Chairman, Society of Petroleum Engineers (SPE) Nigeria Council, Joseph Nwakwue, in this interview with Adeola Yusuf, bares his mind on how COVID-19 brought the oil industry to its kneels and other topical issues in a sector, through which Nigeria services over 85 per cent of its annual budget
In view of the prevailing business environment in the oil industry, what will the exploration landscape look like in Nigeria post-COVID-19?
It will depend on what happens between now and then. The outlook is no doubt gloomy given the relatively low forecast oil prices and prevailing high unit costs in Nigeria. But things could fundamentally change if we pass a fiscally competitive PIB, or if we carry out a bid round with most of the prospective blocks in the basket, or if we remove some of the bottlenecks to investment flows, etc.
You have hosted energy industry transformation summit on changing global energy landscape and industry sustainability. What motivated SPE Nigeria to respond to this?
SPE Nigeria recognises the ongoing energy transition and the challenges it has thrown up. We also feel that as industry experts, we are better positioned to lead the discussion on what the industry and indeed government should be doing to ensure sustainability of not just our industry, but the entire economic system, which is anchored on energy use. So we feel an obligation to help figure out the way forward.
Given the growing demand for clean and renewable energies by consumers, governments and NGOs, how can NOCs, IOCs and IPPs position themselves for a sustainable future?
Excellent question. It is important to recognise that we are in the early days of a transition, moving away from “dirty” fuels to “cleaner” fuels. Post-Covid-19, energy demand forecasts are still robust and would require significant capacity adds not just in fossils but in renewable.
The challenge before us are therefore how to find and develop these resources in a safe, cost effective and environmentally sustainable manner.
We have seen the majors and NOCs positioning and diversifying their businesses in ways that will enable them continue to energize the world through a cocktail of energy solutions not just limiting themselves to fossil fuels.
We have also seen significant investments and technology developments in carbon capture and sequestering to help mitigate the impact of CO2 emissions.
All of these require technology and that’s where SPE comes in.
What is the potential of domestic refining of hydrocarbon for sustainable development in Nigeria?
The potential is huge. The market is there (11m registered vehicles and a significant refined product demand for power generation and industrial use), the feedstock is here, the technology is basic. So what we lack is the plant and capacity to run them profitably.
Also, note that Africa also presents a huge market for Nigerian refined products especially with ACFTA. In a sense, we are in the river and almost blind with soap in our eyes. A classic case of policy failure.
In your opinion, in what way is Nigeria an attractive investment destination for African and international companies?
We used to be a choice destination for investment but I am afraid we have lost that place over time. Key considerations for investors are resources endowment/density, fiscal terms, ease of doing business etc.
We have slipped by most measures but there is scope for rebound if we get the PIB right.
To what extent will the current market conditions affect the evaluation of new exploration opportunities in Nigeria, specifically marginal field bids and development?
The current market conditions will no doubt affect valuation of prospects here just like everywhere else. It is, however, important to remember that it’s in times like this that valuable assets are picked up and developed and monetised when prices rebound. Investment in our industry is long term and we make investments decisions with a fairly long time in view.
No doubt, the current conditions will not support huge pre-production payouts like signature bonuses.
Will you encourage the creation of African joint-ventures and partnerships to boost the African regional content?