SPE 2013 NAICE Communique - Africa’s premier report on the oil, gas and energy landscape.

SPE 2013 NAICE Communique

The Society of Petroleum Engineers

Communique issued at the end of the 37th Nigeria Annual International Conference & Exhibition held at the Expo Centre, Eko Hotels & Suites, Victoria Island Lagos from July 30th to August 1st 2013 under the Auspices of the Society of Petroleum Engineers (SPE) Nigeria Council.

PREAMBLE
The Nigeria Annual International Conference and Exhibition (NAICE) is a major annual event of the Society of Petroleum Engineers Nigeria Council and the best international technical oil and gas conference in Africa. The event provides a platform for stakeholders in the energy sector including the Ministry of Petroleum Resources, Government parastatals, Captains of the industry, Professionals and the Academia to collaborate, share knowledge and formulate strategic solutions for the advancement of the Oil and Gas Industry towards economic prosperity of Nigeria and the Sub-Saharan Africa.

The 37th edition of the Nigeria Annual International Conference and Exhibition (NAICE) was held from July 30th to August 1st 2013 at the Expo Centre Eko Hotel and Suites Victoria Island Lagos. The event which focused on the theme ‘To Grow Africa’s Oil and Gas Production: Required Policy, Funding, Technology, Techniques and Capabilities, was declared open by the SPE I President Mr Egbert Imomoh. Other dignitaries in attendance at the opening ceremony included Mr. Tony Ogunkoya – SPE African Region Director, the MD of SNEPCo Mr. Chike Onyejekwe, Dr. Emmanuel Egbogah, the former Special Adviser to the Nigeria President on Petroleum Matters and several CEOs of E & P and service companies. Over 50 companies were represented at the event.

The event provided a veritable opportunity for a critical and strategic look at  growing Africa Oil and Gas production including its potential and threat of crude oil theft impact on the socio-economic transformation of the country. It featured 100 peer-reviewed technical paper presentations and provided a platform for direct feedback on the gains, challenges and opportunities occasioned in the industry ten years of marginal field development including benefits of gender diversity to the oil and gas industry.

The conference featured two panel sessions with seasoned discussants, focussing on i) human capital development as an enebler for growing oil and gas resources and ii) the menace of crude oil theft and its possible remedies; one workshop on marginal fields’ development – the first of its kind in the oil and gas industry with five presentations bordering on the critical areas of marginal field development and one leadership session on gender diversity and empowering women leadership in the Oil and Gas sector in Nigeria.

OBSERVATIONS
In the course of proceedings, the conference noted as follows:

Human Capital Development as enabler to Grow Africa’s Oil and Gas

  • By 2050, Africa will have the largest potential workforce in the world, surpassing China and India.
  • Human Capital Development is the underlying foundation in growing Africa’s Oil and Gas, overlain with the right policies, adequate funding and technology.
  • Investment in technological change and continuous development of personnel will drive growth, productivity, wealth creation and social stability at the national and international levels.
  • Special attention should be paid to the development of human capital in technical, artisan, and vocational education to achieve a good development balance between vocational, middle level (technical) and engineering manpower for sustainable economic development.
  • Nigeria should look at how successful countries achieved improved human capital development and adopt the enabling strategies.
  • Africa’s human capital strength in Diaspora can be tapped to increase appropriate scientific research effort in the continent.

Crude Theft: Implications for Nigeria and Possible Remedies

  • Crude oil theft is a national malaise that could cripple the nation if not checked.
  • Daily production loss increased from 94,000 BPD in January 2013 to 386,000 BPD by June 2013 and revenue loss jumped by 42% in 2013 from the 2012 levels. Financial losses to both government and producers resulting from lost production in 2013, is put at about $686m per month.
  • Operating expenditure by companies on security has increased greatly, due to oil theft activities.
  • While there was some noticeable reduction in oil theft in 2010 as a result of the Niger Delta Amnesty program, today, Crude oil theft is executed by well organized armed syndicates who have territorial control.
  • Severe environmental damage is being caused by this activity and the livelihood of community stakeholders is being impacted along with serious health implications.
  • Government should tackle crude oil theft as a matter of urgency to protect investment in the industry and the nation.
  • Investment in technology driven solutions is the key to addressing this problem. Various technology solutions were suggested for consideration, ranging from the simple and proven to the complex and novel.

Women Professional Network Development

  • Women empowerment does not mean giving women power, but providing them with the enabling environment for their skills & capabilities (the power within) to be released.
  • Gender diversity benefits include greater creativity in problem-solving, longer mentoring opportunity, more inclusive, conducive and safer workplace, and a more productive workforce.
  • There exists an invisible barrier, corporate glass ceiling, described as ‘the unseen, yet unbreakable barrier that keep minorities and women from rising to the upper rungs of the corporate ladder, regardless of their qualifications or achievements’.  This has kept women from advancing equally into top leadership positions in the industry and has resulted in women feeling incapable of competing. 70% of women and 57% of men in a recent study of 1200 executives in 8 countries believe that this invisible glass ceiling exists.
  • Statistically, women are less than 33% of the workforce in developing countries, 50% in developed nations, and 55% of students pursuing higher education, 16% of Fortune 500 companies’ board members and 1% of CEOs of Fortune 500 companies.
  • Making it to the top in a male dominated O&G sector requires knowledge, skill, good work ethics, passion, dedication, dexterity, motivation to succeed, character, positive attitude, confidence, teamwork, collaboration and sacrifice on the part of women.
  • Companies with higher gender diversity have increased return on equity and higher earnings.
  • To maintain the most skilled and talented workforce, a business must attract & retain women and men alike.

Marginal Field Development

  • Deployment of low quality standards and the use of poor performing local contractors can result in failure to achieve your corporate targets and objectives.
  • Realistic targets setting, balanced with cautious optimism about the capacity of potential clients and fiscal regime, will improve your financial planning.
  • It is critical to carry out your own independent field studies and reviews, as data from regulatory bodies can be highly inaccurate.
  • Private sector partnership is the preferred option for marginal field ventures.
  • There is urgent need for an industry database of contractors. NCDMB should play a pivotal role in compiling such a database and defining the minimum standards of performance for these contractors. Appropriate sanctions should be built into contracts to guide against poor performance by contractors
  • Bundled contracts, similar to those used in deepwater projects should be avoided, as this tends to drive up costs of marginal fields development.
  • Investing in building transparent sustainable relationships with the host communities yields very good results.
  • Frequent export lines vandalization, poses a huge threat to marginal field operators and could curtail their development if not checked. Fiber optic pipeline surveillance system could help mitigate this vandalization problem.
  • Delays in concluding the farm-out agreements to marginal field operators at the inception, delayed early production.
  • The two major issues facing marginal field operations are insufficient technical know-how and lack of adequate funding. The initial funding mechanisms proposed by regulation did not work out as planned.
  • Ten years after award, only 7, of the 24 marginal field awardees in 2003 are actually producing.
  • Tension between joint awardees of such fields, due to non-alignment of major investment decisions, caused initial delays in the takeoff of these fields. Single awardees made quicker decisions and hence better progress.
  • Marginal field operators must demonstrate good understanding of the field and should be able to prepare quality proposals that would attract funding from bankers.
  • Sound development strategies are necessary to minimize development costs.

RECOMMENDATIONS
Based on the foregoing, the Conference recommends as follows:

  • The focus of Africa’s national planners and policy makers must transform from physical infrastructure development to human capital development as this is the underlying bedrock for increasing Africa’s Oil and Gas production and its economy.
  • Educational curriculum should be redesigned to equip students (human capital) with the necessary tools, that would turn them away from the current certificate frenzy and position them as opportunity entrepreneurs and ‘technopreneurs’, who would apply the knowledge and skills acquired to address their needs and those of their immediate environment.
  • Appropriate and enabling policies are required as incentives for the oil and gas industry to train and develop Africa’s workforce.
  • Recruiting and retaining the female Gender is not a compromise, but a necessary step forward for companies in the oil and gas industry. This can only happen when clear business mandates, vision for diversity, understanding of demographic changes in the workforce, targeted recruitment and casting of broad nets policies are encouraged by the companies.
  • Building relationships with recruiting firms and universities, offering of corporate internships/scholarships opportunities to the female gender, effective retention and competitive wages programs are required to promote female recruitment.
  • SPE Women Professionals (WPs) are encouraged to participate in existing women networks  e.g. Total’s TWICE and Shell’s SWN, to ensure work life-balance and become workplace diversity champions in their organizations
  • The Government should declare pipelines and oil/gas facilities as National Strategic assets by an Executive Order, as has been done successfully in the USA, Israel, Brazil and other nations to safeguard similar assets in these countries.
  • Government must strengthen, enforce and apply existing legislation to deter criminals engaged in these nefarious activities of vandalism and crude oil theft. Growth in this sector can only happen when investors can guarantee their investments.
  • Set aside a special fund to secure crude oil assets and facilities under a Federal Government (FG) cum Industry Joint Initiative. This can be modeled after the United States’ National Infrastructure Protection Plan (NIPP).
  • Consider the application of Horizontal Directional Drilling (HDD) Technology to bury crude oil pipelines 15 – 90ft underneath the earth surface, as this would make it more difficult for any thief to access the underground pipeline, thus providing a secure remedy against oil theft in the Niger Delta.
  • The SPE is ready to partner with the Federal Government in the identification and application of novel, fit- for- purpose technologies to arrest this ugly monster called crude theft.
  • The Governments’ strategy of growing NPDC as a National Oil Company and the policy of increasing indigenous participation in the upstream sector through the Marginal Field Development Program is a step in the right direction.
  • The successful model of SEPLAT (Operator) and NNNPC JV should be encouraged.
  • In awarding marginal fields, it is critical to ensure that the field has proven reserves and that the operators have the requisite knowledge and expertise to manage and exploit the acreage.

 

The Society of Petroleum Engineers would like to express her profound gratitude to all panelists, moderators, sponsors, resource persons, captains of industry, industry professionals, exhibitors, academia and the media for their support for SPE activities & the growth of the oil and gas industry in Nigeria and the African region.

Signed

Mr. Osayande Igiehon
Chairman, SPE Nigerian Council 2012/2013.

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