The aspiration of the Federal Government to grow indigenous oil producers’ contribution to the national crude oil basket from the current 10 per cent to 30 per cent within the next five years may be a tall order except all encumbrances towards its realisation are addressed.
Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, had at the closing ceremony of the maiden edition of the Nigerian International Petroleum Summit (NIPS) held in Abuja last February set the target.
According to him, the nation aspires to pump 2.5 million barrels of crude oil per day by 2023 and the expectation is that indigenous producers will contribute about 25 or 30 per cent of the projected volume.
But beyond the rhetoric of setting targets, the Federal Government should be ready to provide a soft landing for indigenous operators in exploration and production, oil service firms and Engineering Procurement Construction (EPC) by assisting to remove some of the stumbling blocks preventing them from moving beyond the current 10 per cent contribution to total crude oil production.
Some of the constraints confronting the operators include militancy, poaching, host community challenges, labour related issues and funding of oil and gas projects.
Indigenous oil companies recorded significant increases in their crude oil production, with their total output rising by 214 per cent in one month, a November 2017 report from the Nigerian National Petroleum Corporation (NNPC) indicated.
The data showed that the total oil production from the indigenous independent firms stood at 7.487 million barrels in June 2017, up from 2.388 million barrels in May.
Many of the local firms were hit by the militant attacks on oil and gas facilities in the Niger Delta in 2016 as they posted steep decline in production until June 2017 when the Forcados export terminal came back on stream. The companies, including Seplat Petroleum Development Company Plc and Neconde Energy Limited, suffered severely from the shutdown of the Trans Forcados Pipeline, their main export route, for more than a year.
Total oil production from the local firms, including marginal fields’ operators, fell to 46.01 million barrels in 2016 from 80.17 million barrels in 2015, bringing their share of national production down to 6.4 per cent from 10.3 per cent.
Managing Director/CEO of EATECH, Mr. Emmanuel Okon, recently listed the challenges that have continued to confront local contracting to include difficulties in accessing finance, poaching of staff, poor perception of the capabilities of local firms by multinationals and the low level of patronage from International Oil Companies (IOCs).
Okon, who said his company had been doing projects for IOCs in the last 10 years, stated that most locals, in their bid to build their capabilities, had to ignore high profit margins to build working capital, competence and capacity.
“We face a myriad of challenges from customers, suppliers, regulators and even from host communities where we execute the projects,” said Okon. “Like most local contractors, access to working capital remains cumbersome for us because of the lack of appropriate collaterals. Customers’ expectation of quality project delivery from indigenous contractor is usually bench-marked against expatriates.
Another stakeholder, Mrs. Ugochi Amugo, also spoke of the challenge of staff poaching faced by local contracting firms. “Local contracting firms continuously battle the problem of staff poaching,” she said. “It is that bad and inimical to our business when you have to invest so much in hiring and training a staff, sometimes sending the person abroad, and having to watch the person being taken away by another bigger player who adds a little to the remuneration and you are helpless,” she added.
On the other hand, labour crisis in the service segment of the petroleum industry arose from futile struggle by indigenous companies to retain indigenous workers they groomed under various capacity building programmes that took substantial investments.
So far, the raging dispute has led to sack of nearly 1,000 field operations staff as the service companies shrink down to avert further exposure to labour union liabilities.
It was equally learnt that some of the workers demanding severance packages are leaving for foreign multinational oil service firms after they have been employed as pupil staff and trained by the indigenous firms to meet industry skills and set standards.
Disagreement by unions against indigenous oil service firms, it was learnt, led to downsizing and outright shutdown that resulted in massive layoffs in the past six months while demand for exit entitlements had also become cyclical as more demands from sacked workers surge against weakened capacity of the companies to write cheques.
Currently, over 17 indigenous service companies based in Port Harcourt, Rivers State, are battling to save their businesses over unresolved entitlement issues. Other five companies have received demand notices from the workers’ groups.
One of them, Ciscon Nigeria Limited, has been forced to declare insolvency as hostility from labour unions and sacked employees assume worrisome dimension. The situation has led to massive staff loadoff after efforts at resolution agreement failed.
The company pointed at low business cycle in the industry as the reasons for delays in payment of entitlements.
Chairman and Chief Executive of Ciscon, Mr. Shawley Coker, explained that the company had to downsize in response to activity downturn in upstream operations after weak oil prices and low oil income forced operators to call off projects and cancel contracts at a time government offered no buffer for companies that staked funds on equipment and facility acquisition.
Salvic Petroleum strategy
But despite these challenges faced by indigenous oil and gas firms, Nigeria’s crude oil production recently got a boost as output from Oil Mining Lease (OML) 30 peaked at 75,000 barrels per day from zero level in March 2017.
Situated in the onshore Niger Delta, the licence covers 1,095 sqkm located about 35km East of Warri in Great Ughelli depobelt and contains 11 fields, Afiesere, Eriemu, Evwreni, Oweh, Olomoro-Oleh, Kokori, Oroni, Uzere West, Osioka, Ofa and Okpolo. The fields were discovered between 1961 and 1966.
According to operator of the block, Salvic Petroleum Resources, on behalf of Heritage Energy Operational Services Ltd (HEOSL), the feat was achieved without drilling any new wells, but with a robust work programme of creative and innovative solutions that optimised production and unlocked value from old legacy infrastructure and equipment.
Other verifiable successes achieved in OML30 on behalf of HEOSL and the Joint Venture (JV) Partners include the rehabilitation of the TFP and sustaining 86 per cent uptime; peaceful community relations and stakeholder management as it changed the practice of treating community workers as cash-based casual labour by converting them to full-time permanent employees with full benefits.
This strategy provided a forum for dialogue where people in oil-producing communities meet to discuss issues that border on their co-existence. Through this, the firm was able to assemble leaders such as the president-generals, traditional rulers and youths, among others, who can influence and shape people in 110 communities in the area.
A source privy to the arrangement said: “Salvic made timely Freedom To Operate (FTO) payments to ensure unhindered access to locations where the firm produces crude oil, among others. The communities relied on the 2017 Global Memorandum of Understanding (GMoU) fund to carry out community development projects and the fund was paid in full.
Beyond the GMoU, Salvic developed a robust Community Service Relations programme for 2018, which was approved by the JV partners like the Nigerian Production Development Company (NPDC) and the Shoreline Energy Limited. In addition, the firm has awarded 55 Quick Win projects and 93 MoUs by the first quarter of 2018.
According to the source, the firm has been able to reduce issues such as community/oil firms confrontations to the minimum barest level in order to boost crude production, which has been hampered by incessant destruction of oil installations by militants in the region.