Cost of Services in Nigeria’s Oil and Gas Industry is Cheapest in Africa – PETAN President
He spoke at a Townhall Session at the 14th Practical Nigerian Content (PNC) Conference and Exhibition at the Nigerian Content Tower (NCT), Yenagoa and provided a detailed analysis of project costs across Africa and elsewhere.
Engr. Ogunsanya insisted that a distinction must be made between the capital expenditures (CAPEX) of the oil industry and operating expenditures (OPEX), stressing that Nigeria’s CAPEX rates were arguably the lowest in Africa. He attributed what some industry observers refer as Nigeria’s uncompetitive costs of production to challenges of evacuation, security costs and the activities of portfolio companies that habitually manipulate their clientele.
According to him, PETAN, the umbrella body of reputable indigenous technical oilfield service companies, has been analysing production costs in different countries over time, using capital expenditure (CAPEX) and operating costs/expenditure (OPEX), and, in the case of Nigeria, carefully identifying cost elements at successive stages of oil and gas production.
In his words, “The number one cost driver in Nigeria’s oil and gas industry operations is evacuation of crude oil and gas. Our pipelines are vandalised, and some companies use vessels, barges to move crude oil, at a cost of US$12 per barrel.” Costs include payments to security agents as guards or escorts.
The PETAN boss, who is also Chairman/Chief Executive Officer of Geoplex Drillteq Limited, said whereas contracting a land rig in India costs as much as US$60,000 per day, the same services in Nigeria cost as low as US$30,000 for the same duration. Part of the explanation for the relatively lower costs in Nigeria, he noted, is that “Local content policy and practice in the industry here subsidises oil and gas production” in ways that might not be very apparent to some analysts, he said.
He lamented that some portfolio companies in Nigeria, companies without the requisite operational assets often constitute another grievous dimension in the escalation of costs. PETAN, he revealed, is “aware of portfolio companies that had previously obtained the Nigerian Content Equipment Certificate (NCEC), became registered on NIPEX (Nigerian Petroleum Exchange) and had services, projects awarded to them.”
The Presidential Directive on Local Content Compliance Requirements introduced in March 24, 2024, had mandated that such portfolio companies be barred from participating in the Nigerian oil and industry, while companies bidding on projects must demonstrate genuine, tangible capacity to perform the work independently.
Ogunsanya called on the NCDMB to allow specialists in PETAN to provide guidance on equipment required for different industry operations. He also wants the Federal Government and the NNPCL to facilitate efforts of PETAN to establish the cost of projects in other markets, to enable the Association advise the authorities on trends globally, “so when any of the IOCs or even indigenous companies say we are doing a US$5 billion project to produce 100,000 barrels, we have a basis for comparison.”
Other issues deliberated upon at the Townhall Session, moderated by the General Manager, Corporate Communications Division (CCD) of the NCDMB, Dr. Obinna Ezeobi, include key requirements for NCEC, whether the US$400 million Nigerian Content Intervention Fund (NCDF) of the NCDMB could be accessed by startup companies or for Research and Development.
On NCEC requirements, the Director of Capacity Building, of NCDMB, Engr. Abayomi Bamidele disclosed that NCDMB has developed “Guidance Notes,” showing documents that are mandatory and others that are specific to assist companies or individuals seeking the certificate.
He advised companies applying for the NCEC to choose one or two of the eight categories of NCEC in which they possess the requisite equipment and assets and not attempt to register for all. A promise was made by Engr. Bamidele and Dr. Ezeobi that a platform would be opened by the NCDMB for complaints relating to NCEC.
On the Nigerian Content Intervention Fund (NCI Fund), the Director of Finance and Personnel in the NCDMB, Mr. Uchendu Ossaowa, said Research and Development (R&D) operations are not eligible to borrow from the NCI Fund scheme because the fund is specifically for contributors and firms that have running contracts with oil and gas operating firms.
However, companies engaged in R&D could access the US$50 million Nigerian Content Research and Development Fund, instituted by the Board, the Director, Corporate Services of the NCDMB, Dr. Abdulmalik Halilu, clarified.
He also pointed out that there are hackathons – innovation contests sponsored by the NCDMB, where R&D focused firms can benefit from the Board’s support.
The 14th PNC Conference and Exhibition ended on Thursday with site visit by delegates to an oil and gas facility, with specialty in electrical services and related solutions.
