29 March 2014, Lagos – Oil firms have continued to cry out over the impact of insecurity and oil theft. They say stolen oil and deferred production have reached an estimated 250,000 barrels per day (bpd). Deferred gas production runs into hundreds of millions of cubic feet per day.
The Managing Director, Shell Nigeria Exploration and Production Company (SNEPCO), Mr. Chike Onyejekwe, said non-payment of counterpart funding by the government in oil and gas joint venture operations, among others, is another challenge facing operators.
He said the impact of the loss of oil production alone translates into about $9 billion revenue loss yearly, and that this has significantly reduced the funds available for distribution to the various tiers of government through the federation account.
“The result of this is missed opportunities to develop essential services that positively impact the lives of Nigerians. Additionally, when one considers the huge oil revenue loss and its knock-on effects, coupled with impact of gas losses and associated power shortages, the overall impact is enormous.
“This state of affairs, if allowed to continue, will not only stifle growth in the oil and gas sector but will also undoubtedly thwart Nigeria’s efforts to achieve its 20:2020 vision,” he said.
On funding of oil and gas joint venture operations, Onyejekwe said the perennial joint venture funding challenges, and the financing challenges faced by indigenous operators and service companies, is another important industry specific issue that needs to be addressed for sustainable development of the oil and gas sector.
He said: “Due to competing national needs, it has become difficult for the government to meet its required funding for joint venture operations.
“Although the industry has typically used alternative mechanisms to address this problem, these are short term in nature, costly and time consuming to negotiate and therefore, not sustainable. These funding constraints should be addressed so that the industry can achieve its full potential.”
He explained that financing is not only a problem faced by the joint ventures, but also a major challenge for indigenous operators and service companies. He noted that the limited access to finance restricts their ability to achieve the aspiration to increase indigenous participation in Nigeria’s oil and gas industry.
He said some international oil companies (IOCs) have initiated contractor financing schemes to help promote the growth of indigenous service providers and increase their ability to support the industry. While this is a commendable initiative, a more holistic strategy is urgently required to energise full participation of all categories of indigenous companies, he added.
Onyejekwe spoke on behalf of the Oil Producers Trade Section (OPTS), an arm of the Lagos Chamber of Commerce and Industry (LCCI), which has about 24 oil firm-member including the IOCs and indigenous operators.
He noted that all over the world, governments seeking to attract investment need to ensure that adequate security measures are in place for safe and stable operations, adding that Nigeria faces security challenges, including kidnappings, piracy in the Gulf of Guinea, and chronic vandalism of oil and gas facilities. The consequence of these can be seen in high cost of doing business, decline in oil production and exports and inadequate supply of gas to meet Nigeria’s power needs.
He also drew government’s attention to the need for efficient and effective regulatory institutions, stable policies and implementation plan.
– Emeka Ugwuanyi, The Nation