Upstream Sector and the Imperative of Collaboration
By Dirisu Yakubu, Abuja, FCT
The upstream sector of the Nigerian Petroleum industry holds the key to the present and future growth of the nation’s energy sector. With an array of respectable International Oil Companies, IOCs and many indigenous firms holding their own in exploration and drilling, there is a general expectation that the industry could be turn around given the focus of the present administration in the task of developing the nation’s oil and gas reserves.
To do this requires increased level of partnerships and collaborations amongst the players as experts brainstormed on the way forward in the recently concluded Nigerian Oil and Gas (NOG) Conference in Abuja, the Nigeria’s capital.
Speaking on “Energizing the Upstream Sector through Increased Collaboration,” panelists at the NOG Conference harped on the importance of building and sustaining synergies which in their words, help greatly in the task of shouldering risks and business uncertainties.
Moderator of the session and Managing Principal Partner, OJA Petroleum Services Limited, Jimmy Ahmed said the time has come for companies to collaborate in areas of common strength and capacities, arguing that uncertainties associated with businesses in the upstream sector would be better mitigated when cost fluctuations are bore by more than a single entity.
“This is the time for companies to come together and trust themselves by pooling resources (money, equipments, technicals) in the execution of contracts. This will go a long way in fostering further partnerships in the future, thus leading to improved service delivery,” Ahmed stated.
For Osagie Okunbor, Country Chair, Shell Companies in Nigeria and Managing Director, Shell Petroleum Development Companies, SPDC, government owes it a duty to Nigerians to ensure that companies do well, noting that the public sector must find a way of building close ties for the sake of the industry. “Government must ensure that companies do well in their production capacities. Both need to collaborate for good,” said the Shell boss.
Okunbor’s remark is premised on the fact that a good number of companies have either folded up or are gasping for breath owing largely to their inability to operate in a harsh business environment. Apart from the difficulty associated with ease of access to loans, companies have had to put up with poor fiscal regimes, leading to exodus of some to neighboring countries in the past few years.
One man whose contributions drew a thunderous applause from participants was Sadiq Adamu, Executive Director, Mobil Producing Nigeria Unlimited. According to Adamu, collaboration is important given the fact that some Nigerian companies do not respect the terms of contract. He also pointed out that to be taken seriously, there’s the compelling need to learn and adopt what works for other players in other countries of the world.
“Nigeria is just beginning to embrace the tradition of obeying laws and respecting contracts,” he said, urging upstream players “To borrow a leaf from other countries on the way their oil and gas industry works.”
In what appeared a veiled reference to the lingering crisis between government and Shell over the Malabu scandal, Adamu said approaching a court for resolution should not be interpreted as an end to a business relationship, noting that time has indeed come to appreciate the significance of resolving cases within the ambit of the law as obtained in advanced climes.
“In Nigeria, there is the tendency to see those who take us to court as enemies. This should not be because people go to court to settle their differences,” he counseled, calling on incumbent administration to put in place incentives capable of attracting investors into the petroleum upstream sector. “If we want to attract investors, we must make fiscal regimes good and conducive for doing business,” he added.
Jeff Ewing, Chairman and Managing Director, Chevron Companies in Nigeria emphasized the importance of collaboration this way: “Whether we are talking about security in the Niger Delta, technical know-how or manpower, companies can come together in their quest to deliver service in the oil and gas industry. This collaboration would ultimately culminate in reduction in the cost of doing business,” he stated.
Echoing same position, Managing Director, Total E &p Nigeria Limited, Nicolas Terraz said the company is ready to engage in multi-levels collaboration with any company operating in Nigeria provided such a company is of proven integrity and competence. Terraz also stated that collaboration would afford local companies opportunities to imbibe best-practice culture, stressing that to a large extent, the petroleum industry would be better for it.
“Collaboration is good for the industry as it mitigates risks associated with uncertainties such as dollar/naira fluctuation and rising cost of production. Even the IOCs are not immune from occasional hazards associated with contract execution. So when burden is shared, even the smaller companies can cope and continue in business,” he noted.
In a quick chat with Orient Energy Review at the end of the session, Ahmadu-Kida Musa, Deputy Managing Director, Deep Water District, Total E & P Nigeria Limited called on companies offering same or complementary services to come together and find ways of taking the sector forward.
Asked for his take on the call for increased collaboration, Musa responded: “This is the time to come together to salvage the oil and gas industry. Crude oil prices are beginning to rise but no one is sure about the future. Despite the optimism in the gradual rise of oil prices, you will agree with me that it is far from what it used to be. This is enough for stakeholders to synergize and share operational and personnel costs for mutual benefit. Government also needs to play its part in this collaboration,” he added.
Meanwhile, it is the hope of Nigerians from all walks of life that the deliberations at this all-important session would provoke new policies and subsequent implementation to leave the old for the new business model that the experts keep talking about. Time is of the essence!