A time to rise in Nigeria

June 3, 2020

The Energy Year talks to Chief Timipre Marlin Sylva, Nigeria’s minister of state for petroleum resources, about the progress that the country’s oil and gas industry continues to make despite Covid-19 as well as post-crisis opportunities for investors. The Ministry of Petroleum Resources ensures that industry operations are in line with health and safety regulations and national development goals.

This interview is featured in Nigeria Special Edition: Crisis and Resilience in the Covid-19 Era.

How do you measure the nation’s response to the Covid-19 pandemic?
Aside from all the difficulties it brings to the global economy, I believe that Covid-19 presents significant opportunities to us as a country as well. We see the current period as a chance to develop local capacity, which will allow us to utilise cheaper, locally produced sources and reduce our reliance on the global supply chain. Increasing our investment in local manufacturing and supply is of key importance in order to operate our industry better.
We are also aggressively working towards lowering our cost of production and reversing the Covid-19 pandemic’s impact on exploration and production. I am confident that our local oil and gas industry will come out of the Covid-19 crisis stronger than before.
Prior to the pandemic, Nigeria was completely dependent on foreign exchange for oil. However, the current crisis has proven to us that we cannot continue to depend solely on oil. We must expand our economy, and part of that expansion includes more aggressively developing gas-based industries.
One of the testaments to that objective was the signing of the Nigeria LNG Train 7 EPC deal with Saipem in April 2020, and we are going to see more gas development projects in the coming months. We are also looking at developing fertiliser projects on Brass Island and constructing an ammonia plant to monetise our gas resources locally.

 

What can be done to optimise the production costs associated with Nigeria’s oilfields in today’s environment?
Most of the production in Nigeria is through joint venture agreements between NNPC and private companies, which are either IOCs or local indigenous players. Most of the time, the private companies are the operators. Unfortunately, we believe that the audit of these joint venture assets has not been carried out properly in many cases, so we are optimising this process to determine the real value of these assets. I believe that we will soon begin to see some very good results, which will lead to a lower cost of production per barrel.

What role can local capabilities play in strengthening the resilience of Nigeria’s petroleum industry to cope with the dual shock of Covid-19 and the oil price collapse?
I am convinced that this is an area in which we have scored quite high from the African point of view. A lot of African countries have asked us to support the development of their local capacities. For Nigeria LNG Train 7, we have moved from almost zero in-country participation to nearly 85% of the construction being done in Nigeria. Going forward, we would like to reach 100% local procurement for the project. In terms of local capacity development, we have done very well, and these advancements will help further develop our oil and gas supply chain through the difficult months ahead.

How can new technologies help the local energy industry attract private investment?
The Covid-19 pandemic has really opened the eyes of all industry stakeholders, and we have all been forced to do things differently. We are incorporating many new developments from the area of technology into the legislative process and the new Petroleum Industry Bill that we are working on. We want to make Nigeria a more attractive investment destination so that a lot more people and companies can come in.
There is a lot of competition around Africa, and the only way to make investors more interested in our offerings is by showcasing the real opportunities present in our country and our appetite for technology transfer. Technology is one way to optimise the costs in our industry, and we definitely want to attract new technological developments into the country.
NNPC is trying to see how it can get more involved in R&D so that we can develop local solutions to local problems. In the coming months, there will be a lot more involvement in R&D from both NNPC and the Department of Petroleum Resources.

How do you view Nigeria’s ability to attract FDI into its oil and gas industry post-Covid-19?
We are quite pleased that the Train 7 EPC deal was signed during these difficult but crucial times. It was also one of the few projects that reached the FID stage during the past year, and it tells the global investment community that Nigeria is prepared to beat the crisis.
We have seen a lot of competition growing around Africa, and there have been a lot of discoveries on the continent recently. It is time for Nigeria to position itself as the strongest oil and gas investment destination in Africa, so we are working on making important changes to the investment environment in the country’s oil and gas industry. We want to continue growing our industry and increasing our lead.
Post-Covid-19, investors should not hesitate to invest in the country’s hydrocarbons industry. Nigeria is getting safer and a lot more attractive, and it offers an environment where operations are becoming more profitable.

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