Following the dwindling fortunes of the oil and gas sector as a result of the fallen price of oil, Mr. Alex Neyin, Chairman, Board of Trustees of the Society of Petroleum Engineers, SPE, Nigeria Council and Chief Executive Officer, Gacmork Nigeria Limited, who is also a retired Chevron Manager, in this interview with OREDOLA ADEOLA, called on the new administration of President Mohammadu Buhari to focus more on engaging Nigerians who are professionals in the oil and gas industry as a means of reducing the cost of production. He also called for value re-orientation of Nigerians and workers in the oil and gas sector in order to position the country as a global players.
What suggestion has your organization offered to the new administration?
SPE as an organization has sent basic industry messages about the way we would love the industry to be run to the new administration. As an organization, we hope that for the first time probably we would have a chance to work with the government to improve the industry for generations unborn. Through the recently concluded Nigeria Annual International Conference and Exhibition, NAICE 2015, organized by our organization in Lagos, we have seen how the market forces effectively regulate the gas prices. We are also glad that government has also realized the need to allow market forces regulate the gas prices.
The Department of Petroleum Resources, DPR, as a regulator, has seen the rationale behind doing things properly. Thankfully issues relating to leakages have been discussed and the present administration has demonstrated enough commitment to get rid of them. Apparently, the stakeholders have been giving the opportunity to work with the present administration for grow the oil and gas industry.
What is your view on the appointment of a new Group Managing Director for the Nigerian National Petroleum Corporation (NNPC), by President Mohammadu Buhari and what are the things you would like to see him do in the short term to improve the oil and gas sector?
The structure is new; we need to revamp the entire structure and re-orient the people operating within the industry. We need a restructuring and reorientation of the people doing the jobs within the sectors. The bottom line of the rot in the industry is due to the bad orientations of workers which must be completely changed. We expect this new administration, with the steps it is presently taking, to do a proper restructuring and reorientation of the people in government, particularly in the oil industry. They should be professionals to the core and all the leakages needed to be checked. There are Nigerians who have the capability to turn things around, the government must focus on how to look out these people and and get them to engage for the industry to work.
What can be done to mitigate the impact of the fallen global oil price, which had recently crashed to about $40 per barrel?
The economic laws must be balanced to mitigate against the negative impact. There are several ways of doing business in the sector. If you increase your cost and your price gets lower, what’s going to happen to you? You lose money. Now if the price gets lower and the operating cost and capital expenditure – capex, is reduced, you are still going to be floating. In this case you won’t feel the impact.
At a time like this government must be concerned about ensuring that most of technical manpower needs of the industry are Nigerians. The citizens must have a sizeable share of the jobs in the sector. They also must also learn to do their job professionally to bring the cost of operation down, compared to most other parts of the world. If our cost of operation goes down, even at $40 per barrel, this country will still be in business. But as long as we have bloated cost, then we are going to be in a mess.
I think the first thing is to close the leakages, re-organise the place, reorient the mentality of Nigerians that “this is Nigeria, we all own it and all the little things we do for self-interest should be out”. You are a trained professional, you should do your job professionally and one of the major things is to see how you can effectively reduce your cost and get the required result.
So even if the price of oil goes down, because you have low operating cost, low capex, you are still going to be in business. We are a third world country, we should be more creative in whatever we do. What we have found over the years now is that the cost of operation is going higher. We must reorganise and restructure the industry.
Is it that the current global oil price decline, which started in June last year, caught Nigeria unawares, what did we fail to do before the slump?
The economic laws come in at a time of energy crisis. What we are seeing as regards the oil price today, I saw it 10 years back. The SPE International came up with unconventional oil as a topic at the international conference and all those that have some form of interest or the other in this country attended that conference in Houston. They even organised field trips for people to go and see the alternative oil (fracking) they were doing in San Antonio. So this took almost several years and as they progressed on that job, most of our people from government circles, NNPC, they attended and saw these things.
But we didn’t do anything; we sat down and the Americans were saying they wanted to be self-sufficient and at the end of the day, they ended up producing oil and gradually the volume increased and with time they became self-sufficient such that they don’t have to buy from us. So it is pure market force and good planning for a government that has foresight. That is what we need here; get the right people, do proper planning to mitigate situations like this. I am not surprised that this is happening because we knew 10 years ago that it was going to happen. It is just that those who were at the helm of affairs never thought it wise to plan. That is where any government that refuses to plan properly will run into this kind of situation, but luckily we are here and we have to bite the bullet. Hundred mile journey start with one step . the rest of the world would not wait for Nigeria.
The way forward, what should be done to get the industry back on its feet?
Now that we have realised this mistake, we have to go back to the drawing board and do the right things because the rest of the world will not wait for Nigeria. They are planning to ensure they sustain themselves. So nobody should blame America or anybody; if they are buying oil from us and now they are able to produce enough to the point that they can even export if they want to, there is nothing bad in it. It is left for us to do our own due diligence.
How do we do our own due diligence?
We should be able to refine the oil we have and meet our local needs. The little money we have, we are taking it out in dollars, while in reality we can make our refineries work; we can build modular refineries and the products that come out of it will give us more money. Refined products produce more money, otherwise people won’t come here to buy crude. Why don’t we refine enough to meet our domestic needs? The countries around us will be open markets for us to sell, and we will make money.
These are some of the things we need to do, and if we don’t do them in time, other people will overtake us. We have a gas pipeline to Ghana, but the Ghanaians are busy today trying to get their own gas. We should have got that done and start selling gas long ago, now if they finish building their own gas plants, the line we laid from here to Ghana may be useless.
How do we get over these challenges?
It takes a focused and well organized people the intelligence to address some of the basic challenges. Most Nigerians takes government’s work as if it is everybody’s business. I don’t see a Nigerian investing that kind of money as an individual seeing thing go like that. We have wrong attitude to government project, we call it government own. If it government’s project it is also your project because, it is your money or else your great grand children will suffer it. People steal because of the wrong perception that it is government’s money. There must be some conscience in Nigerian to must to ensure that we do the right thing. I dint see a Nigerian investing that type of money and seeing to going. That is why people are stealing government’s money.
When oil was discovered in Nigeria, most of the services are delivered by Nigerians. Let Nigerians start taking most of the jobs, our salaries are lower, we have knowledge, we will get the equipments. If this is ensured the cost of operation would be low.
”All our focus at this period is how to ensure local content in all the operations of the sector. Government must focus on where Nigerians have competency. Efforts must be on how to grow our own manpower and generate more employment. Over the years the cost of operation is getting higher, because we left most of the jobs in the sector are done by expatriates.”
We need to be bold with taking decision that is critical to growing the economy. We need to restructure the sector. Nigerians should start thinking objectively to make this sector work. We must reorganize there is no two ways.
What would be the economic implication of the fallen oil price?
There is no two ways about it, Nigerians must be willing to take over some of the services in the sector. If we do this the fallen price would not directly affect us if Nigerians start taking this job and started doing it because, our salaries are lower , we have knowledge we get the equipment are low of operation would be low, If Nigerian takes the job and start doing; we need to embark on Nigerians content. We focus on where we have competency, we grow our own manpower and generate more work. Over the years the cost of operation is getting higher, because we left most of the jobs in the sector to expatriates. We need to be bold with taking decision that is critical to growing the economy. We need to restructure the sector. Nigerians should start thinking objectively to make this sector work. We must reorganize there is no two ways.
Gas is increasingly on demand in the country, what should be done to develop the gas sub-sector?
I think gas is a new area that we need to go into. I recall that when I return from the US in 1979, the first project I worked on in this country for Gulf was evaluation of gas availability and to make proposals.
We had some people from the NNPC join us in Gulf to do a thorough study and we recommended Liquefied Natural Gas, gas for electricity and several others. It was on the basis of the report we produced that the government turned around and said, “Don’t flare gas any more. If you flare 1,000 cubic feet, you pay 5 cents”. And then I felt bad because I have worked in the US, drilled wells to produce gas and sell. So I said, “If you tell someone to pay 5 cents per mcf, it is cheaper for him to pay the penalty and not do anything.”
So the oil companies were comfortable paying 5 cents per mcf. And till today, the government is shifting the goalpost, saying by this year, there will be no gas flaring.
Another year, you will hear another date. They keep shifting the goalpost. We have to take a full stand. If you are going to develop an oil field, you must have gas utilisation in mind, otherwise the DPR should not approve it. We should treat gas as a business because it is profitable