CLEAR GUIDANCE

Nigeria 2018 | ENERGY | INTERVIEW

TBY talks to Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources, on efforts in the downstream segment, overcoming the flaring issue by 2020, and developing local content.

Emmanuel Ibe Kachikwu
BIOGRAPHY
Emmanuel Ibe Kachikwu is the present Minister of State for Petroleum Resources and Chairman of the Board of the Nigerian National Petroleum Corporation (NNPC). Preceding his nomination and confirmation, in 2015 he was appointed to the position of Group Managing Director of the NNPC. Kachikwu served as President of OPEC in 2015, President of the Gas Exporting Countries Forum (GECF) in 2016, and President of the African Petroleum Producers Association (APPA) in 2016. He holds a master’s in law and a PhD from Harvard Law School, where he was the best graduated with distinction. He also has a higher diploma from Georgetown, US.

How can Nigeria overcome the issue of relying on the imports of finished products?

The government is extremely committed to having as much processing of crude oil as possible within Nigeria, and we hope to reach a point in the medium term where we can start to export products. Our strategy is to repair our existing refineries and encourage new investment in refining by the private sector. We see great interest in modular refineries and have also received at least four proposals for large-scale refineries to be established here. We have enough production to support this, although we expect production to increase. We project new refining capacity of about 50,000bpd added to the current capacity and the existing refineries to be up and running within the next two years. If we add the revamped refineries, we should have enough to respond to our domestic needs. As for exports, that will likely take several years, when other refineries start production.

What are the ministry's views on gas flaring and monetizing gas?

This government has come up with clear policies toward flare gas monetization and flare gas elimination. We have taken a holistic view; we want to provide third parties that have the technical commercial solutions with access to the flares. There are about 700 million scf of gas that is being flared daily, making Nigeria the sixth-largest flaring nation in the world. If we can capture some of that gas flaring, we can use that for power production and industrial use. In addition, the government has committed in the Paris Climate Change Agreement to nationally determined contributions toward the reduction of greenhouse gases. For the petroleum sector, our commitment is to eliminate gas flares. To this end, we have designed a comprehensive program called the Nigerian Gas Flare Commercialization Program through which we want to make sure that the flare issue is behind us by 2020.

What is the role of Nigerian National Petroleum Corporation (NNPC) in developing local content and talent?

If the experience did not come from international oil companies (IOC) then it came from NNPC. Agreements between NNPC and its partners require localization. It has worked reasonably well, though there is still room for improvement. Now that we have the Nigerian Content Monitoring Board, this will help even further. Nigerian content is improving. We now have a strong regulator that is reasonably independent and will strengthen that system. There is still a large amount of technology developed internationally as it is an international industry; however, we have Nigerians working all over the world in industrial sectors and the international oil economy. That could flow back if we have a better managed industry. As the industry broadens, we expect to see more Nigerians coming back and getting involved. We are building strong Nigerian upstream companies.

What are some of the challenges companies in oil and gas will face in the coming months?

It is important for upstream that we have clarity around the fiscal regime and that works both for the government and investors in the upstream. There is no policy until we actually implement fiscal policy and the earlier we implement it, the more clarity one has because it affects investment decisions. For service contractors, and even in upstream, efficiency in contracting will also be a major issue that we have to work on so that decision-making can become quicker and costs are lowered. The way that we project costs for projects is an issue for us currently on the government side. We expect tighter rules around cost management and cost containment, which will have an impact on the service level. Service providers must now be more efficient and competitive, because if we put more pressure on the upstream to be efficient cost wise then they have to put pressure on service providers to also be competitive and efficient.