INDUSTRY Solutions

Challenges facing the Industry

The often severe conditions under which oil & gas is extracted requires high performance solutions that repair and protect concrete from chemical substances, corrosion, fire and deterioration

The development of the oil and gas industry is integral to meeting the world’s constantly increasing energy demands. As the industry explores some of the farthest and most obscure corners of the globe in search of new reserves, Master Builders Solutions experts  offer intelligent construction solutions on an international scale for both on- and offshore oil and gas exploration.

Stakeholders proffer solutions to petroleum sector challenges

Fifty-six years after independence and more than 58 years after Nigeria’s first commercial oil discovery, the sector is still bedeviled by low production level/reserves, militancy and weak regulatory framework. As the country marks its independence, stakeholders in the oil and gas sector have proffered a leeway to resuscitate the country’s dwindling sector. They called on the Federal Government to tackle the issue of militancy in the Niger Delta, reduce contractual circle, strategise means of funding Joint Venture (JV) cash call and others. Proffering solutions to the sectors’ challenges at an oil and gas forum in Lagos recently, Chairman, Oil Producers Trade Section (OPTS), Clay Neff, said it is essential to have efficient and effective regulatory bodies to ensure transparent and timely approval of activities such as permits, licence renewals, projects, and contracts. According to Neff, the government agencies that regulate the petroleum industry often have duplicative and overlapping functions leading to unnecessary bureaucracy. He said that procurement-contracting approvals take up to 36 months, while in many countries similar processes take an average of six months. Neff said there must be a solid tax and legal framework that leads to stable laws and policies in order to attract the required massive investments. He added that it is important for Nigeria to maintain its reputation for honoring contracts. “Businesses need to know with reasonable degree of certainty that contracts and agreements entered into in good faith will be honored, and where disputes arise that there will be access to an independent and fair mechanism for a timely resolution. Neff noted that Nigeria’s huge untapped gas resources could underpin Government’s vision to grow gas production for power generation and to support industrial uses. He stated: “Government policy should be directed at striking the right balance between seeing gas as a catalyst to drive economic development and as a commodity for revenue generation. Chairman, Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, wants government to as a matter of urgency, review the country’s fiscal terms to maintain attractiveness and investment. Okoroafor urged the government to either honour its JV cash calls obligations or convert them to sovereign loans. “Another possible scenario is to reduce government equity in these JVs to 10 per cent and focus more on royalties and taxes, which generate close to 80 per cent revenue for the government. Investors’ confidence in oil and gas activity in Nigeria is eroding within all these frameworks of uncertainty. Investments are moving to countries with better terms,” he added.

He also emphasised the need for the Federal Government should as a matter of urgency utilise the net cash flow to stabilise the oil and gas service industries, provide more credit guarantees, short-term loans and venture capitals to local suppliers and contractors. Okoroafor said oil and gas service industry is dying. “Activity level is at the lowest. Projects have been deferred or cancelled. Service industries that have built capacities and capabilities are laying-off well-trained personnel. “Banks are no longer lending; there is tightened access to capital with decreasing cash flows, highly leveraged companies will struggle as lenders and investors tighten access to capital, limiting their ability to continue exploration and developmental activities. Rig count is at the lowest; well intervention and well completion activities are down to zero level. We should as a matter of urgency review our fiscal terms to maintain attractiveness and investment. Investment goes to friendly environments. Speaking also with The Guardian, the Managing Director of indigenous oil servicing firm, Emval, Valentine Obidi, urged government to focus on creating an enabling environment for businesses to thrive. “There is tremendous industry, drive and resourcefulness amongst Nigerian entrepreneurs, and if we are just provided with the right environment for businesses to thrive then you would see the ingenuity of our people flourish. “There are several areas government could focus on to achieve this but I will advocate for the following two key areas; reduction in size of government as we foster a performance driven culture and removal of bureaucracy in the power sector as we drive power generation, transmission and distribution by providing tax incentives and favorable fiscal terms to investors,” he added. He lamented that the current economic recession is causing limitations and a reduction in the value of the finances of employees and therefore it is affecting businesses. According to him, employees are important to us and when they are doing well it means that there is greater chance that they will provide superior service to our clients. He said that the current situation is also affecting clients’ ability to carry out the necessary work on their facilities that would keep the indigenous firms busier than they are currently. “So it is affecting us in that area as well. In a nut shell when our employees and clients are not faring well financially then it would naturally affect us as well by way of delayed payments, low productivity, high cost of funds and others,” he said.


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