CHALLENGES FACING INDIGENOUS OIL COMPANIES IN NIGERIA: INSIGHTS FROM PENGASSAN LEADERSHIP
Overview: The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, recently addressed concerns regarding the financial capabilities of indigenous oil companies to manage assets acquired from international oil companies (IOCs). His comments were made during a press conference in Lagos following an energy summit.
Key Points:
1. Financial Inadequacy: Osifo highlighted that many indigenous oil companies lack the financial strength necessary to fund the assets they purchased from IOCs. He provided examples of companies that acquired these assets but have struggled to maintain and operate them effectively, resulting in job losses.
2. Impact of Divestment: While divestment from IOCs is intended to enhance local capacity in the petroleum sector, the reality is that many local companies cannot manage these assets properly. The consequence of mismanagement has led to depletion of resources, as some companies are unable to meet their financial obligations, such as cash calls.
3. Case Studies: Osifo referred to specific instances where companies that purchased assets from Shell and other IOCs faced operational difficulties. He noted that some were even taken over by the Nigerian National Petroleum Company Limited due to their inability to manage the fields.
4. Capital-Intensive Nature of Oil and Gas: The oil and gas industry is described as a “petrodollar business” that requires substantial capital investment. Osifo pointed out that the scale of investment required for projects can be astronomical, citing TotalEnergies' investment of $16 billion for a single field—an amount that exceeds the capital capabilities of most Nigerian banks.
5. Access to Funding: Unlike indigenous companies, IOCs like ExxonMobil have access to international funding due to their established partnerships and listings on major stock exchanges, enabling them to attract significant investment. Osifo expressed skepticism about local companies’ ability to secure similar funding, particularly from major financial institutions like Bank of America or Bank of China.
6. Regulatory Support: PENGASSAN supports the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in its efforts to scrutinize prospective investors before they enter the oil and gas sector. The NUPRC aims to ensure that only financially capable companies are allowed to operate, which is critical for the proper maintenance and enhancement of oil fields.
7. Job Creation vs. Retrenchment: Osifo stressed the importance of successful local companies in creating jobs for workers, which directly benefits PENGASSAN and its members. He warned that if local companies continue to struggle and underperform, they may resort to retrenchment, negatively impacting the workforce.
8. Call for Proper Oversight: The union is advocating for more stringent regulations during the divestment process to ensure that assets are sold to capable and responsible buyers, rather than political affiliates.
This oversight is crucial for safeguarding the interests of the workforce and the sustainability of the industry.
Overview: The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, recently addressed concerns regarding the financial capabilities of indigenous oil companies to manage assets acquired from international oil companies (IOCs). His comments were made during a press conference in Lagos following an energy summit.
Key Points:
1. Financial Inadequacy: Osifo highlighted that many indigenous oil companies lack the financial strength necessary to fund the assets they purchased from IOCs. He provided examples of companies that acquired these assets but have struggled to maintain and operate them effectively, resulting in job losses.
2. Impact of Divestment: While divestment from IOCs is intended to enhance local capacity in the petroleum sector, the reality is that many local companies cannot manage these assets properly. The consequence of mismanagement has led to depletion of resources, as some companies are unable to meet their financial obligations, such as cash calls.
3. Case Studies: Osifo referred to specific instances where companies that purchased assets from Shell and other IOCs faced operational difficulties. He noted that some were even taken over by the Nigerian National Petroleum Company Limited due to their inability to manage the fields.
4. Capital-Intensive Nature of Oil and Gas: The oil and gas industry is described as a “petrodollar business” that requires substantial capital investment. Osifo pointed out that the scale of investment required for projects can be astronomical, citing TotalEnergies' investment of $16 billion for a single field—an amount that exceeds the capital capabilities of most Nigerian banks.
5. Access to Funding: Unlike indigenous companies, IOCs like ExxonMobil have access to international funding due to their established partnerships and listings on major stock exchanges, enabling them to attract significant investment. Osifo expressed skepticism about local companies’ ability to secure similar funding, particularly from major financial institutions like Bank of America or Bank of China.
6. Regulatory Support: PENGASSAN supports the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in its efforts to scrutinize prospective investors before they enter the oil and gas sector. The NUPRC aims to ensure that only financially capable companies are allowed to operate, which is critical for the proper maintenance and enhancement of oil fields.
7. Job Creation vs. Retrenchment: Osifo stressed the importance of successful local companies in creating jobs for workers, which directly benefits PENGASSAN and its members. He warned that if local companies continue to struggle and underperform, they may resort to retrenchment, negatively impacting the workforce.
8. Call for Proper Oversight: The union is advocating for more stringent regulations during the divestment process to ensure that assets are sold to capable and responsible buyers, rather than political affiliates.
This oversight is crucial for safeguarding the interests of the workforce and the sustainability of the industry.