The Chairman of Independent Petroleum Producers Group (IPPG), Abdurazaq Isa, in this interview with KINGSLEY JEREMIAH discusses critical issues affecting oil and gas sector in Nigeria, especially the wave of divestment in the sector and the many implications for the country.

What’s your take on energy transition and what are the options for Nigeria?
First and foremost, IPPG is fully aligned with global decarbonisation initiatives and adoption of renewable energy. However, in the face of energy poverty and economic stagnation, sub-Saharan Africa (SSA) decarbonisation efforts cannot be at the expense of growth and development. In terms of low emission rate, SSA generates the lowest carbon emissions in the world (less than two per cent of global emissions) and a blanket financing ban on all fossil fuel projects is detrimental to the growth of SSA economies.

Nigeria’s (and much of Africa) focus will remain on providing affordable and reliable energy to its population using its hydrocarbon resources in the short to medium term. With the current global decarbonisation drive, there is an urgent need to focus on gas as a transition fuel and to power our economy (promoting the country’s industrialisation drive, addressing energy poverty among others) and ensuring Nigeria remains on a path of low-carbon growth whilst rapidly transforming its economy. We applaud the Federal Government for the declaration of 2021 – 2030 as the Decade of Gas to fully utilise and commercialise the nation’s abundant gas resources. Significant progress has been made to promote domestic gas utilisation and end gas flaring.

Do you think the independent oil and gas producers in Nigeria are ready to take over as IOCs are divesting?
Independent oil and gas companies have a proven track record and have demonstrated operational and financial capacity to manage previously divested IOC assets. Since the major IOCs’ divestment in 2009, over 15 indigenous independents acquired divested assets enabling contributions from indigenous companies to significantly grow from about three per cent to 18 per cent. Our aim in the short-to-medium term should be to increase our contribution to between 30 to 50 per cent level at three million barrels per day. With the next round of IOC divestments, we forecast in the next two to three years, the onshore and much of the shallow water assets will be dominated by indigenous companies. This next wave of IOC divestment also offers opportunity for us to expand and deepen our capabilities and spearhead the country’s energy security drive.

Indigenous players remain best placed to guarantee a steady flow and incremental investments in adding value to these assets (over $11 billion and $13 billion spent on acquisition and CAPEX cost respectively) even in the face of the energy transition drive. I have no doubt that independent companies, particularly, our members, are more than ready and capable to step into the shoes of the IOCs

Moreover, across the onshore and shallow water acreages, we have been successful in managing the perennial community restiveness issues by creating direct and indirect employment and effective engagement of host communities and adoption of a successful model to effectively engage host communities across areas of operation. The result has been minimal disruptions in operations.

The issue around oil theft appears to have defied solutions. What are the costs of this menace for independent operators, the nation’s economy and what are the possible sustainable solutions?
The situation we find ourselves in is fast becoming unsustainable and a major threat to our businesses. The sheer level of theft is unprecedented. In 2021 alone, producers in certain parts of the Niger Delta suffered losses between 15 per cent to as high as 90 per cent.

Such monumental losses attributable to theft are a major threat to our business, revenues to government as well as to national security. The huge cost incurred on security is also adversely affecting Unit Operating Cost (UOC) targets of $10 per barrel. The escalating security and repair costs due to vandalisation of key oil and gas assets is a major concern.

A concerted effort is required to address these challenges (the Government, security apparatus, operators, communities and others must all be involved in finding a sustainable resolution to the issue). Some initiatives or steps that can be undertaken include, executing private sector driven pipeline security initiatives (such as the IPPG championed TFP Security Surveillance Initiative); deploying surveillance technology such as, drone technology to identify illegal crude oil theft, providing enhanced security for strategic installations and assets across the region (major pipelines, trunk lines and terminals); minimising operational disruptions due to communal restiveness – promoting collaboration amongst host communities, operators and relevant. We commend the government on the current efforts being undertaken to address these challenges.

So far, how will you rate the implementation of the PIA?
The implementation of the PIA has taken off at a reasonable pace and I must commend the Federal Government for that. The PIA was signed into law in August 2021 and the President was quick to inaugurate the PIA Steering Committee also in August 2021. The important role of this committee in ensuring the effective and timely implementation of the PIA cannot be over-emphasised. We are pleased with the progress made, particularly, in setting up and appointing the leadership team for the newly established industry regulators i.e. the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Nigeria Midstream & Downstream Petroleum Regulatory Authority (NMDPRA).

The timely set-up of these regulators will facilitate the implementation of critical aspects of the PIA and address grey areas in the Act, thus, facilitating a smooth transition with minimal operational disruptions. As a key industry stakeholder, IPPG seeks continuous engagement by the PIA Steering Committee and newly-created Regulators in the formulation of industry regulations.

What needs to change for Nigeria to harness the potentials of natural gas, which is being positioned as transition fuel?
Two critical issues need to be addressed in the gas sector to unlock the investment potential of the sector. Gas pricing: The current downward price trend for gas is a disincentive to potential investors (domestic supply Price of $2.50/Msfc to $2.18/Mscfd and even lower at $1.75/Mscf for Gas Based Industries). Legacy Debts: Huge outstanding arrears owed to gas suppliers (gas to power) – constrains additional investment for gas projects. Significant investment required to meet the 10Bcf/d of gas (i.e. 50 GW approx.) – $150billion to deliver 50 GW. Transition to a market driven pricing regime is a key imperative for the growth of the gas sector this guarantees rapid and sustained investments required to develop our gas resources

With over 206 TCF of gas reserves, Nigeria has no business experiencing energy poverty.

Can the current architecture in the downstream segment of the nation’s petroleum industry deliver energy security?
Over the years, there has been under-investment in the downstream sector. This has resulted in the sad situation of Nigeria depending on imported petroleum products. This is a threat to our energy security.

Until full deregulation of the downstream sector is undertaken, the sector will continue to be underdeveloped and be a drain to the government’s resources. The sector is susceptible to various shocks across the global market and the time for targeted policies that will translate today’s oil and gas industry from “commodity exporting” into a “broader value-enhanced midstream and downstream industry”. Despite the unfavourable investment climate, a few of our members, notably NDPR & Waltersmith have invested in refinery assets and expanded capacity over the last decade. It is our belief that we have a role to play in supporting the federal government in delivering the nation’s energy security aspirations.