LAGOS- Some oil and gas experts on Thursday expressed optimism that the ongoing oil block divestments by major international oil companies (IOCs) would create better opportunities for indigenous players to grow.
They said in separate interviews with the News Agency of Nigeria (NAN) in Lagos that there was no cause for alarm over the divestments.
A Geologist, Mr Aderemi Adesina, said that Nigerians should not entertain fear over the ability of indigenous operators to manage the divested oil blocks.
The geologist, who is also the Managing Partner, Energy Geo-physics Ltd., said the divestments would boost local players’ participation in oil exploration and production.
According to him, IOCs in Nigeria began divestment from onshore and shallow water assets in the Niger Delta region four years ago.
“The ongoing divestments of oil blocks by multinationals will provide opportunity for indigenous oil and gas companies to become active players in the upstream sub-sector of the industry.
“Rather than causing crisis, the divestment is changing the onshore corporate landscape and creating material opportunities for players in the Nigerian upstream space,’’ he told NAN.
Also speaking, Mr Frank Eremosele, the Managing Director, Data-Services Oil and Gas Ltd., said the divestment reflected the declining quality of the investment climate in the sector.
According to him, the scenario is best explained within that context and it is a natural response of investors.
Eremosele, however, said that the speed response of indigenous companies would depend on the liquidity of the investment.
“Nevertheless, it is disheartening that the economy is losing investments in such a vital sector at a time when investment drive should be government’s top priority.
“It is disturbing because the oil and gas sector is the mainstay of the Nigerian economy from the perspective of financial resources needed to drive the economy.
“This sector accounts for 95 per cent of foreign exchange earnings and 85 per cent of revenue. There cannot be a more strategic sector.
“Against this backdrop, no effort should be spared to stem the current trend of divestment in the sector,’’ he said.
Similarly, Mr Afolabi Jubril, a member of the Nigerian Association of Petroleum Explorationists (NAPE), observed that major investments in the upstream oil and gas sector run into billions of dollars.
He told NAN that not many domestic banks had the capacity to finance such investments.
According him, the interest of indigenous players and that of the IOCs are not mutually exclusive.
“A good investment climate in the sector will be beneficial to all investors in the sector, irrespective of origin and size.
“In the investment space, there is little room for sentiments; capital would gravitate to areas that are most conducive.
“Competition for investment in the sector is becoming more intense globally.
“There are new discoveries and investment opportunities in Ghana, Liberia, Tanzania, Mozambique, Kenya, Uganda, Papua New Guinea and Australia among others.
“In response to these developments, several countries, which have huge oil and gas reserves, are introducing more competitive fiscal terms in order to attract investments,’’ Jubril said.
However, Mr Simon Ogunjimi, the Executive Director, Prime-Log Price Oil and Gas Consultant, urged the government to provide the fiscal terms that would boost investment in the sector.
This, he said, should be without compromising the interest of the country.
He stressed the need for the Federal Government to ensure adequate protection of life and property in the oil producing areas.
Ogunjimi spoke on the need to ensure clarity and certainty in the policy document to create investors’ confidence.
“Oil producing companies pay 85 per cent tax on profit, royalty and signature bonuses.
“This also includes the three per cent annual budget to the Niger Delta Development Commission (NNDC) and two per cent education tax among others,’’ he explained.
He stressed the need for government to insulate the sector from undue interference by the political class and bureaucracy.
Ogunjimi also advocated the creation of a professional and independent regulatory body for the sector.
NAN recalls that Shell Petroleum Development Company of Nigeria (SPDC) had divested from eight oil mining leases (OMLs) from 2010 to date in Nigeria.
SPDC had sold its interests in OML 4, 38 and 41, which were sold on July 30, 2010.
Others are OML 26 and 42 which were sold on Nov. 30, 2011; OML 40 on Aug. 31, 2012; OML 34 on Sept. 5, 2012 and OML 30 on Nov. 9, 2012 respectively.
NAN also reports that another four have been slated for divestment before 2015. (NAN)
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