Nigeria 2015 | ENERGY | INTERVIEW

TBY talks to Markus Droll, Vice-President Nigeria & Gabon of Shell Exploration and Production Africa Limited, on Nigeria's production capability, and the growth potential of the natural gas industry.

Markus Droll
During his 27-year career at Shell, Markus Droll, with a background in engineering, has worked in various locations including International Exploration & Production, Netherlandse Aardolie Maatschappij, Petroleum Development Oman (twice), Brunei Shell Petroleum, Shell Global Solutions, EPM/Dubai, Nigeria and most recently Malaysia. His first stint in Nigeria was in 2006 as Vice-President of Corporate Support and then as Vice-President of Technical. He is currently Vice-President Nigeria & Gabon of Shell Exploration and Production Africa Limited.

With over 6,000 km of flow lines and pipelines and about 700 producing wells, the Shell Group is the pioneer and leader of the petroleum industry in Nigeria. How do you see Nigeria's production capability changing in the future?

Nigeria is truly blessed with tremendous resources. There are not that many countries around the world with an oil and gas resource base that is as impressive as that of Nigeria. Hence the foremost challenge for Nigeria is not really technical in my view. It is mostly about having a conducive business and operating environment. There are, and there always will be, opportunities here. What the industry and the regulators need to do is to unlock these opportunities. Nigeria is a challenging place to operate, but it certainly has a resource base that allows some optimism for the future.

What opportunities and challenges are there specifically?

Nigeria is an expensive place to do business because of the security issues we face. Operating in the Niger Delta, both onshore and offshore, requires special precautions and measures that incur considerable expense. Because of that, the costs are higher compared to other places around the world. Another challenge is fiscal stability. What investors need is a sense of certainty. This is a business where investments do not generally provide a return within 12-18 months. Very often, it takes up to 10 or even up to 20 years, meaning investors need predictability in terms of the fiscal environment. Broadly speaking, I would say the economic environment we operate within is crucial in terms of having the confidence to continue to invest. If Nigeria can provide that, there is a considerable opportunity to be had.

What is the strategic importance and potential of liquefied natural gas (LNG) resources for the Shell Group and Nigeria as a whole?

The importance is considerable. Nigeria LNG is one of the largest single LNG plants in the world. It is important for its shareholders, which include Shell, Total, ENI, and the Nigerian National Petroleum Corporation (NNPC), which is actually the largest single shareholder in the venture. Today, the facility accounts for 8% of the global LNG market, which is truly significant. Of course, the rest of the world is growing rapidly in terms of LNG capacity, an example being Mozambique, but elsewhere, too. The world is looking for gas, which is a clean source of energy relative to certain alternatives, and tremendous growth is projected as a result. There are currently six trains in operation at Nigerian LNG, with the potential to work on train seven. This could be a significant expansion as trains built today are larger than those built 10 or 15 years ago, meaning that Nigeria LNG may move from 22 million tons per annum to around 30 million tons given sound investment conditions.

Despite the oil in Nigeria being of the highest quality and relatively easy to drill, many among the largest IOCs are currently retreating from the region and selling their Niger Delta oil fields. How can you explain this trend?

I can only speak for Shell companies in Nigeria, and for us it is part of normal portfolio rationalization. What we are doing in Nigeria with some of the oil blocks that we have put up for sale is simply a consequence of having looked at our portfolio and made a decision that this is an area where other companies can also play. Some can perhaps add more value to it than we can. As with any other business, when that becomes the case, divestment becomes a consideration. It is not a question of a retreat. If you look at how much money the Shell Group is investing in Nigeria yearly, it is still extremely high. We have large projects like Gbaran-Ubie Phase II going ahead. We are looking to push forward on the deepwater projects of tremendous potential. We have a number of exciting deepwater projects, as well as some promising shallow-water schemes that we may develop if conditions are right. As I have already said, there are tremendous opportunities in Nigeria. We are concentrating on those areas we believe we can add the most value in.