IN this interview with Daily Sun, Engr. Emeka Okwuosa, CON, discusses opportunities, challenges and trends in Nigeria’s oil and gas industry, the role of his company, Oilserv Limited, in the advancement of gas infrastructure and investments in corporate social responsibility, among other issues:
Congratulations on the award of Commander of the Order of the Niger (CON) by the President recently, we are aware that it came in recognition of your enormous contributions in enlarging the economy through delivery of critical infrastructural projects. So, as a symbol of indigenous capacity in pipeline development, how are you prepared to participate in the transnational pipeline projects that are conceived to deliver African gas to Europe?
I thank President Muhammadu Buhari for deeming Oilserv and me fit and deserving the national award of Commander of Order of the Niger. I believe strongly that this is an award that takes into account the contribution of Oilserv or my personal contributions in the country, whether in oil and gas or in other areas of Nigeria’s economic and social development.
I also believe that I am not the only one that could have possibly gotten the award. It is obvious that other people that were honoured deserve their awards too. So, I do not take it lightly.
I also appreciate your recognition of what Oilserv as a company has achieved. The truth is that, at any time, there is always much to do.
Oilserv has achieved a lot in the country over the past 25 years of its operations. The reason is that we deploy experienced folks and determination to make impressions first in the oil and gas industry and then in other sectors.
We have been involved in many projects and we have been able to deliver many difficult projects: difficult in technical, difficult in environment and difficult sometimes because of the politics of what we do as human beings and organizations, and also difficult due to issues of security.
We have been able to overcome very difficult situations and deliver projects to our very valued customers and clients. Oilserv has built several pipelines in difficult terrains: some on land, some in swamps and some on mountains and some across rivers. So, I am delighted that a Nigerian company can develop the necessary skill sets and capacity that would enable development of oil and gas facilities of world-class standards.
Having said that, opportunities will always be there as we move forward, because the economy will continue to grow. And as we grow the economy, the principal factors of economic activity will emerge. And in Nigeria today and most parts of the world, what is predominant in the energy field is gas. Of course, oil remains important and will continue to generate its own value. I am sure that you know that, as of today, the bulk of foreign exchange and revenues that drive the Nigerian economy comes from oil and gas.
However, as for the energy we deal with today, a lot of existing projects we are executing today and more that will come after that will be on gas. Gas is such an inventory-riser that, for you to produce, distribute and utilize gas, you have to deliberately engineer and build the right infrastructure. You cannot store away gas the way you do oil. You have to build infrastructure that would match production with transportation and utilization. That is why you have pipelines; that is why you have LNG and CNG technologies for virtual transportation of gas. These take gas to utilization.
The biggest bottlenecks in the utilization of gas energy in Nigeria today are the pipelines to distribute and, of course, the LNG for international sales and delivery.
So, Oilserv is always ready and well prepared to make the difference in the delivery of the emerging pipeline projects on the continent.
The Trans-Sahara Gas Pipeline is actually one of the two major international pipelines that are being envisaged. The pipeline is the one that will take off from Kano and go through Niger Republic and Algeria and end up in Europe.
The project that is actually hot now and is on board in terms of process is the Nigeria-Morocco, which will run offshore West Africa to North Africa. It will go all the way from the Niger Delta to offshore Lagos. It will then go through all the countries on the coast of West Africa until it gets to Mauritania. And then it goes on land from the back of Mauritania to Morocco, where it crosses the channel until it gets to Spain.
So, these are the key pipelines that are coming, and we are very aware of the opportunities and we have been part of that.
We know that it is a project that might require more than one contractor to execute, but we want to be part of it because we have the capacity to deliver our scope.
At home, the prevailing headache is pipeline vandalism; and many solutions have been proffered, including horizontal directional drilling technology in replacing the existing pipelines. Of course, there are other security arrangements and contracts. How best do you think the problem could be solved?
Pipeline vandalism is not peculiar to Nigeria. It has been existing in Nigeria for decades, but it has been exacerbated in the past few years. It became prominent and impactful on the operations of the oil and gas industry, starting from the 2000s. But today it has been in the news, but there are quite a few ways to tackle this problem. What is important is that every problem in the industry actually has solution.
What do we do? It is just to sit around it and strategise on the right solutions that are cost-effective and deliver the goals. Nigeria needs to be able to secure industry production, whether it is oil or gas.
Gas is not easily stolen because you cannot safely keep the stolen pipeline gas. The problem, however, is that most of the gas produced in Nigeria is associated with oil production. So, whenever oil production goes down, it affects production of gas, too. Pipeline vandalism simultaneously affects oil and gas production.
There are quite some existing methodologies to solve the Nigerian pipeline problems. In some areas, it makes sense to use the horizontal directional drilling, which is the HDD you mentioned; in some other areas, we have the methodologies where we can reinforce the pipelines and make those pipelines invulnerable to sabotage. Oilserv has that technology. That technology is already tested in the United States and it is working there.
Most importantly, beyond technology, it is left for us to develop a system that recognizes the problems we have in this country, find out the root cause and deal with the root cause. That will require the concerted efforts of everybody: people in government, NNPC Limited, IOCs, and in fact all the producers. It also involves all the communities. It involves government at all levels: local, state and federal government.
I can tell you clearly that local governments are very impactful because they deal with people at the level you can see who is doing what.
So, yes, in protecting the pipelines, there are instances where you can use HDD to mitigate vandalism and solve that. There are also instances where you may not be able to use HDD, and you can actually apply technology to reinforce the pipelines with special coatings that would make it impossible for anybody to find them accessible.
What you have to know is that, in all this, it will require serious investments because it is going to cost more to utilize these methodologies rather than use standard construction methods. But at the end of all these, what is important is that it is going to save more damage. It will actually save you more, especially with regard to the products. So, that is the way it is.
How have the frequent production downtimes affected the activities of service companies in the industry?
I will be very blunt and tell you that vandalism and other events that force players to shut in production is impacting Nigeria as a country very seriously. It is impacting oil and gas companies extremely badly. Some of them have shut down operations for once. Imagine the cost you carry in the course of your operations, and are going to sustain that business with that level of cost when you have shut in your production.
So, what about the other stakeholders like the service companies that are mostly impacted? Because, when you shut your operations, you can no longer retain the services of these companies. And these service companies are Nigerian companies; so there are multiplier effects. And that is why it is important to find a solution quickly because the multiplier effects on the economy are very bad.
Actually, a lot of the service companies are struggling since the past years because there is nothing to do. Imagine when you have the NCTL that has capacity to flow hundreds of thousands of barrels per day shut down for a year. You have the Trans-Forcados shut down, and you have other export pipelines shut down. What that means is that companies that feed these pipelines are shut down. And if the operating companies shut down, then they won’t need the service companies.
So the perspectives for the service companies under the prevailing circumstances are extremely negative. As I have said, quite a lot of service companies are virtually doing nothing. What it means is that revenue is not there. What it also means is that some of the service companies are in the situation of shutting down their businesses.
Of course, laying off staff has been going on for quite a while but the numbers will be visible when companies do their numbers. As at today, I can tell you it is hurting. It is hurting the service companies and it is hurting the producing companies. The producing companies are hurting because most of them have no production.
Government’s gas monetization programmes have suffered traditional delays due to funding crunch; with the rising price of gas, how can the market assist with supply?
Basically, from the project development point of view, there is no project in this world that is conceived for development with proper strategies that by the end of the day would not have one issue or the other. In the case of Nigeria, we have our own peculiar situation; other countries have theirs.
I mentioned it earlier that gas development requires infrastructure. Without the right infrastructure, you cannot utilize gas. And when you talk about infrastructure, you talk finance. And there are many projects scattered across the world. So, projects around the world are struggling for the same finance, and the finance we are talking about is not $5 million or $10 million. Sometimes, these finance issues run into billions of dollars. And we do not have the capacity to fund these projects entirely within the country. In most cases, the funding syndication involves international members and Nigerian banks.
And for real big-ticket projects, Nigerian banks take a smaller chunk. With that, it takes time to actually put together a financing plan and execute it. It is a process because part of it is looking at the risks involved, and being able to mitigate them as far as banks are concerned. And I can tell you, in finance contracting, banks do not look at risks the way we in technical services look at them. Finance people look at risk as total. So, you have to mitigate all before they can check the boxes. That leads to delays.
In actual execution, you also have issues that impact speed: logistics issues, sometimes security and management issues. But I can tell you that, in all the initiatives, the NNPC Limited is driving the government’s gas development initiatives very strongly.
A lot of pipelines are being built today for transmission and distribution of gas, being driven by NNPC Limited, and they have achieved quite a lot within the confines of the amount of funds they can muster. And with what we have today and what is being done today, some of the future projects will learn from the experiences of the past to make sure that we go around financing in a more effective manner, working closely with NNPC Limited and other agencies that are required to develop these assets and infrastructure.
So, the point I am making is: yes, there could be delays.
Given the security situation in the country, how are you working to protect your investments against uncertainties in the local environment?
On the issue of security, I said earlier that every country has its own security issues. I am also aware that elections are coming and things are going to heat up. But these are real threats that happen at every election. I am sure you know what happened in the last election in America between Joe Biden and Donald Trump; but America did not crumble or come to an end. So, it is not unusual. That is the resilience of democracy.
And, of course, we have a number of security issues. There is no doubt about that. But I can tell you that we have been through it over several years and we have been able to adapt and mitigate such possible risks. I can tell you also that we also strategize and stay ahead of issues. We do not wait to the bridge before we cross it. When we know we have to cross a bridge, we plan how to cross the bridge before we get there.
So, these issues are going to be there. The essence of managing a system is the ability to deal with difficulty; to overcome the difficulties and be able to take care of your results. That is what separates a system that is successful and the one that is not.
So, what you pointed out is a risk and it is part of the risks that are going to be dealt with. There might be some foreigners that see the risks and become skeptical at this time for some reason or the other, but there are other ones that look beyond the risks to see opportunities. So, we just have to work with those who are willing to work with us.
What is key for us as a company is that almost every set of our operations is entirely run with local capacity. That made it easier for us to overcome some of these negatives.
But for Nigeria as a country, we see high capital flight. The CBN announced about a week ago that there is more reduction in international investments, and investments coming from outside the country.
With all that as the case, it is the duty of government to work hard to make changes to be able to impact strongly and sell the country, and we all also have to sell our country in positive light to enable investments in the economy.
There are concerns that despite its huge gas resources, Nigeria is missing the rush for new market share created by the demand surge in Europe. How do you think Nigerian supplies can take advantage of the gaps in Europe?
As far as the security of gas is concerned, it is always an issue under discussion. Let me put it in perspective. I said here that, for you to utilize gas, you have to match clearly the production through to transportation to utilization. A lot of times, it is difficult to match that.
If you build all the facilities for transportation on the basis that you already have offtake, and offtake has demand for gas, there is still the possibility of disruption at upstream level. There could still be an issue that relates to maintenance of the upstream facilities. There could be problems with particular figures that relate to gas. These things could be very elementary.
You could also have disparity at the midstream, where you could have a pipe failure. Assuming that there is a pipeline failure and you are unable to deliver, you may have to shut in production or flare gas.
You may not be able to deliver to the end users. This happens when the offtaker is unable to take delivery of assigned volumes. It impacts on the systems on the upstream of gas.
The point is that the biggest issue as of today is how we develop the infrastructure that will enable the distribution of gas. The more we deliver, the more we encourage the upstream to produce. There has to be alignment. Building the infrastructure signals the offtakers to also build their systems, including industries and power plants that will guarantee utilization of the gas.
So, that is the way it is interconnected, and it is always a moving tide. Obviously, what is important is to have a robust system that would develop over time.
With government driving mega projects like the AKK pipeline and also opening the market for mini-gas power plants through regulations for embedded power and mini-grid systems, is there adequate internal capacity to cope with the rising call for gas supplies?
Yes, as I mentioned in the course of my deliberations, it is a moving tide. You are aware that gas plans have been in the pipeline for a couple of decades to enable development. One of those is the Nigerian Gas Masterplan, which is a masterplan that looks into the backbone gas transmission system. That is the masterplan that incorporates the Escravos-Lagos pipeline, including the second loop that has just finished. It is also the masterplan that incorporates the OB3 pipeline, which is a major interconnect between east and west networks. That is the same masterplan that deals with the south-to-north pipeline, part of which is being built now, which is called AKK. The first half will become due to be built as soon as AKK is out because that one is duly taken.
So, all this, plus if we fast-forward to the call from NERC regarding embedded power, it will make for more robust gas utilization as far as the third world is concerned. The answer is that all the pieces are being built. You know that, sometime ago, the gas code was also passed.
The gas code actually governs, defines and controls how gas is transported and how you manage the value creation. It makes it possible to produce gas in the Niger Delta, put it into the pipeline system and come to Sokoto and pick the equivalent of the same amount of gas. All we need to do is use the principles of the gas code to determine the tariff system that you are to meet relative to your production.
So, these things have made the gas transportation industry more robust. But there is still more work to be done. The issue is all this initiative of the government, the much NNPC Limited has done and what the regulatory agencies have done make for robust pipeline system for gas. It will take years to take it to a level where it will be fully robust. So it is good to know that it is happening as it is supposed to.
It is widely circulated that international service companies hold the exclusive capacity for deepwater contracts, while indigenous companies are limited by capacity to dominate onshore services; what is the Nigerian content capacity plan for deepwater operations?
I can say, because I was involved at the time the Nigerian Content Bill was worked, including writing some of the parts of what has been passed as sections of the Act as it pertains to pipeline works, that land and swamp are entirely within the purview of Nigerian contractors. It has to be 100 per cent to lay pipelines on swamp and on land. Whether is shallow or deep offshore, what matters is the ability to muster the capacity.
In those areas, foreign companies play with Nigerian contractors, either as partners or the other. But you have to know why it is so. It is not that some Nigerian contractors may not be able to lay pipelines offshore. Laying pipelines offshore requires the relevant equipment, the right facilities, and the right personnel. And we have a lot of Nigerians that run that. Where you have a gap is to have the facility to own and operate pipeline-based activities and laying vessels. And we report that some Nigerians have some of those; but the way it works in the industry is very simple.
You don’t really need to own a pipe-laying vessel to be able to lay pipeline offshore. Laying it requires engineering, putting the project management system in place, and securing the facilities. There are companies in the world that own these facilities but do not lay the pipelines. What it means is that, if you have what it takes, all you need is to put together a system that enables you to lay these pipelines without being the asset investor. So the point I am making is that Nigerian companies are really laying pipelines offshore, and they have the capacity to lay these pipelines offshore. International companies are also involved. It is an integration of works. Today that is not any negative at all for any Nigerian company to be involved in.
We are ready and prepared as Oilserv Group to lay pipeline in any area that is required.
Numerous refinery licences to local players offer new opportunity for EPC contractors in the country but observations show that development of plants is dominated by foreign companies. What are companies doing to develop local capacity for refinery building?
I like your question but let me quickly put it in perspective so that you appreciate my answer. The oil and gas industry is as wide as anything you can think about. Building pipeline systems, building manifolds, building stations that are associated with oil and gas is one thing. Building process systems like refineries, these are all licensed based on the technology that is being used. And when you talk about building a refinery, you have various aspects of services that go into it. But what you build at the end is by retaining an EPC contractor. Under that EPC, you can have many other companies in there that will be part of that EPC, with a single company being the main EPC contractor.
Let me let you know that an engineering company that designs pipelines can also have the capacity to design complex process systems. It is slightly different but capacity can be built to be able to do both. There are specific companies that build process systems that make up a refinery. But, of course, you talk of installation and construction.
So, asking why Oilserv is not doing that, know it is a bit different from building a pipeline. Oilserv has always been involved and we have always been part of building refineries by actually offering services that are within our own area of knowledge and capacity. We have been involved in a rebuilding and refurbishment of a urea plant. This is a process plant. It has similarity with a refinery and we have our specific scope to do there but not in the oil scope.
So, the point is that, today, EPC companies that can take over the building of a refinery are mostly big multinational companies that have that capacity. Nigerian companies do not have that capacity and it is not because we can’t or because we are too small. It has to do with area of specialization. Don’t forget that you do not build capacity every day. Sometimes you develop additional capacity in many years. So, you discover that there are only a few of these companies that exist because the market and the industry do not require multiplication of big EPC companies.
Flare and reinjection volumes are still high at production fields despite numerous government programmes on gas to value. What is the global standard in monetizing gas?
Let me say this: There is something we all need to know, as far as the industry is concerned. When we produce gas, it is used for several things. In some cases, you need gas to maintain pressure of the reservoir to enable production to continue. So you find out that some producers reinject gas not necessarily to store it but to maintain pressure with the gas.
There are instances where you need water to maintain pressure but it depends on the design of the reservoir management system of the producing well.
The other part of it is that, if you are producing the gas and you are not reinjecting it because you have no need to reinject it, then you need to have a plan of transporting it to where it is going to be utilized. When you don’t have the transportation or transmission system, you find out that, to produce the oil in an associated gas system, you have to flare the gas. Otherwise, it means you have to shut down production, which means you will lose the ability to produce oil. But we want the oil. So you find out that flare goes on.
But over years, there are the policies to utilize this gas and reduce these flares. I am aware that, even though I don’t have figures with me here, flare reduction has been achieved in the past 15 years; but we still have significant amount of flares out there.
I am aware also that government has some flare reduction initiatives that have been going on, not so successful but I think they are being re-engineered to attract investments.
Now, having said that, of course, it is better for the country and the economy that all the gas we produce is utilized. That way the economy will grow, energy will be available, and the country will develop. That is what we want and that is the essence of all these initiatives: whether you are talking about embedded power to utilize gas or for firing power plants or creating industrial corridors with reliable gas supply.
There are lots of gas hubs around the country, so you can locate where gas is available. It does not have to be at the production area. It can be thousands of kilometres from where gas is produced, as far as you are able to transport it to the place.
So, your point is noted but I can tell you clearly that the initiative to reduce gas flaring is crucial. We should go to a stage where there is zero gas flare going on. That is when we can say we have achieved the ultimate. I believe we will get there. It requires a lot of work, a lot of investments, a lot of planning. When you talk of flare reduction and extinguishing flares, don’t forget that a lot of investments in transporting the gas and utilizing it would also be needed. So, that is it.
Your company has a corporate social responsibility programme that calls for huge budgets. What is the driving force and what objectives do you intend to achieve with such social investments?
As a company, at Oilserv Group, we have our own principles of transacting business. We believe strongly that business should reflect who we are and the life that we live. We also believe that business should not be done in a vacuum. Apart from us taking care of our workers, we also make sure that all the impacted communities and systems become part of us: whether they are host communities or communities where we have any part of our activities impacting.
What it means also is that we need policies and processes that enable us to actually execute this. And how do you execute this? We are not the owners of the projects that we execute. We build the pipelines and sometimes maintain them for the clients. But what we do when we come in, working with clients like the NNPC Limited, is to identify the communities.
There are aspects of the impacts that will happen from NNPC as the owner of the assets. There are some that would happen from us as the service company that is building or maintaining the pipelines or facilities. So, all these are determined by getting to the communities to know what they want.
What is important is that, in the course of anything we do around the communities, we employ people from the locations. We have workers that earn income to feed into the communities to create positive economic impact.
We also employ the security people from host communities because the most primary aspect of security is local security. When you have the community working with you and they are happy, it is easier to secure what you are doing.
It is deeply driven by our desire to impact positively on our communities. Secondly, it is a realistic situation. The fact remains today that, everywhere in the world, if you don’t engage the communities and the people you impact on, it is only a matter of time before you find what you are doing is unsustainable. So, it is natural.
Finally, of course, it is driven by the commitment to be able to contribute to the development of the country in our own little way, together with the government. I believe strongly that, if every company impacts positively in areas where they operate, we will build up a momentum of development in the country because there are many ways to influence the economy of the country and the people. And this is one of them.
This is why service business is important for the country in the oil and gas industry because the service business is what enables the trickledown effect on whatever activity and benefits that come from the industry. It is through employment, it is through services, it is through engagement and it is through positive presence in these communities. The communities wherever they need this, I believe, we will do our best to enable it happen.
In specific terms, there have been some attention-grabbing social responsibility investments your company has made recently involving hospitals and others. Where are you going with such service-based interventions?
We have done quite a lot in the past 25 years. I cannot begin to count them, but of recent we have built a girls’ secondary school. Today, we continue to expand it. We have just laid a foundation stone for a very modern dormitory that will be able to house as many as a thousand students. It is quite a mega project of high status.
For the hospital, we chose to build a cardio-thoracic hospital that is very specialized. It is a 57-bed hospital, out of which 14 beds are intensive care units: full-fledged ICUs. And when you talk of cardiology centre, it is not just a normal or standard hospital. It is beyond that. We have facilities ranging from CT scan, digital x-rays and many more.
We just don’t end it up there. We also know that, for it to be effective, we have to employ the best. We have a partnership with a foundation based in the United States. And the foundation is non-profit, the Voom Foundation. They work in collaboration with our own Sir Emeka Okwuosa Foundation, which is principally driven by the Oilserv Group. Our foundation is also non-profit and we have been doing quite a lot, but in this regard we go beyond just setting up a hospital. We also have medical fairs like this one that will be coming up on the 28 of this month for two weeks. And that would be the second one for this year, where we will have about 45 medical doctors coming in from the United States and Sweden to carry out open-heart surgery. You might be aware that, the last medical fair that we did, we carried out eight open-heart surgeries. And these were done free of charge to the patients. You can only imagine what it means. You check and see how many open heart surgeries we have in Nigeria a year, to now see one hospital carry out eight in 10 days.
The next one we are carrying out will involve a minimum of 14 open-heart surgeries, out of which the majority will be paediatric cases. And it is going to be the first if its kind. Paediatric cardiologic cases are very specialized. Those who are in medicine will understand that. This is what we are going to be carrying out between now and mid-November.
The hospital is named after my late mother who inspired me a lot, Dame Irene Okwuosa Memorial Hospital. Search it online and see the impact it is making today in the medical area. For me and for us, t is part of the story of how we are continuing to see how we impact on the society besides just running our business. And I believe that this hospital and other areas where we impact on the communities, especially education and other areas, will make a difference.