A Review of the Nigerian Energy Industry

Flaring must be unattractive for total flare out

natural-gas-flaring19 August 2014, Lagos – To put an end to the recurring issue of gas flaring in Nigeria’s oil and gas sector, the Federal Government should make the practice unprofitable by enforcing stringent penalties against defaulting companies.

This is the opinion of Mr. Moritz Abazie, the Managing Director of Strides Energy and Maritime Limited, an offshore oil and gas construction firm.

Abazie, who spoke in an interview, noted that conventional operations in the oil industry make it more viable for oil producing companies to flare gas than to harness it. “As such, it is quite difficult and expensive to contain the menace,” he added.

Maintaining, however, that appreciable success had been recorded and that penalty for defaulters should be made a bit more stringent, the oil and gas services expert said: “It is natural to toe the line of little resistance when you start a business. But having done that the consequences of gas flaring have been felt; it is obvious and everybody can see it. Government has come up to say, look, gas flaring has to be stopped and has set a timeline.”

According to Abazie, it requires huge capital investment to set up the infrastructure required in harnessing gas. He said that although a number of companies have been complying with the rules, the ultimate target is zero-flaring.

The regulatory and monitoring agencies, he said, need to up their game, noting that if the Department of Petroleum Resources, DPR, and the environmental agencies improved their efficiency, flaring would be a thing of the past.

On the Nigerian Content Act, Abazie observed that the law has opened the floor for indigenous companies to prove to the world that they are capable competing in the international oil and gas scene.

The CEO noted that Nigerian companies, who had the capacity to carry out contracts efficiently were marginalised before the Nigerian content policy came on board, saying that the level of implementation has been quite impressive.

Maintaining that the project could still be described as ‘work in progress,’ Abazie explained that the compliance level by the International Oil Companies, IOCs, has been satisfactory to a reasonable extent.

The Nigerian Content Act has been quite effective. It has been very useful; you cannot compare the situation now for local players with what it was before this policy came on stream. The implementation has been quite good; it could be better, though. The point remains that the policy, the law, is well cut out (because) it was long overdue. But the good news is that it has come to stay and the IOCs are implementing it.”

Explaining further, he stated, “Before now, for instance, dredging services, which is one of our areas of core competencies, was a major hit. Nigerian companies were not given a chance. But it is something that we could do. We have companies like former Willbros, Van Ord, Westminster Dredging, Dredging International, and others in the sector. These are multinational companies and they made it look like a enormous task that no Nigerian company could even carry out. But, with the Nigerian Content Act, the IOCs have been compelled to give Nigerian companies a chance.

We have been given a chance and we are doing it, and very well too. The oil is being produced with us providing the access in the same area they used to. Also, in pipeline construction both onshore and offshore, in mechanical installation, construction, fabrication, commissioning onshore and offshore, Nigerian companies have shown to a great extent that we can do these things if given the opportunity.”

However, he noted that some areas needed to be addressed if the recorded growth were to be sustained and improved upon, even as he fingered financial constraints as major challenge.

Some companies will need financial support, in which area Nigerian financial market is yet to live up to expectations. This is important because these companies need to grow and develop into world-class companies capable of taking complex projects. This requires that they have the capacity, strategic assets, both physical and human resources, which are capital-intensive. This is where the financial market comes into play. But on government’s side, the laws are there; the monitoring agencies are doing their best ensuring that the laws are implemented. The IOCs are improving in compliance and we believe that it will get better,” he said.

Commenting on the Petroleum Industry Bill (PIB), he noted that “the bill is a consolidation of all the existing oil and gas laws in the country into a single legislation, with the introduction of some dramatic changes to things like the deep-water fiscal regime. This is meant to improve government income from the oil and gas sector and boost economic retention. It is normal and expected that the International Oil Companies will want to have it easier.   But what we are looking at is a middle ground, what is obtainable in other countries, what is reasonable, what can benefit the country and also benefit the investors. We think that the passage of the PIB has dragged for too long and it has to be passed for the industry to move forward.”


– Vanguard

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