OTC: Operators in Nigeria call for quick industry reform

Nigeria's operators are urging that the major industry reforms proposed under the country's latest petroleum industry bill to be quickly implemented to ensure regulatory certainty.

Uchenna Izundu
OGJ International Editor

HOUSTON, May 6 -- Nigeria's operators are urging that the major industry reforms proposed under the country's latest petroleum industry bill to be quickly implemented to ensure regulatory certainty.

Speaking May 5 at an Offshore Technology Conference topical lunch in Houston, Adewale Tinbu, group chief executive of Nigerian oil company Oando PLC, told attendees: "The reforms are good. We want to see more companies like ours being involved in the process as the focus tends to be on the international oil companies and national oil companies."

Nigeria announced plans in 2004 to break up its national oil company, Nigeria National Petroleum Corp. (NNPC), into smaller separate and autonomous units to end its conflicting roles of operator, regulator, and national assets management. With aspirations to have a similar model to Norway's StatoilHydro or Brazil's Petroleo Brasilerio SA (Petrobras), a new, integrated IOC, Nigerian National Petroleum Co. Ltd., will be created. Currently, NNPC has been unable to contribute its share of funding for joint venture projects as the government has not provided enough money.

Tinbu noted that NNPC should give assets to local oil companies under the reforms to help them develop. "We want community relations to be improved in the delta and as a hangover, I believe from colonialism, people look at [IOCs] as 'pseudo governments.' There is a lack of local companies in the area and we need to see wealth transfer in the area."

Tinbu said Oando has struggled to secure gas from IOCs in Nigeria for local distribution despite spending $300 million to build domestic pipelines and called on them to allocate it as their contribution to the country.

Faithful Abiyesorhu, NNPC group executive director of engineering and technology, urged industry players to be patient with the restructuring. "We hope to get it right. It will come with pains and gains, but the pains will be transient."

Mark Ward, lead country manager of ExxonMobil Corp. subsidiary companies in Nigeria, said that technology transfer and developing local people were important in its relationship with NNPC. "We spend $1 billion/year on [research and development] on technology," he said. "We have done work on 3D seismic; directional, horizontal, and extended-reach drilling; subsea technology; and multizone simulation." But during this downturn, it was critical to recognize that both parties had a long-term relationship, he said, adding, "National content must be realistic and achievable. We have workforce development, supplier development, and strategic community investment."

Eyo Ekpo, special advisor on projects in the Cross Rivers state, said it was crucial that the reform process was handled efficiently. "The new agencies need boundaries, resources, and capital and we need to make sure that the reform is not slowed down during the transition process to keep away people who have vested interests."

Emmanuel Egbogah, special adviser to the president on petroleum matters, told delegates that public hearings are scheduled for the petroleum industry bill in May. The National Assembly has passed the legislation in its first and second hearings.

"The reform also provides for the conversion of all the existing joint ventures into incorporation joint ventures (IJVs). Each IJV will be a corporate entity to be incorporated under the laws of Federal Republic of Nigeria," Egbogah said. "The incorporation process including capitalisation and restructuring will be carried out through negotiations with the respective IOCs during the reform transition period."

Other highlights of the bill include creation of the following:

-- National Petroleum Directorate, a policy body that will initiate, formulate, and develop policy and be a secretariat for the petroleum minister.

-- National Petroleum Inspectorate, an autonomous technical regulator and it will replace the Department of Petroleum Resources.

-- National Petroleum Assets Management Agency, to manage petroleum assets and commercial regulation of the industry to ensure Nigeria derives maximum value from its oil and gas resources. (Will replace NAPIMS).

-- Petroleum Products Regulatory Authority, to focus on the commercial downstream sector (Will replace PPPRA).

-- A research and development center, to focus on capacity-building.

-- Petroleum Training Institute.

-- Establishment of fund organisations, including Petroleum Equalisation Fund and Petroleum Technology Development Fund.

-- Frontier Exploration Services, to regulate and stimulate exploration in frontier areas, including the Anambra, Benue Trough, Bida, Chad, Dahomey, and Sokoto basins.

Contact Uchenna Izundu at uchennai@pennwell.com.

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