Nosa Omorodion, Director of Independents Schlumberger, and President of the Nigerian Association of Petroleum Explorationist (NAPE) speaks on the nation’s crude reserve and NAPE’s stake in improving the upstream oil and gas industry. Interview by Temitayo Adetoba
CED Magazine: As the president of the Nigerian Association of Petroleum Explorationist, what is your opinion of the nation’s current crude oil reserve?
Omorodion: There is no doubt that we need to validate what the actual reserve is. For years, we have been producing and depleting the reserves without replacing it at the same level of depletion. So logically the rate of depletion has not matched replacement and that is a challenge we have always faced. We have not had any major mega discoveries in this country in quite a long time, and it takes an average of seven to ten years for major deep water discoveries to come to production from the time of award. It is unquestionable that we have not been replacing the oil we have been utilizing, and exploration work has suffered a lot in the last six years because of the investing penchant to produce. We have not done a very good job in investing in the search of newer hydrocarbons than the ones we currently produce. The department of petroleum resources is the statutory body that can adequately report the exact details of the nation’s crude oil reserves or barrel equivalent, however, as a senior industry practitioner, I can tell you that there is a major concern that we are depleting without replacement.
CED Magazine: What is your opinion on the current fuel situation in the country?
Omorodion: I believe that the current administration of the NNPC is working tirelessly to address the nation’s current fuel situation. This is a wakeup call for everyone. We don’t have enough in-country refining capacity to meet the daily refining needs of the country. The NNPC refineries are not working at optimum capacity and there are lots of innovations to address that. Modular refineries are becoming very much accepted and small independents like Niger Delta Exploration Company are building their own refineries to augment what we have currently. Dangote is also working on a refinery in order to address the existing gap. We have to be able to get that optimum refining capacity for our petroleum products, instead of producing locally and export for refining and bringing them back into the country.
CED Magazine: Apart from the refining capacity challenge, what other challenge is facing the exploration business in Nigeria?
Omorodion: The major issue with exploration business in Nigeria is that there has to be an incentive for exploration. When people get oil blocks especially now that divestment is ongoing; the first thing to do if you want quick return on investment is to open up the oil blocks wider since they already produce oil, and produce more. More needs to be done to improve the state of the oil and gas industry by putting in place measures of incentives that will encourage exploration. Without exploration, we cannot survive as a country because we need to ensure that we continue to find more oil in hydrocarbon.
CED Magazine: Are you assuring us that we have the necessary manpower to drive the oil exploration industry?
Omorodion: Manpower has never been an issue in the exploration business. We have had a couple of generations that have retired and are still retiring whose wealth of knowledge and experience cannot be overemphasized. What is quite important is the will, the means, the incentive on the government’s part to encourage exploration.
CED Magazine: What forms of support or incentive has the Nigerian Association of Petroleum Explorationist had from the government in the past, and what more are you expecting going forward?
Omorodion: NAPE will continue to work to promote our ideals of finding more oil. We have worked with the government in the past; we have had our inputs in policies, conversations and discussions to improve the upstream oil and gas industry. We are undoubtedly the leading largest, the number one and the premier oil and gas association in Nigeria till date. Virtually all relevant operators within the oil and gas industry ranging from the young geologists to past executive members of the NNPC, former directors of the department of petroleum resources to former ministers of petroleum are members of the association. We have influenced bills in the oil and gas industry; we have been party to seeing the marginal crude decree, indigenalization decree, independent decree, deep water decree. We were instrumental to all these bills coming up; even the local content bill and we are having our own input in the petroleum industry bill. So we get consulted in bills that govern the upstream of the oil and gas industry, and we have members in positions of government who understand that the industry must be carried along.
NAPE members cut across the entire face of the industry from Nigerians to Expatriates, from the young engineer to the chief executives across strata.
CED Magazine: Have you had the necessary support from the government in times past?
Omorodion: NAPE is independent of the government, so we always try as much as possible to work with them. We organize conferences and provide them our communiqué that gives them insight into how we think and what to do to surmount pressing issues.
CED Magazine: In terms of joint venture operations, do you think the petroleum industry bill will do justice to the operators involved?
Omorodion: What has led to the cry about joint venture is because government has over the years not been able to make cash commitment to the venture, and it’s becoming a major concern because it is a partnership between the private individuals/ companies and government. If the private companies go to the equity market to raise fund and then wait for the government to bring its own share of 60%; the longer it takes for the government to provide the money, the time value of money diminishes and they might begin to run at a loss. There is a funding gap that needs to be addressed, and we need to have a creative funding mechanism in place. That is what the industry is going through right now. Our government needs money to be pumped into infrastructure. Government makes more money by having less in this joint venture than when they put more funds. We simply need to decide what is best for this nation, if the joint venture needs to be reviewed or not.
CED Magazine: Last year NAPE made a lot of sensitization on gas flaring; can you say it has reduced since then?
Omorodion: Undoubtedly, in the last two years, there has been a remarkable difference in what is flared or not. It is at a very low point now, reason being that there are lots of creative ways to monetize gas at present. The gas to power project is consuming a lot of gas, and also the LNG; so gone are the eras. Gas is becoming very profitable now as you make more money exploring and producing gas than you make for oil, and NAPE has been a key player in ensuring that.
CED Magazine: NAPE’s ideal of finding more oil and creating utilization for it, has the association done justice to that ideal so far?
Omorodion: In forty years, we pride ourselves on the numerous impacts we have made in the oil and gas sector. We have encouraged and created platforms for networking and interaction. We have strengthened professionalism. We have supported new technologies and maintained our ideals of finding more oil, and we have consistently discussed capacity and policies within the industry.
It’s been forty years of improvement and innovation and we think we have come of age, and we are quite relevant today. Government all over the world needs to continue to lean on NAPE to actualize their expectation as we are the custodian of the technical know-how of the profession.
CED Magazine: What are your expectations in terms of funding capacity on the government’s part for the exploration business?
Omorodion: Government needs to be more decisive. We cannot continue to operate the JVs the way it is today, so we need some creative funding, that will take the burden off the government without wrestling the supervisory intervention of the government which has been the fears of many. We need to strike a balance between those two; letting the investors and partners find more creative ways to earn support, exploiting these reserves to the maximal benefit of the country. My desire is for us to have less government funding involvement in the JVs, so that they can invest in other aspects like infrastructure.
We need to have a general awareness to the general public that reducing your stake in the joint ventures does not in any way take away from the wealth of the nation.