields’ operators still resort to the use of the trial and error method of restructuring. There is need to structure a marginal field company to look like an E&P company. A marginal field operator should not put his daughter at the helms of finance just because she just finished from a finance school. You don’t have to make your son the CEO, simply for finishing a Master’s Degree in Petroleum Engineering. Get knowledgeable people in the business to restructure the company for you. There are lots that need to be done and that is why those companies producing are trying to open up to tell other operators the way to go. Energia is moving and by the time we finish our refinery, things will change. The company has a gas plant it is trying to upgrade with its partners and the refinery will be the company’s focus. If things are working for Energia, why can’t it work for other operators? It is just about putting our acts together.
You mentioned Oando as your partner in 2015. Is that partnership still subsisting?
Yes, because managing partnership is key, and this is one of the things some of the fields lack. You cannot keep fighting and struggling; you have to sit down and agree on what to do. If Oando were here, they will tell you Energia is managing the partnership well.
In your presentation, you spoke a lot about the risk factors in Nigeria-her ranking as third in the world, how can a marginal field survives in that kind of environment?
Excellent, I am not sure a lot of people picked that for that is why I spoke last. Radicalization, ISIS and terrorism are giving the industry serious problem. Look at the Niger Delta Avengers; they are not the same as the Movement for the Emancipation of Niger Delta (MEND). After Avengers, another militant group will surface and this is the time the government and the operators need to sit down. Our environment is changing and before the youths morph into ISIS, we need to motivate them and make sure we put them to good use. This is the only way it (violent campaign) can be stopped. If the government waits for them to be radicalized on the internet, it can’t be solved. Europe is almost in turmoil, we cannot afford radicalism in our confrontation with these elements. Some sections of the country are asking for resource control, it has gone beyond that. Youths are trying to become ISIS and Al-Qaeda terrorist groups because they think that is the only way to agitate. For instance, in Akwa-Ibom, the Avengers were claiming that they bombed a gas pipeline, but the NNPC exonerated them. This is where we are now in the oil industry. During my presentation I went through that global perspective. If you miss the global perspective and Nigeria is placed third on global terror risk, it means we shall have a lot more to contend with and the government needs to start thinking. I mentioned that the population is growing faster than the GDP. This is a social problem because when your economy is going down and your population is increasing, you are going to create violence in the society. I am not pleased with the situation because people should be focused with these issues. This will create more people in the creeks that are idle, who have access to internet and see what is happening in other countries. They will keep bombing and this is quite crazy.
What is the solution sir?
The solution is to begin to address the issue and make sure it is not about resource control, but about radicalization. How do we start getting the youths away from ISIS’ mind set of causing atrocities as if it is a medal? The United States has started dealing with these issues because they realize that their youths are being radicalized in the country. Look at what happened in Florida where a young man killed many people and he has no record of affiliation with ISIS. But how did he do it? They just radicalized themselves. Nigeria needs to act fast because our population is growing faster, our economy is going down, there is stress and more militants are going to look like ISIS. This is the time to pay more attention to social structure, social sensitization by gradually moving people away from such mindset. The country and the oil companies need to do the needful. The companies should also know that the youths in their environment are no longer going to block the roads but rather bomb the roads.
What’s your advice for the government?
The government should think outside the box. Remember the country said fall in oil prices will not affect it but it did. The 2007 and 2008 financial crisis will not affect us, but it did. Brexit will not affect Nigeria but it is going to affect the country because there is a link. The country should recognize that we are in a global world, as whatever happens in Britain will affect us and while we are fighting corruption, the country should also look at the social aspect of things going around globally. Nigeria is growing exponentially with about one hundred and eighty two million people, 2.6% annual growth rate. If you check what it will be next year and the economy is in recession; many people will lose their jobs and some with salary cut while some would be fired. More radicalized mindset will be created. This is the time everybody should come together, the press and the oil companies. The government needs to see how they can get the youths out of radicalism. They should focus on the youths and the unemployed. I showed a curve during my presentation which illustrated no terrorist activities in Nigeria, but it later picked-up and it is now high ranking. Nobody believed the country will come to this extent. When Dele Giwa died of a letter bomb, people thought it was strange, now it is different. Suicide bombers are everywhere, how did it happen? Government needs to pay attention to that. If ISIS is saying Nigeria is one of their provinces, government needs to act fast.
With the recent spate of bombings by the Niger Delta Avengers, how do you think we will play in the global oil market with the current situation?
It is simple, Nigeria production has dropped, and the country is losing 600, 000 to 700,000 barrels per day. We have never gone beyond the 2.5 million thresholds. Angola is now the biggest oil producer in Africa by reason of the disruptions in the creeks. Government should calculate it to know how much the country is losing. How much does it take to rehabilitate the environment? It is a balancing thing and the time is just too short to address these issues. If you are losing 600,000 barrels a day at $40, how much development intervention will you set up? Government needs to face this fact. How much will it take, you are ready to lose 600,000 barrels a day for ten months, calculate it and how much development fund is needed in the environment? Somebody has to put that number together and see that we are probably penny wise and pounds foolish.
What’s the future?
The future is interaction and every stakeholder must be part of it. That is why we show that globally, oil companies must know that terrorism is here with us. They must all sit down and consult security experts on how to go about it. The Federal Government while fighting corruption should also tackle terrorism because it is here with us and we don’t have to deny it.