Nigeria’s oil and gas industry: The challenges and prospects

By Isaac Aregbesola

On many occasions, concerned stakeholders in oil and gas industry have expressed worries that the rising operational costs in the industry, among other challenges, have been limiting the industry’s growth.

They note that the sector is also affected by inadequate finance, poor policy implementation, professional knowledge gaps and low capacity building.

At the recent National Oil and Gas Conference and Exhibition in Abuja, the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, called on all stakeholders in the oil and gas sector to concertedly tackle the challenges facing the sector.

She listed some of the challenges as crude oil theft, pipeline vandalism and she underscored the need for the sector to surmount the challenges and maintain its position as Africa’s leading gas and oil producer.

“Currently, our oil and gas provide the highest external income to the 36 states government that make up the federation but it contribute less than 40 per cent to our Gross Domestic Product (GDP).

“Government’s intention is that the final destination to reform the oil and gas sector has to be in increasing its contribution to the GDP and growing its revenue potential,’’ she said.

In spite of the minister’s viewpoint, Mr Mutiu Sunmonu, the Managing Director of Shell Petroleum Development Company, noted that there were cost efficiency problems in the oil and gas industry.

He said that the development could make it impossible for the government and other stakeholders to reposition the sector effectively.

Sunmonu said that one of the challenges facing the sector was the noticeable delay in the contracting processes, adding that the challenges also included funding and security problems.

However, Mr Adams Okoene, the Managing Director of Midwestern Oil and Gas, bemoaned the high tax regime existing in the sector, warning that it posed a threat to the sector’s growth.

He said that some factors that would facilitate the realisation of the desired goals in oil and gas production were policy implementation and partnership between oil companies and the industry’s regulators.

He frowned at a situation where priority attention was given to oil to the detriment of gas production, insisting that this posed a serious challenge to the nation’s gas production and income projections.

Okoene, nonetheless, noted that with timely implementation of the right policies and provision of adequate infrastructure, Nigeria would be a nation to be reckoned with in oil and gas production.

He stressed that efforts should be made to tackle Nigeria’s dependence on oil to the detriment of gas, as the country had about 184 trillion cubic feet of proven natural gas reserves.

All the same, Mr Andrew Fawthrop, the Managing Director, Chevron Nigeria, said that Nigeria’s desire to become a major gas producer in Africa would be attained if all the perceptible challenges were addressed.

In his view, Mr Mark Ward, the Chairman of ExxonMobil Companies, urged the stakeholders to promote advocacy on revamping the ageing infrastructure, while addressing problems such as crude oil thefts and difficult contracting processes.

He noted with dismay that some of the oil production facilities which were used in the early days of Nigeria’s oil production were still being used today.

He said that when the challenges facing the country’s oil and gas sector were addressed; the sector would experience a tremendous transformation.

Nevertheless, Mr Abiye Membere, the former Executive Director (Exploration and Production) in NNPC, noted that the focus of the stakeholders’ attention should be on mode of operations in the oil and gas sector.

“The oil and gas industry didn’t start well; basically, what we are doing in the last decade is to correct the anomalies.


“We started the oil and gas industry in Nigeria only looking for oil as if the gas aspect was not important.

“What has been happening in the last 50 years is that there is a major oil infrastructure in place but the gas infrastructure is still lagging behind,’’ he said.

Apart from inadequate infrastructure, Mr Victor Briggs, the Managing Director, Nigerian Petroleum Development Company, said that the capacity of small gas producing companies was constrained by factors such as funding, limited assets and inadequate technical resources.

On the issue of finance, Mr Herbert Wigwe, the Group Managing Director of Access Bank Plc., said that companies without a good governance structure and the necessary financial security would find it difficult to get funds from banks.

He, however, said that financial institutions should assist the country’s oil and gas companies so as to ensure the growth of the sector.

Wigwe, nonetheless, stressed that the purpose for financing of any project ought to be explicit, particularly if the funds were to be used to finance oil exploration.

He assured stakeholders in the oil and gas sector that Nigerian banks were capable of funding the sector’s projects.

Nevertheless, Mr Markus Droll, the Vice-President of Shell Upstream International, Nigeria and Gabon, said that Nigeria had the potential to remain the leading oil and gas producer in Africa if the perceptible challenges were addressed.

Droll urged participants in the Nigerian oil and gas industry to re-double their efforts to remain competitive and secure an investment climate that would attract more capital.

All the same, Dr Oluwole Oluleye, Executive Secretary, Petroleum Technology Development Fund (PTDF), said that the Fund had taken measures to address some of the challenges, particularly those relating to the development of human capacities.

He noted that PTDF had trained a lot of professionals for Nigeria’s oil and gas industry, adding, however, that international oil companies should also key into the efforts of the Fund, especially in the area of capacity building.

“If we keep on building capacity that is not engaged in the industry; we will continue to face the problem of youth restiveness in the host communities and this could result in revenue losses,’’ he said. (NAN)


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