SUSTAINING ENERGY OUTPUT IN NIGERIA Threats to fossil fuels, financing constraints, oil price volatility and militancy are challenges Nigeria can turn around through constructive engagement and strategic initiatives

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Sustaining Energy

Afam P. Umeano

Challenges in the Nigerian oil and gas industry have lingered, cutting across the spectrum of the industry with varying degrees of impact on virtually every participant in the oil value chain, sparing none, – from the government and regulators to operators, producers, service providers and specialists. Challenges in acquiring foreign exchange, critical equipment and technologies, fuzzy regulation to fiscal issues, have kept many industry players on their toes.

Several Nigerian companies went under, many downsized; others are still on shaky grounds.

The downturn in the economy saw investors and investments depart the country, with an unprecedented demand for forex. Despite the federal government’s best efforts on fiscal policies, the value of Nigerian currency plummeted to an all-time low, producing an incidental economic depression with soaring inflation. The digits became unimaginable.

The causes – global oil price slump, which began hitting oil producing countries from 2014, became pronounced in the 2015 and 2016 fiscal year. It had and continues to have major adverse impact on oil production in Nigeria and on oil operators.

The second very damaging cause of the challenges was militancy and restiveness in the Niger Delta region – the source of Nigeria’s oil. This inflicted tremendous setback in oil production as oil installations, facilities and pipelines were targeted and attacked, halting operations and inducing fear and trepidation among all stakeholders in the oil economy.

Perception is real, as they say in PR. It is therefore instructive to know that, precarious as our situation may be, how we present ourselves is how we are perceived by the world around us, especially investors. What we hype is what we become, as long as we get the fundamentals going. If we portray ourselves in our situation as confused, hopeless, disillusioned and incapacitated, that is what we make of ourselves before others. Therefore, if you don’t say “you are” at a time like now, nobody will ever say, “you are”, now or at any other time.

Clearly, the global oil and gas challenges affect not only Nigeria, but the rest of the oil producing economies in the world, big and small, advanced or developing. Research shows that the impact of global oil challenges on the economies of the oil producing nations and states differ from one country to the other.

Similarly, the actions and survival strategies adopted in response to these challenges differ from one country to another. Most oil producing nations were quick to find ways to adjust to these global issues more adequately than others and greatly minimized the impact on their economic well-being. Most affected, as is often the case, are those nations whose economies revolve around oil only, such as Nigeria.

Nigeria was severely hit mostly by the global fall in crude price and dwindling demand of petroleum products . She did not seem quick to adjust to the problems for various reasons which includes a new government struggling to set up its administration at the time, internal insecurity and militant attacks on oil facilities, political tensions and instability, which together directly and indirectly had damaging effects on the economy. The effect of the maladjustment was heavy and unfortunately poorly managed that it shot the economy into a recession, which it is painstakingly struggling to wriggle out of. The impact has been so significant that downsizing, job losses and cuts in oil contracts, exploration and production activities was at its worst level.

Still on the global causes and effects, it was held in some quarters that the global oil challenges were off-shoots of a conscious, deliberate efforts by the Western world to wage war on terrorism via downplaying the significance of oil because of the belief that oil money fuels terrorism. How far this is true is left for time to tell

Another global challenge confronting the oil business is the advent and pursuit of shale gas. Fracking has in recent times become an actual alternative to the traditional sources of crude oil and gas, despite its ecological effects and relatively prohibitive costs.  The US has massively invested in shale gas operation and so are many countries, including China. The technology for this alternative source of energy is rapidly advancing.

A more trending challenge to hit global oil production business is the planned phasing out of hydrocarbon (petrol and diesel) – powered motor vehicles and machinery over the next 25 years by major equipment and automobile makers. What this portends is that in the very near future, petroleum would be irrelevant, especially among industrialized nations, which together make up the largest market for the product. In the light of the foregoing, there seems an unspoken scramble for the oil business at the global scene, while it lasts.

Nigeria needs sustained investment in the oil industry to keep the economy going and to provide the resources for economic diversification. Part of this focus should be on making the investment climate in the oil sector attractive to foreign and local players. This is where agencies like the Nigerian Content Development and Monitoring Board (NCDMB) come in. Through incentives and regulations, NCDMB is helping to position Nigerian companies to play in the local market not just as service companies but as E&P operators. And the results are outstanding; placing Nigerian E&P companies as potential foreign investors in other African oil economies. Proper perception of a virile, active, viable oil industry needs to be created and constantly maintained to induce investment confidence and motivate/inspire existing investments already in the sector.

So far, every play out ought to be harnessed for the ultimate good and corporate improvement of the industry. In the words of the honorable minister of state for petroleum, Dr. Ibe Kachikwu, “it is indeed a new dawn for Nigeria oil and gas industry in all ramifications. Let’s therefore brace up and trudge our road to reinvigoration.” Bracing up to reinvigorate the industry needs the whole industry, active and engaged. Through the marginal fields program local E&P players like Aiteo take a commanding role as core industry players in their own right. Like expected, many like Aiteo are not just circulating resources within the industry but are turning the wheel of the economy in many other ways, through sponsorships of sports, arts, culture and socio-economic initiatives. Pushing for the diffusion of the oil industry gains is a veritable way to diversify the economy and this deserves support. Industry associations too are working to get the much-needed capacity to power a Nigerian-based oil and gas industry. These initiatives demand support.

Beyond what companies are doing to put a positive shine on the industry, the government needs to start the process of strategizing on the use of Nigeria’s massive gas base to build a power hub for the African continent. Before oil loses its appeal, we can begin to develop its derivatives – massive thermal power plants that would make us not just self-sufficient in electric power but put us in a position to sell power to countries in demand around us. New thinking such as this will see us beat the ban on fossil fuel by developing the infrastructure to compete in the global arena on those terms. However, the government and oil companies must keep the engagement with restive youths in the oil-bearing belt on a positive high.

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