‘Delayed Gas Master Plan implementation impacts on earnings’: The Chairman/Chief Executive Officer, Oilserv Limited and Frazimex Limited, Mr. Emeka Okwuosa, an engineer, says the petroleum industry can add more value to the economy than it currently does. This, he says, can be achieved through increased domestic gas utilisation and local capacity development. Okwuosa speaks to Assistant Editor EMEKA UGWUANYI on this and other national issues. Indigenous oil services companies are recording remarkable success and are gradually taking over the petroleum industry from foreign firms. What do you think is responsible for this? The Local Content Act is a combination of efforts. Originally from the private sector, and later on the Federal Government taking a cue from that and getting the Nigerian National Petroleum Corporation (NNPC) involved. So, between the private sector service companies such as ours and the NNPC, we were able to put together what we have today. But we thank the NNPC representing the Federal Government, for moving when it was required. If we hear about local content as a law today, some of us may not know that it took us 20 years fighting for it. After the first 15 years, NNPC did a very good job of setting up a sub-division within its group. Again, luckily and incidentally, the Group General Manager of the division at that time was the same Engr. Ernest Nwapa who currently superintends the Nigerian Content Development and Monitoring Board (NCDMB). That is why Nwapa’s position in NCDMB gives all of us joy because you see an individual who understands what the issues are and who was involved from the beginning, in getting to where we are today. That gives him the background and opportunity to be able to drive the process, because it is not about us as individuals, but how we create opportunities in Nigeria for the future of the country. When we talk about the future of the country, we are talking of how we, as individuals, impact the system to ensure that the extraction of oil and gas in the industry is done in a manner that would retain most of the values in Nigeria. The good story is that today, after 20 years, we can beat our chest and say we have actually been able to achieve a lot. But we have not got there yet because the target is still far away. When I came back in 1993, I made up my mind to make a change in the system. With the experience I acquired, in conjunction with my colleagues, we started the Petroleum Technology Association of Nigeria (PETAN) with the sole purpose of developing capacity in oil and gas industry, from service provision to exploration and production of crude. Nigeria is said to be more of a gas province than oil; yet there is a dearth of gas supply in the country. What does the country lose to the delayed implementation of the Gas Master Plan? The Gas Master Plan (GMP) should be executed faster because we are losing value. What we are losing by not executing it is difficult to quantify. It depends on the model you use. Do you know that Nigeria, as we speak, has the capacity to take and use five billion standard cubic feet of gas per day. If you look at the cost of gas at 1000 cubic feet, which varies between $2 and $6 depending on where it is being sold and transported to. This is a huge amount of money being lost on daily basis. But this situation is not as straight forward because there are several issues around gas as a commodity. One of this is the issue of gas commercialisation. For instance, if I own an oil block and you want to take my gas, there is a cost for me to produce that gas, clean it up and put it in a condition that you can pipe it. That cost has to be covered by a commercial arrangement. If the commercial arrangement is not right for me to do that, I’ll leave the gas there or burn it. That is the problem we have dealing with the international oil companies (IOCs). They also have a clear case of being able to get value from what they are doing. It is not just the cost of gas but also the cost of processing and moving this gas. They have to recover that. If they can’t recover that, then why are they into the business? So there has to be a win-win situation. And that is where I think we are moving to and I believe there is a commercial framework for that and it is a matter of driving that arrangement. Your company was awarded the East-West pipeline contract. At what stage is it, and when will it be completed? The project is to raise the OB3 pipeline. The OB3 pipeline is the largest pipeline being done in Nigeria. It is a 48 inch pipeline and we have never built a pipeline of that magnitude. This is the first time such pipeline is being executed. We call it OB3 because it goes from Obiafu-Obrikom in Rivers State to Oben in Edo State. So instead of calling it OB-OB to Oben, it is called OB3. We were awarded the contract for half of it, and we commenced activity. This contract is an engineering, procurement and construction (EPC) project. We have finished the engineering and have procured the entire pipes. The pipes started arriving from November last year. Some constraints were there but they have been solved by NNPC. The major constraint was the right of way. It was only in April that NNPC secured the entire right of way. I think there are still some gaps. In Nigeria today, the most difficult aspect of the kind of work we do is dealing with communities. Ordinarily we have a law in the country that should enable us to acquire the operating pipeline license (OPL) as it is called. Ordinarily, you go to the Department of Petroleum Resources (DPR) and apply, go through the processes, which involve detailed environmental impact assessment (EIA) and all the requirements before issuance of the licence, and with that licence you go in there and build the pipeline. But it doesn’t work that way in Nigeria. You have to go back and take it meter by meter and start negotiating with individuals to make sure you have a framework to enable you work. So, it was only in April we got that and we have commenced work. The bottom line is that building a pipeline is not like going out there to buy a car, which you just start and ride away. It is a long process. But I believe clearly that now that we have started, within the next 20 months we should be done with the construction all things being equal. There are other things that could delay but we don’t hope for that. Is there a guarantee that your community engagement strategies would ensure delivery of the project in 20 months? We can’t guarantee that community issues will not impact delivery of the project, but the good story is that we are experts in what we are doing. We have experience that goes beyond discussing it. We have been talking about OB3 but beyond OB3 we are executing 10 other projects. We have a total of 11 projects going on at the same time. And we have been doing this level of activity for a very long time. So, what it shows is that we have a method of engaging communities that enables us understand the communities, understand their needs and go for win-win situation. Discuss with them and agree on what has to be done, which includes opportunities for provision of jobs, sub-contracts, security, and also do some community development projects for them. If you agree with them, you sign agreement and execute accordingly. What is the cost of the 11 projects your company is executing? The 11 projects are worth more than $550 million. This capacity we showcase is typical of what PETAN represents in promoting indigenous capacity to deliver on challenging assignments. We in PETAN do not represent government but we collaborate in building industry capacity to ensure that national economic aspirations are realised in full through creation of value in the domestic economy. With vandalism challenges in crude oil and gas supply, can the LNG be used to close the gap between production and consumption centres? The use of LNG and investment in gas supply alternatives are all commercial issues. If it is commercially reasonable and can be funded, it can be done; otherwise, it cannot be done. It is not based on technicalities at all. It is possible to go and set up a regasification plant, buy LNG, regasify it and pipe it but it is not worth the cost in Nigeria because we have the gas already. All we need to do is pipe it where we want to use it than to build a regasification plant. That means that you sell your gas as LNG and import another LNG back, re-gasify and pipe, all in the name of averting pipeline vandalism. All the challenges of pipeline in Nigeria are superficial and transient. All it takes is for the country to have a proper master plan and execute it in a way it makes sense. There is no difficulty in building pipelines; it is a matter of how we work about that. So, building a regasification plant is not commercial enough to make it workable. We have a lot of gas offshore. If the country decides to harness the gas, it is a policy issue and NNPC will take it and talk with the international oil companies (IOCs) and strike a commercial arrangement whereby the IOCs will extract proper values from their gas, whereas government will create the right environment to be able to utilise this gas in a way that is commercially attractive. It has to match it. It is business. It is not a very big issues but it can be done. And I believe there is a plan to do that but it is a matter of executing that plan. What is your take on funding challenges faced by indigenous players? Funding is a key issue in capacity building. For us, at the very early stage it was very difficult because Nigerian banks and funding institutions were not tailored to doing this kind of business. They were more tailored to importation of materials. So in the early 1990s if you went to them for facility to execute contracts, they would only give you facility for three months. And you don’t do these projects in three months. But today we have gone beyond that. Funding is not really a major problem for us because we have built capacity that enables us to continuously perform. And what banks want is to be sure that when they lend you money, they can get it back with interest, not stories that the project has failed. Oilserv and Frazimex have never done any project that failed. In fact, before we sign a project, banks would have lined up to give us facilities. It might not be the same with other companies. The experiences differ from one firm to another. But really, anywhere in the world you have to understand that money is always available. It is a duty of matching money with what it needs to do. That process is the issue. If you want to raise a billion dollars, you can do that so far there is credibility in the process of utilisation. Secondly, the issue of pipeline vandalism is a major problem in Nigeria. But there is technology solution to that. The 54 kilometre pipeline we are building from Umudasege to Umugini in the Niger Delta will host the pioneering vandalism detection fiber optic system that we are installing. The fibre optic vandalism detection system is so sensitive that it can differentiate between somebody coming to dig, walking on top of it, or driving a car across the line. So, you can determine what is happening along that right of way and whether it is a threat to the pipeline. And there is a control system and access controls to enable you take action immediately. Such are technologies that you can be deployed to curb pipeline vandalism. There are other technologies you can also deploy, but we have to consciously deploy more technology in pipeline protection and that calls for massive investments. How have Oilserve and Frazimex contributed to local capacity development? Oilserv is purely engineering, procurement and construction (EPC) company in land, swamp and offshore terrains. It has great capabilities. We build pipelines, flow lines and facilities associated with pipelines; from manifold stations, pigging stations to metering stations, among others. The capacity we have today is similar to what Wilbros had when it held monopoly in the country. When you talk about Oilserve, we are not just doing challenging jobs but also building capacity and training people. I can tell you that all the people working in Oilserv today are Nigerians. And some of these individuals left universities in the 1990s and early 2000s and came in as fresh graduates. Today, some of them are general managers, some of them are managers. So you can see that Nigerians can do it if given the opportunity, but you need to be trained. We move into other countries as expatriate companies, which nobody would have thought about 20 years ago. Frazimex specifically focuses on engineering design ranging from feasibility studies, front end engineering, to detailed engineering. Frazimex also is involved in gas development. You hear about gas to power. How important is gas to the country’s economic survival? Today, gas is the key driver in terms of capacity building in the Nigerian economy. If Nigeria can articulate and seriously commit to the implementation of the gas master plan, make gas available to every part of Nigeria, you will see that with energy available, it is possible to have things like power generation made easy. What people fail to understand is that gas is related to our ability to feed ourselves. Gas is the main source of urea production, which is the main component in fertilizer production. So the fertiliser that you apply to be able to have good yields in agriculture, comes from gas. But unfortunately, the only fertiliser plant we have in Nigeria is the one built over 30 years ago, which is now owned by Notore. How come a country that has so much resource has only one fertiliser plant? And I know that some quantity of fertiliser is being imported to meet the country’s consumption need. Meanwhile we sell our gas as liquefied natural gas (LNG); the countries that buy the gas would produce fertiliser with it and sell the fertiliser to us. It is the same story about importation of refined petroleum products. You ask yourself whether it makes sense to have the crude, and you cannot refine it. You sell the crude, provide jobs for people where they have refineries and they sell to you the refined products, which you have no control over the quality. Obviously these are the issues we have to address, and in addressing it what we are doing in our own little way is to continue building capacity in our own field in such a way as to be able to make a difference in the country. Is there any collaboration between Oilserv and Frazimex in jobs execution? I would like to clarify that one part of Frazimex manages and handles engineering design and feasibility. You have the other aspect of gas development and power. And you have another aspect also that manages Exploration and Production portfolio. For Oilserv, the synergy there is that it retains the main value of the EPC but when we bid and get EPC projects, which means it covers from engineering all the way to commissioning; Frazimnex comes in to manage the engineering aspect as part of the Group. As I speak to you Frazimex is handling engineering scope of a job being executed by one of our competitors. That doesn’t stop Frazimex from working for us as a group. Considering your knowledge of gas business, what is your view on developing LNG projects in the country? Nigeria has capacity to build a number of LNGs but I’m not an apostle of LNG. In fact, LNGs are not different from what we do with crude oil. You take your crude oil and sell to somebody, and they use it to develop their place. What is more important to us in Nigeria is how to pipe gas all over Nigeria to enable us develop with our gas. So, as a first option we must have gas available to all Nigerians and not to outsiders, because we can create the value, and money will come out of it and we can make payments to the same international oil companies (IOCs). So, there should be a conscious effort by the government through the NNPC to drive this home. What is the size of your company’s workforce? Oilserv employs more than 400 people. Why I cannot put a figure is that you heard the number of projects we currently handle. By the nature of our business, the number of staff I have today might be different from the one I will have next week. It moves up and down but it has always varied between 400 and 500. And that includes the project staff members. They do not include community based staff who are ad hoc workers because as you finish your project in one community, you drop the ad hoc workers from the community and pick another ad hoc staff from the next community. What particular services does your firm export? Services that we export are the services that we’ve developed already, from engineering to construction, to maintenance of facilities, power generation, and to gas-to-power systems as well as exploration and production. We export services to across West Africa and East Africa. And we will continue to develop that as we move on. Original link Read More goo.gl/0mj5JS (y) ✍comment ☏share
Posted on: Sun, 12 Oct 2014 23:26:14 +0000
Trending Topics
Recently Viewed Topics
© 2015