The Chairman of Petroleum Technology Association of Nigeria (PETAN), the umbrella body of oil servicing firms in Nigeria, Mr. Emeka Ene, says the Nigeria Petroleum sector is not panicking over the continuous drop in oil prices at the international market, rather the unfolding scenario is out to create opportunities for Nigerian firms to grow. He spoke to Anayo Korie, Acting Energy Editor, on this and other issues concerning the oil and gas sector, after the annual dinner held in Port Harcourt recently. Excerpts:
What are the implications of the continued drop in the cost of oil at the international level on our economy?
It is interesting that current crash in oil price is not creating the panic within the industry that previous crashes had generated, which is a good sign. It means that the industry is matured. However, you have to understand that Nigeria oil today is not as cheap as it was in 15 years ago.
Today, cost of production in Nigeria oil is within the range of 20 to 30 dollars per barrel or more.
The circle of ups and downs is a good thing. It allows for building of efficiency; it also enables companies to re-strategise on how to deliver service quicker, better and faster.
I think to a large extent the opportunity that Nigeria companies have should be on the increase because all companies now want to get more values and they are not ready to open up their Cheque book and sign without asking for the values to be rendered.
We reckon that Nigeria content and Nigeria companies are actually getting busy with the support of regulator and policy makers. Nigeria companies should actually get proactive in high marketing than other way round.
What is the impact of devaluation of naira on Nigeria crude oil export?
One has to place this against the geopolitical nature of our industry, by extension, the naira. You see, the price of oil and the value of dollars at the international market is inversely proportional. In other words, when the oil price dropped the naira gets stronger, for obvious reason, the dollar is denomination of currency of choice in oil transaction.
So, if the price is high there are more dollars, if there is more dollars, then there is more naira to spend, and if you spend more dollars the dollars will weaken in value.
This is supply and demand scenario, now, when you bring it closer home, when the dollars gets stronger, because of the lower rate price there is automatic pressure on the naira to get weaker.
In the past, oil pricing especially in 2001, there was less impact on local services, therefore the impact on the economy was direct today. You have local capacity created by local content. There is local capacity to generate capacity and employment. Therefore, that will help to sustain or weaken the naira.
To what extent has the FG supported local capacity building in Nigeria?
I think that more than anything we need to recognize and applaud this government for taken the bold step to pass the Local Content Act. I think this is laudable, the reality was that the passage of the Act was a good initiative, which gave impetus to local companies in Nigeria to began to ramp up capacity. That is the bottom line. To a large extent, government created a spring board for growth in the oil sector.
This is one of the decisions that could position Nigeria as a strong country over the next 20 to 30 years. The first is local content and gas master plan, which create a basis for real gas market; privatizing power, which will boost the development of Nigeria economy stronger in multiple.
PIB, when passed into law, will also create long time investment in the country. All of these will create huge investment for the industry and the country as a whole.
The two key note speakers said that the survival of oil industry depends on PETAN, how true is that statement?
PETAN continues to provide leadership. We advocate on behalf of the industry, not just for Nigerian companies. PETAN advocates on what is good and best for the industry, both from operators, Nigeria and international point of view.
That is the reality of it because we are in the same boat; we want to continue to provide services that are world class for operators that want to get world class values for the dollar they pay. We want to encourage and continue to encourage investment. So, in that regards, PETAN leadership role in the industry is participatory, collaborative and inclusive.
We recognized that for the industry to keep growing, we have to maximize local availability of services.
Now that the year is coming to an end, if you are asked to appraise the year from January to December, do you think the expectations of the oil industry have been met.?
Oil servicing in Nigeria is maturing. It is an indication that local industry initiative has come to stay. People have recognized that positive things are happening at the oil servicing sector of the Petroleum industry.
More and more independent operators are becoming recognized through capacity development. You can no longer do it from palm flash point of view, you have to engage others. We have seen initiative from companies like Shell, Agip, NCDMB collaborating with PETAN on initiative that seems to create a ‘win win’ scenario.
This is a long term view, what happened this year and last year is setting the pace for a sustained growth for oil serving companies in Nigeria over the next decade because infrastructures were been built to maintain capacity irrespective of availability of contract and staff to run the facility.
In this period where cost and returns are declining, do you think investment in Free Trade Zone (FTZ) is the best for PETAN companies and how do you think it can be spread across the regional zones in the country?
China economy grows by at least 100 per cent on the creation of special economy zones, at the time it encourage trade across its borders.
To a large extent, FTZ in Nigeria enables investment. It is a save haven for investment. Across Nigeria you find out that FTZ are cluster in Lagos, North and no one single FTZ in the South-East part of the country out of 30 FTZ in Nigeria.
It is ironical because most people from South-East are industrialist and one would expect that such initiative will strive in the area. I want to commend the president for approving the first FTZ in Enugu in 2013. It is very commendable.
How come we have not seen more activities under the Free Trade Zone act?
I believe that the promoters of the projects on FTZ know that they are things that are bonded on long term viability.
These things are subject to lots of scrutiny, l must commend the current Minister of Trade and investment because he brought some level of professionalism to investment that was missing in the past, which may account for why many FTZ in the past had not succeeded.
Investors are ready to invest and establish long term availability. I know that the 34 process is ongoing and it’s our expectations that before the end of the year the authority in charge will give approval for the zone to take off.
That will create another centre of industrial activities that will further support the development in the oil and gas industry.
How will Enugu and Anambra State Governments gain from the signing of a deal with Engineer Emeka Okwusa that made that part of the nation Free Trade Zone?
In the first place, industry part and FTZ serves two purposes. One, it allows resources to be converted into viable results and employment associated with that by focusing on power that will drive the FTZ where there is an airport, and cargo airline. We need to look at the investment on infrastructure on ten year time frame.
They will pass the FTZ to the North to provide feed stock. There is abundant of coal; economic availability is not in doubt. What is missing is industrial investment frame work, which is essential to attract long term investments into the area.
Are investors worried that the translation of the Presidential oral approval to effectively start work on FTZ is getting protected. What is the faith of investment considering that funding continues to accumulate, partners are beginning to run out of patience, and foreign investment partners are also losing confidence, what danger does it potent to the nation?
In terms of time frame it can be frustrating. However, one thing we have recognized is that to get to this level and point of approval.
It is also important to save the interest of investors and partners. Yes, we have few of them who had lost interest in the past yet we have few who had built confidence in the zone, simply because they have committed their fund, some of them have also tested the model available prior to getting to the project.
We have had interest to the project as far as Australia, China, Indian, Chez Republic, USA manufacturing solar panel. We have companies that want to set up fertilizer plants; we have companies that want to manufacture various electrical and generating equipments within the zone.
All of them are making their plans on the availability of opportunities of other region not just Nigeria but surrounding region, West Africa, and East Central African in terms of ability to export their products into this areas.
In terms of energy that will drive the economy in that region, do you think that FTZ can accommodate viable investment in power generation?
Nigeria today is about 170 million people; Brazil is over 109 million and they produce 2 million barrel per day. Nigeria does 2.4 million on a good day but the difference is that Nigeria produces 5 per cent of the power that Brazil generates, where Brazil is generating 1000 Giga watts Nigeria is doing 5 Giga watts. Now, if all the gas that is flared in Nigeria is put to use, it will only produce 32 giga watts.
Can you imagine, if we are producing 50 giga watts today, it will transform our manufacturing to huge investment haven.
Today, manufacturing companies start from the scratch, they have to get their power on ground.
FTZ provides infrastructures so that you will only come with briefcase to start manufacturing. There are groups who are ready to come down and set up factories to manufacture real furnished goods but the reality is that they have to start by building their infrastructure.
The Minister of Petroleum Resources, Mrs. Dezani Allison –Madueke, has become the OPEC President. In the past, we have seen some Nigerians becoming Secretary General and President of OPEC and that never translated into improving the life of an ordinary Nigerian, what would be your advice to the Minister on strategies to bring development to the domestic economy?
Leadership has no gender. If you go to history you will find out that when women lead they lead very well. They bring positive change. The opportunity for a Nigerian to be at the top of OPEC this time is very strategic. OPEC as a body is trying to create a balance in the global oil marketing. Nigeria is critically needed in OPEC at this time not just in term of managing oil price but in terms of creating enabling environment for that oil to be produced.
The role of a minister is to look at the perspective of Nigeria’s interest that is what every other OPEC person does, and she has demonstrated that in strength and character, with the support of stakeholders in the industry. She will be successful in protecting Nigeria interest, though she is not just working for Nigeria but for a global body, but she will still protect Nigeria interest first.