Treating existing investors well will attract new ones – ND Western boss

In this interview with DAYO ADENUBI, Managing Director/CEO, ND Western Limited, Eberechukwu Oji, speaks on topical and diverse issues in the oil and gas industry

You assumed leadership of ND Western at the onset of the COVID-19 pandemic. What were the immediate challenges and how did you weather the storm?

It has been a tough 18 months globally, but as ND Western, we have fared well, mainly because we value our people; we were swift in making key decisions without hindering or jeopardising our operations and our people.

We quickly adopted the work from home approach and provided our staff with the resources they required to work effectively from home.

To make sure that our people are actively engaged, we had daily meetings, twice a week with all the staff and with the management staff for the rest of the working week.

We started the Employee Assistance Programme to help employees who might be dealing with mental health issues especially those that lost loved ones or in isolated areas. To give you the numbers, our staff lost more relatives in the first eight months of the lockdown than in the past eight years.

We set up the COVID-19 test centre in Ogunu which should be commissioned soon, and we made sure all staffs get tested regularly. Where there were positive test outcomes, we provided needed support to ensure the staff recover quickly. We also made provision for our staffs to get vaccinated.

ND Western has done relatively well weathering the storm. As they say, if you take care of your people, they take care of business. That’s what has happened. Our business performed very well despite the pandemic and lock-down; 2020 was one of our best performing years on many accounts.

That said, from where I sit, the storm is not yet over.

Your journey in the oil and gas industry span several jurisdictions. What are the peculiarities of the Nigerian oil and gas industry?

Yes, indeed; I have had the privilege of working in several jurisdictions including the Netherlands, UK and much of Europe, Singapore and far East Asia up to Australia, Kazakhstan, India, the United States etc.

There are peculiarities with the Nigeria oil and gas industry. These include the regulatory uncertainties which we are now addressing with the PIB, host community issues also partly being addressed by the PIB, high level of pipeline vandalism and crude theft, by far the highest I have seen compared to other climes, and general insecurity in the Niger Delta where we operate etc.

However, on the positive side, Nigeria has some of the finest industry professionals, a rich talent pool, sweet crude that is relatively easy to produce, uncomplicated reservoirs with many years of sustained production history.

Taken together, these are the peculiarities of the Nigeria oil and gas industry.

ND Western is a player in the Nigerian gas sector. You aim to double your current production capacity to 600 million standard cubic feet per day by 2022 which is the estimated timeline for completion of AKK pipeline. How do you plan to achieve this and mitigate the risks?

Our development of gas resources is driven by market gas demand. We have drilling campaigns which are undertaken within the timeframe to take our production capacity to 600mmscfd by 2022 and our aim currently is to achieve production capacity of 400mmscfd by end 2021.

The gas market in Nigeria must mature enough to absorb all that we can produce. We are aligned with the conventional wisdom of developing gas supply to match demand. This is because you cannot store gas unless you liquefy it. You want to sell the gas to a paying customer before you make the investment to drill a non-associated gas well.

We are in the process of finalising gas purchase agreements for these extra volumes of gas before we commence the drilling campaign.

With the completion of the AAK pipeline which opens more opportunities for our gas demand, 600mmscfd is not far from our reach.

The NNPC estimates that Nigeria needs about $40bn of direct investments to achieve the potential of the ‘Decade of Gas’ plan. That’s an average of $4bn each year over 10 years. What do you think about the prospects of attracting this level of investments?

With the right investment friendly policies and securitisation of investments, you will be amazed with the level of direct investments that can be achieved. Look at the NLNG Train 7 example. Over $10bn was needed but this was massively oversubscribed even during the lock-down.

In simple terms, it is possible to attract this level of investment if our policy trust as a nation is specifically aimed at attracting these investments.

The investment dollars are there but it will go where the most enabling environment has been created for it. That’s the challenge for our policy makers.

As you can understand, Nigeria is in a global competition for investment dollars. New investors will be taking a hard look at the experience of existing investors before they come in.

These things are not so complicated. You can look at NLNG case and replicate the conditions that attracted such massive oversubscription for Train 7, and you will attract the needed investment. The same is applicable in deep offshore. Look at the Production Sharing Contract terms that enabled Bonga investment, you replicate the same, of course benchmarking with new deep offshore basins like Guyana, Suriname etc and you will attract the needed investment dollars.

My advocacy is, treat your existing investors well so that new ones will come in and we need to replicate what we have done in the past that worked very well as in the examples I have given.

Looking at our energy deficit, in particular the power sector. What are some of the potential holdbacks and risks in building the gas infrastructure to achieve 58,000 megawatts of power generation for industrial and residential use?

Nigeria currently has an installed capacity of 12,522MW. However, we are only able to dispatch about 4000MW to a population of 195 million people. That is a significant energy deficit.

There are many reasons for this including transmission constraints, gas supply interruptions, uncertainties around government policies, and most importantly, lack of funding. There is a huge infrastructural deficit in the power sector. We need to build more power plants and we need to build more gas pipelines to supply gas to these power plants.

Specifically, the government must commit to extend gas pipeline to all the states of the federation. To start with, we would like to see the Trans Niger Gas Pipeline kicked off. Government must welcome private investor investments in gas pipeline development across the country.

However, investors are looking at the entire value chain to achieve the level of power we need to close the energy deficit.

Therefore, we need an expanded grid and power transmission network; we need more investments in the distribution network including providing consumer meters etc. To achieve 58,000 megawatts, we need investments across the entire power value chain and the right polices to enable the investments.

The AKK pipeline is touted by some industry watchers as a white elephant. Some say even if it is completed, it may not generate substantial Return On Investment. Right now, it is currently going through some funding challenges. What do you have to say about this project?

The purpose of the AKK Pipeline is to make gas more accessible within the country. There is a huge gas market in northern Nigeria but due to the infrastructural challenges, there is limited accessibility to gas.

The AKK Pipeline is estimated to transport 3.5bcf/d of gas from the southern part of Nigeria to the northern corridor thereby utilising the country’s gas resources.

The pipeline will increase gas utilisation and boost Nigeria’s electricity by adding 3,600MW of power to the national grid and improve electricity in the northern part of the country. This is good news to us as gas producers because it means more customers.

I was at the AKK Gas Forum in Kano last week and I can tell you that there are many gas users in the North already being serviced by virtual pipelines. AKK will help to expand that user base.

ND Western is looking towards becoming a full-fledged integrated energy company. Is the renewables space a priority for your company now? If it is, what are the moves you’re making in that direction?

ND Western as an integrated energy company will have renewables in the mix in the future in one shape or form. Our company growth strategy takes the issue of energy transition very seriously and we are working in that direction.

Today, we see gas as the transition fuel and part of our medium to long-term strategy is to maximise our gas potential.

Being a big player in the gas space, we are open to discussions where we see a strategic fit with emerging renewable energy technologies that match our energy transition agenda.

One of the issues that became apparent during the COVID-19 oil and gas downturn is that Nigeria is a high-cost production jurisdiction. How can we bring down the cost of production in the industry?

Yes, indeed the cost of production is a well-known issue. ND Western as a very prudent operator maintains a single digit unit operating cost per barrel. We are extremely proud of our low cost of operations and our operations excellence performance.

For the industry, we can only address the high cost of production in our jurisdiction and start reducing the cost of production if the key issues driving our cost of production high are addressed.

These issues are insecurity, pipeline vandalism and crude oil theft, unattractive and inconsistent fiscal terms, multiple taxation, long contract cycle, high labour cost and many other operational factors.

Finally, the National Assembly has passed the much-awaited Petroleum Industry Bill. What are your expectations after the bill must have been signed into law or are you among those that are asking Mr President to withhold his assent?

Irrespective of few adjustments that the PIB needs, I fully support it being signed. It serves more good than harm to our country and to our industry. Policies or laws can always be reviewed to meet current realities.

The PIB is designed to address regulatory uncertainties, improve governance, and drive infrastructure development within the industry and bring benefit to the host communities. These are good objectives. Therefore, we expect a more transparent and accountable oil and gas industry and investment driven policies post PIB assent.

What is your take on OPEC loosening the grip on production quota among its members and alliance?

The COVID-19 pandemic has affected every economy in the world including OPEC member states. Against this backdrop, OPEC imposed the production quotas to shore up crude oil price following the price collapse of 2020 during the lockdowns.

Now that the global economy is opening, and crude prices have returned to healthy levels, it only makes sense that these production quotas are relaxed for member states. My advocacy will be that this is done gradually to avoid price shocks in the global crude oil market.

Is it not contradictory that Nigeria is ramping up campaign on switching to the use of gas for vehicles at the same time it is making incremental efforts to acquire local refining capacity?

I do not see this as being contradictory. We are still a long way to getting most of our vehicles to run on gas mainly because a lot of infrastructural investments and policy initiatives will be needed to make the transition happen.

The acquisition of refining capacity will take us away from importing about 90 per cent refined petroleum products. Also, this will increase our utilisation of some of our produced crude internally and hopefully drive down the cost of refined products.

If you think about it, Nigeria has no business importing refined petroleum products. We should refine all the products we need from the crude we produce and only export what we do not have capacity to refine.

Now, of course, we must address the issue of gradually removing the petroleum subsidy which has not allowed investment in refineries to thrive.

Do you think that the new NNPC should be spending 30 per cent of its profits on oil exploration in the frontier basins when global emphasis is shifting to renewables?

Nigeria has abundant oil and gas reserves, and it is important that we maximize the known and existing potential whilst making further investments in exploration.

In my view, capital allocation is best handled by competent managers of any corporate organisation of the size of the new NNPC. Mandating a percentage for frontier basin exploration is a mistake and should be corrected.

If anything, we should be seeking to diversify the Nigerian economy by building a strong and well-funded sovereign wealth fund to drive the diversification agenda. We need to invest more in gas as a transition fuel, invest in renewables to future-proof our economy and channel our available funds to the most important resource that Nigeria has which is her people.

Aggressive human capacity development in the frontier basin is guaranteed to pay more long-term dividend than a certain per cent profit allocation for exploration in the same basin.

Finally, I will advocate more private investment participation in the frontier basin exploration.

PUNCH

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