How have lower oil prices affected your business?
The effect on LADOL of the fallen—or rather, corrected—oil price has been positive. What happens when the oil price is too high—and I think that over $100 is too high—is that inefficiency and rent-seeking increase, and many agents enter the market that are not adding value. When the oil price corrects, people look to optimize their business strategy, and optimization requires transparency and making wise economic decisions. Fortunately for the oil companies, this correction has come at a time when we have seen unprecedented levels of credible private sector investment in the Nigerian oil and gas industry from indigenous companies like LADOL. We have invested in facilities, equipment, and people, which lower the cost of doing business and also align interests between the oil companies, indigenous private sector and the public sector—enabling them all to contribute positively to their bottom lines while significantly and sustainably boosting the economy. We are making these investments at a time when oil companies need to rationalize their operations, and they are finding that their ability to do so has been significantly increased by developers such as LADOL. It is a win-win situation.
You are building the first domestically constructed FSPO. What is the time line for that project?
We are expecting the FPSO to come into LADOL sometime in the next 12 months. The FPSO has been partially built and integrated in South Korea and it will be finished off at Ladol. However, for subsequent projects, what we are targeting is a 50:50 situations, moving toward 70% local content, hopefully within the next 10 years. This is a gradual process that has been initiated by the construction and operation of this facility. The damage done to our economy by not having FPSOs integrated onshore in Nigeria is vastly underestimated. This new facility is a real game-changer. If you are spending tens of billions of dollars developing a new oil block and the key components never touch land in your own country, local content is never going to be more than 5-10%, and even that 5-10% will not be creating sustainable jobs. Hosting the FPSO in Nigeria means that we are now telling all companies involved in the development that they must set up significant operations in Nigeria. When people start to do that, they think about what makes sense in the medium-to-long term. This is about returning the market to sanity and long-term growth. Every country that has successfully deployed a local content strategy has reduced the cost of oil and gas in that country, both on the development and on the operational sides.
What is your opinion of the PIB restructuring and attracting new investment?
The PIB was becoming a red herring. It was something that nobody understood, yet it was being used as an excuse for not making billions of dollars of investments. The Nigerian National Petroleum Corporation (NNPC) needs to be restructured into some sort of private organization that has its functions split between the business of being an oil and gas company and the functions it has as an industry regulator, similar to what happened with PETROBRAS. It does not require a petroleum industry bill to do that. Those changes need to happen, one way or another; they will benefit the oil companies and Nigeria. Breaking it up into smaller pieces of legislation would make it easier to pass and we hope this will happen. Nonetheless our main wish is that the government finds a way to make it less of an issue by making moves now to increase transparency and privatize some of the JVs and PSCs—in essence replicating the NLNG model that has been successful. While we have been debating the PIB, people should not forget that Total invested in three new offshore blocks, and Shell has made it clear that they are prepared to go ahead with Bonga South West irrespective of the PIB.