By Moses Akin Aremu
Prefects of the Patch: How a group of earth scientists became the key policy think-tank for the Nigerian oil industry
From the podium in the banquet hall of L’Hotel Eko Meridien, on the edge of the Atlantic in the east of Lagos, a passionate appeal went out to the Nigerian government a quarter century ago.
Laide Adegbola (then) president of the Nigerian Association of Petroleum Explorationists (NAPE), an organisation of geoscientists working in the petroleum industry, requested Jibril Aminu, the (then) Petroleum Minister to administer “policies that would unleash the entrepreneurial energy of Nigerians and mobilise domestic venture capital for active Exploration and Exploitation of our Petroleum Resources.”
Exactly 10 months after Adegbola’s exhortation, the Nigerian Government delivered 12 new concessions in the Niger Delta to 11 indigenous exploration and production (E&P) companies. The event was sometime in mid-1990.
It was the first time in the country’s 107 years of oil search that Nigerians themselves would gain so many footholds as leaseholders in the upstream sector of the oil industry. The awards immediately increased the number of domestic lease operators from 2 to 13.
By 2000, four such companies were collectively producing 135,000 barrels of oil per day, a 7000% jump from the volume on the day of Adegbola’s speech. The share of Nigerian independents in the national production was 7%. But this was gross production, which meant that the equity share could be as low as 4%.
In August 2015, that share of production, on equity terms, was 12%, or roughly 260,000BOPD.
Many more Nigerian companies are battering at the door, with mixed successes. But everywhere from Escravos swamp to the Calabar flank, there is pressure from the Nigerian professional to get more than a toehold in the oil industry.
No organisation has fought that battle, and won more handsomely, if slowly, than NAPE.
It is easy to assume that Adegbola’s plea, as NAPE President, influenced the minister to grant those licences to Nigerian operators.
The reality is that the idea had lingered in the air for a long while before Adegbola came calling.
What is more, the minister himself had a personal agenda.
“When I first arrived at the Petroleum Ministry”, Aminu told a press conference in 1990, at the launch of the Indigenous Push, codename for encouraging Nigerian private sector participation in the oil industry, “I found that only one Nigerian-owned company was producing anything near I ,000BOPD. Even then it was a Government owned company.” Such a situation, he argued “was unacceptable.” Aminu decided to invite Nigerian businessmen, who had proved successful in other spheres of endeavour, to come into the oil industry by operating leases. He gave such businessmen discretionary awards and thereafter held a bidding round at which he specially looked out for Nigerian companies interested in lease holding.
Still, there is no doubt that Aminu’s indigenisation policies was in sync with NAPE’s sustained campaign for the integration of the petroleum industry into the mainstream Nigerian economy. It is a brave and odd battle, given the background of the organisation. To understand the oddity and the sense of bravura, we must go back to the beginning.
The body called NAPE came into being as the Lagos Society of Geologists and Geophysicists 40 years ago. It was the idea of a gentleman named Akomeno Oteri, who felt it was desirable to have such a professional society for furthering both social and technical interaction among professional colleagues. The idea was developed after he attended one of the monthly meetings of the Society of Exploration Geophysicists in Dallas, United States.
The first meeting of the Lagos Society of Geologists and Geophysicists attracted 10 individuals, some of whom were not even interested in the whole idea.
“We were looking to have a body which specialised in discussing current ideas in soft rock geology.” recalls Chamberlain Oyibo, who succeeded Oteri as president of the body. Oyibo went on to become the Group Managing Director of the largest oil company in the country, the state owned NNPC. He is the only former NAPE president to have held that position. “Most of the founding members were already members of the Nigerian Mining and Geoscientists, which was then made up mostly of mining engineers and professors of hard rock geology. We felt there was need for periodic meetings to discuss the most current thinking on sedimentology, petroleum geology, litho- and biostratigraphy, and the like.”
Although part of the mandate for the Lagos Society of Geologists and Geophysicists was to improve the quality of professional education for its members, the meetings then were held after work, in the private residences of members as they, being mostly low to middle ranking earth scientists, could not request their companies to grant them the time to meet during work hours.
Some of the most memorable meetings were held over fresh fish pepper soup (a choice Nigerian delicacy) served by Mrs Oyibo, who unofficially became the first “associate member” and “matron” of this burgeoning petroleum club.
Oteri, who then was working for Mobil (now ExxonMobil), recalls wondering, how that American company could even have allowed him the few hours, to run the society’s functions. Oyibo was working for Texaco. In those days, Shell would not allow any of their geoscientists to participate, at least openly.
Today, some of the distinguishing feature of NAPE is that it has had seven Shell (or former Shell) employees as president.
Ebi Omatsola, Laide Adegbola, Precious Omuku, Yomi Fisher, Promise Egele and Emmanuel Enu were all serving Shell staff when they were presidents of NAPE. Layi Fatona is the only former Shell employee who wasn’t at Shell when he became NAPE President.
NAPE has grown in leaps and bounds, buoyed by funds from oil companies — who are invariably multinational — and had been careful from birth, not to espouse views in public that would be seen as sharply at variance with the policies of its sponsors. But then over time, the membership composition has become mixed: the low –to- middle ranked earth scientists of the early days became management cadres and then became industry icons of their own. A good number of them have left the mainstream oil companies. Geoscientists running companies outside the exclusive league of multinationals have come on board. NAPE is composed of 7,000 individual geoscientists and 100 supporting corporate members, the largest professional association in Africa’s largest oil industry. The association organises a technical school every summer, at which petroleum geoscientists learn new tools of oil search. NAPE has become an affiliate of the American Association of Petroleum Geologists (AAPG). Its annual conference has become a huge event, attracting the cream of the industry, other professions and the country’s leadership. The conference entails four days of technical sessions and four days of exhibition involving scores of companies, spread out over several square metres of space. There is a lot of networking: with lawyers, engineers, bankers and investor types, attending the conference for no more profound reason than that it helps them gain a foothold in Nigeria’s premium industry. Now NAPE is so self assured that it takes its own logo very seriously: “Our ideas find oil.”
NAPE’s quest for an oil industry that would benefit the larger economy is the result of many strands of ideas, but the one event that put this issue firmly on the organisation’s agenda was the 10th anniversary of the association and the 3rd annual conference held in 1985.
There, in his keynote address to the conference, Duimo Itsuelli, then Managing Director of Phillips Oil, worried about the dearth of indigenous entrepreneurship in the industry and wondered why there could not be seismic exploration companies, seismic processing companies, drilling companies, biostratigraphy interpretation companies, even marginal field producing companies owned and operated by Nigerians. Itsueli looked around the Banquet Hall of the (same) Eko Hotel and remarked: “There are Nigerians now, who have been working for multinationals for 20 to 30 years; and some of them have worked in different corners and terrains, nay geological conditions of this earth. They have the appropriate experience, they have the knowledge. In these men and women, we already have technology transfer.”
The issues addressed by Itsueli’s paper featured largely in the NAPE President’s opening address the following year, 1986. There, in the same hall where Itsueli spoke, Bayo Akinpelu, then President, called for incentives for “Nigerian entrepreneurs to participate meaningfully in petroleum exploration” and offered that “NAPE would be most willing to participate in the formulating a blue print in that regard.”
Between 1986 and 1988, Presidents Dan Ndefo and Steve Okolo fashioned out a framework for a NAPE Foundation, floated to fund NAPE programmes, ranging from educational assistance to Universities, through sponsorships of NAPE summer schools, to scholarships for outstanding geology students. But the core issue of the development of local (E&P) business for the Nigerian petroleum industry remained staunchly on the front burner.
Then the dam broke.
In 1989, the Department of Petroleum Resources, the industry regulator, invited a paper from NAPE for a seminar on Statutory Control of the Oil industry in Nigeria.
In that paper, NAPE outlined a roadmap for the country to maximally benefit from the industry. Such a route, NAPE urged, would benefit multinationals that provide much of the investment funds and the technical know how as well the Nigerian people, whose resources are being exploited; it would challenge and squeeze the most value out of Nigeria’s own petroleum professionals and reward all stakeholders.
The Paper called for:
• Reduction in license renewal cycles and rationalisation of license fees
• Initiation and enforcement of unitisation as a precondition for field development where there are straddle structures.
• Gradual and phased withdrawal of government participation
• Removal of control and administrative overlap between the Department of petroleum resources and JVs (NAPIMS)
• Centralisation of Data archives to international standards and commercialisation of distribution.
• Participation of indigenous companies in the upstream end of the industry
These issues seem mainstream today, but they were revolutionary at the time, 27 years ago. In fact, to hear NAPE enthusiasts tell it: “it was our groundbreaking paper.” And it upped NAPE’s status from just another professional both to an influential advisor of government on policy issues.
“By then we had become an engine room,” says Lai Fatona, Managing Director of Niger Delta Resources and a former president of NAPE, “not just for Government Policies, but also for the industry.” It was Fatona who, then, as a member of NAPE’s executive committee, delivered that paper, in the year of Adegbola’s presidency.
What has helped NAPE thus far,” argued Tayo Ogunjemilusi, a former Vice President of the association,” is that the key administrators in the Ministry of Petroleum Resources are NAPE people anyway.”
In 1991, NAPE instituted a Pre-Conference workshop during which ideas that could help improve Government’s policies in the upstream sector of the oil industry would be canvassed.
Communiqués at this workshop were, until recently, routinely adopted by Government.
NAPE continuously adapts its style of organising the workshops to the changing dynamics of the country’s governance. In 1999, the year the country became a democracy, the discussion segment of the Pre-conference workshop was peopled by the relevant members of the National Assembly, Nigeria’s bicameral house of legislature. The session was chaired by the chairman of the Senate committee on Petroleum Resources. Among the panelists were the chair of the House of Representatives Committee on Petroleum Resources. When, at the formal opening of the conference on the following day, the communique was handed over to Jackson Gaius Obaseki, the Group Managing Director of the NNPC, who was representing President Olusegun Obasanjo, he simply lifted it up in the air and declared “This communique will be implemented, if we all agree to keep faith with it.”
Such a disclosure helps NAPE admirers to confirm their own feeling of achievement. Asks Fatona: “Has there been anything we have talked about as a Pre Conference theme, that has not remained a prominent issue for Government and Industry?”
The Challenges Ahead
NAPE’s influence with Government does not automatically translate to a cure-all for the challenges facing the oil industry. As Nigeria lacks an industrial base, the integration of the oil industry with the mainstream economy becomes impossible after a point. Nor has the association gotten anywhere close to sensitising industry operators into having a comprehensive scheme for producing high quality geoscience graduates from the Universities. 80% of geoscientists who graduated between 1995 and 2015 didn’t make it to the oil industry, according to a random survey by the Committee for the Development of Geoscientists. Although the study and practice of geology and geophysics transcend oil and gas and solid mineral exploration, the reality is that these sectors are the ones that are regularly overwhelmed by applicants. As such, even while they have no control over the matter, umbrella organisations like NAPE and NMGS find themselves challenged to do something about the escalating unemployment.
“There is need for more Nigerian involvement in the petroleum sector,” says Oyibo. “But the industry cannot exactly be Nigerianised. Nothing is being made here. We don’t have a technological base. We don’t have the industrial background. When they were building Aladja Steel complex, we said make line pipes so that at least we can use that to build pipelines..”
In spite of the aggressive localization effort since the Local Content Act was passed by parliament five years ago, the oil industry is still generally like an offshore industry. The crude oil is almost entirely exported. Most Nigerian service companies have to have foreign partners. “Statoil came from a developing oil producing country. Norway makes ships. We are asking foreigners to come and invest and we want to dictate. Yes. But we know the industry is going to remain foreign,” Oyibo maintains.
NAPE’s dominance of the Nigerian Independent space
NAPE’s rank and file members have benefitted from the direction of localization that the oil industry has headed in, even if they worked hard for it. Five of the top twenty indigenous oil and gas producing companies in Nigeria-the so called league of Nigerian independents-are either being run, or were built from scratch, by geoscientists who themselves were at one time presidents of NAPE. The most symbolic is Conoil, the first midsized independent Nigerian owned oil company operating its own fields. The founding managing director was Ebi Omatsola, Africa’s leading exploration thinker who so happened to have been a president of NAPE. Conoil was the only one of the Nigerian companies granted leases in 1990/1991 to take its acreage to first oil. In spite of its challenges over the years, it still produces over 7,500BOPD.
Niger Delta Petroleum, headed by Layi Fatona, (NAPE President 1993/94) is the most integrated of all Nigerian E&P companies, and the only one running a privately owned crude oil refinery in the country. Officially, NDPR is the first indigenous marginal field holder and has produced the Ogbele field uninterrupted for 10 years.
Amni Petroleum, of which Tunde Afolabi (NAPE President 1998/1999) is both Managing Director and Chairman, was awarded the Oil Prospecting Lease (OPL) 237 in 1994 and has produced the Ima field since1996. In July 2015, the company’s net production from the combined Ima and Okoro fields was ~10,000BOPD.
The smallest asset run by a former President of NAPE is the Assaramatoru field, operated by Prime Energy, of which Chambers Oyibo, one of the founders of NAPE is Chief Executive. It is producing around 2,000BOPD. The marginal field was awarded in 2003 and is one of the eight fields from that award that have reached first oil.
The Ebendo field onshore Western Niger Delta is operated by Energia Limited, founded largely by George Osahon who, in 2013, held both the positions of Director of the Department of Petroleum Resources DPR, the industry regulator, and President of NAPE. Ebendo is the second largest producing marginal field of the class of 2003, delivering in excess of 5,500BOPD.
THE LARGEST INDEPENDENT, home grown oil and gas E&P company in Africa is headed by Austin Avuru (NAPE President 2005/2006) who, at 57, is the youngest former NAPE president to run a company of that size. Avuru led Platform Petroleum, a marginal field producer, to form an integrated joint venture with Shebah Petroleum, operator of the Oil Mining Lease (OML) 108 in 2009. The Special Purpose Vehicle, named Seplat, was later joined and funded by French explorer Maurel et Prom (M&P) to purchase the Shell operated OMLs 4, 38 and 41, which collectively produce in excess of 72,000Barrels of Oil today. Seplat has grown both organically and by acquisition of more acreages and equity; it purchased 40% of Pillar Oil (a marginal field producer doing about 3,000BOPD) and acquired the 40% owned by Chevron in OML 53 as well as significant holding in OML 55. (These two purchases are being challenged in court). Seplat is in final stages of consummating an agreement over OML 25 with NNPC. Its operated 280MMscf/d of gas from Oben and Sapele fields makes Seplat the largest, private indigenous player in the Nigerian domestic gas market.