Executive Chairman, & Founder, AA Holdings, Austin Avuru has said the Nigerian indigenous oil producers have the capacity to do 1.7million barrels per day (mbpd).
He also noted that Nigeria is currently in a shortfall of almost a million barrels of oil per day. This, according to him meant that if all the 13 assets were performing optimally, the country wouldn’t be doing that.
Avuru stated this during the Harvard Business School Association of Nigeria meeting in Lagos with the theme Exits, Divestments & New Players: ‘The Future the Nigerian Oil & Gas Industry in the Hands of Indigenous Players’. The event was sponsored by Shoreline Natural Resources Limited.
He said there are Nigerian assets that have huge potential, however much less than their potential, ‘so you have a shortfall waiting, out of just 13 assets’.
“So we should be doing about 1.7 million barrels a day. From this, if you then add 700,000 barrels from the deep offshore, ordinarily, we should still be doing 2.5 to 3.6 billion barrels a day,” he said.
Avuru who spotted about four of the assets said though they’re not the very largest assets, nevertheless, they are performing optimally, meaning that they are producing to their potential as of today.
Blaming this development on a badly managed transition, Avuru expressed dissatisfaction that those who should manage the process for a smooth transition (from majors to independents) turned it into an approval power play.
According to him, political connections rather than capacity became the qualifying criteria in the absence of guidelines and defined processes, adding that a long-drawn process meant that neither the divesting nor the acquiring entity was investing in the assets.
He said most of the evacuation infrastructure fell into “no man’s land” (the divesting IOC’s stopped investing in their maintenance and surveillance). A predictable noticeable and measurable decline in production set in but chose to blame it all on “Crude Oil theft”
On the way forward, Avuru agreed that a roadmap to 3.0m barrel oil per day (bopd) and 10 billion cubic feet (bcfd) (with 3.0bcf domestic) is possible with IOC’s, independents and small operators all playing effectively in their areas of relative strength.
According to him, strong, target-driven regulation is needed to make this happen, “drill or drop” enforcement, regular, transparent licensing rounds, level the playing field for entries and exits, re-establishment of execution capacity, a reinvention of NNPC efficient manager (not operator) of vast assets, functional, value-driven partnerships
He agreed that the new Presidential Orders will help re-build execution capacity, rekindle deepwater development, rekindle gas development, and address the shortfalls of the local content campaign adding that only effective, regulatory action plan will deliver the required results.
According to him, the decline in production is actually attributable to decline in investment, adding that the general story that we hear is that all of the difference has been stolen.
“It’s not surprising when there is no investment, no drilling, no work done; the natural decline of these assets on their own is 10 to 15 per cent, if you do nothing, that’s what you see,” he added.
“It’s to tell you those majors, acquisitions, divestments; they are no more business decisions than much of business. This is the time you find IOCs rationalizing their assets and doing that. We didn’t take those decisions for everything. We took the decisions, and it was up to us how we reacted as an industry and as a country.
“At this point, we ordinarily should have everything to be digested as a country, almost everywhere else, including Cameroon and Egypt, when the IOCs move out, independents from the same geography will come into play adding those transactions are usually done in Europe and the U.S. and they only come here.
“At least we have home-grown companies that can even take the products. But to tell you how well they have done is a different story. The difference between Nigeria, especially in most parts of Africa, is that IOCs are leaving, and Nigerian independents are pulling their chests out and saying, we can do it, that’s the difference,” he said.
Avuru explained that the exit of IOCs and the entry of independents, whether they are Nigerians or independents from around the world, was a process, a transition that was managed properly from a policy and regulatory point of view.
“It shouldn’t have been something you just do every day. And when the sales are over, and you go for approval, that’s when those who had the responsibility to manage the process in the best interest of this economy do not take part in that whole process, and then we all do.
“All of us, Nigerian companies, are knocking our heads together, hoping we’ll win this asset. In the event, we’d probably be paying over a billion dollars for an asset that you could have paid in over a billion dollars,” he added.
The Chairman of Shoreline Natural Resources Limited, Kola Karim said the reality of the industry is strong regulations, which according to him is now coming into play with a defined model, and more importantly, committed relationships between the local companies.
“Shell formed a venture with Total and E&I, you cannot go it alone. And what I see is the opportunity in this sector for people with different types of ideas coming together and building formidable businesses because the global oil companies will continue rationalizing their portfolios, looking at this industry as it’s going.
“What I’m going to leave you with is this: 40 years ago, oil was the natural preserve of a country called Nigeria. On the continent of Africa, you have Libya, Algeria, Nigeria, and then came Angola.
“But today, what we call oil and gas is found everywhere. Ghana is producing, Ivory Coast is now producing, Senegal has found gas, and Mozambique is coming on so the reality is if we stay stagnant as an industry, there’s interest elsewhere for the big players,” Karim said.
