It is a great pleasure and honour to be here to give the keynote address at this year’s NAPE International Conference and Exhibition. This annual conference has always been a platform for industry professionals and stakeholders to share best practices and exchange ideas on how to move our industry forward.
Chevron Nigeria Limited, welcomes opportunities such as this to engage in dialogue and collectively offer sustainable solutions to issues affecting the energy sector of the Nigerian economy.
This year’s theme, A Roadmap for Nigeria’s Oil and Gas Industry in a Diversifying Economy, provides an opportunity for us to further enhance the conversations on how to sustain reforms in the industry and maintain stability in an increasingly challenging, complex and competitive global energy environment. It also presents a unique opportunity to discuss the significant role of the oil and gas industry as a catalyst for economic diversification, growth and developmentof Nigeria.
The Nigerian Oil and Gas Business Environment
In the last two years, the oil and gas industry has continued to experience difficulties in light of persistent low oil prices, a phenomenon that continues to generate global socio-economic impact. Following the fall of crude prices in 2014, and the resulting recession in the Nigerian economy, it has become imperative that we evolve ways to manage the situation. As an Industry, we must challenge our cost structure and eliminate obstacles that directly or indirectly introduce unwanted cost premiums in doing business. We must take steps to increase efficiency in what we do and do more with less funding. We must continue to challenge all expenditure to ensure we get maximum value for every dollar or Naira spent. Each key player in the oil and gas industry must look inward and identify resource saving measures, opportunities for collaboration, efficiency and optimized operations to save costs. The more viable our business, the more we contribute to the economy!
Amidst all these challenges, the security within the Niger Delta needs to be addressed. We are thankful for efforts by the Federal Government of Nigeria to engage in dialogue with leaders in the Niger Delta and we expect that in the foreseeable future the environment will become more secure for business and for oil and gas activities to thrive. To sustain oil and gas production at required levels, security issues will have to be given priority attention.
Significant progress has been made with regards to funding. Recent successes in ‘Third Party Funding’ for some projects have resulted in increases in production volumes. While low oil prices continue to challenge projects in the pre-FID phase, Third Party Funding allows projects with good economics to progress. It is working and it is a successful funding model.
The efforts of the Nigerian government and our Joint Venture (JV) partner in addressing JV cash call arrears must also be commended, as they will help to stimulate growth and improve investment in the industry. While we commend these efforts, we ask that as government develops the new oil and gas fiscal policy that they ensure the terms are globally competitive. When fiscal regimes are competitive, investors will invest and when investors invest there is more oil and gas revenue, and this will have an impact on job growth and new business opportunities throughout Nigeria’s economy.
Economic Recovery and Growth Plan (ERGP)
In February 2017, the Nigerian Government rolled out the Economic Recovery and Growth Plan (ERGP). The plan is a medium-term plan covering 2017-2020, broadly targets economic recovery, human capital development and the growth of a globally competitive economy to achieve sustained diversification and inclusiveness.
The incremental reform measures have started to yield results. According to the World Bank Ease of Doing Business Report(2018),which captured the performances of 190 countries across the globe, Nigeria ranked 145th, moving up 24 places. Nigeria has also been ranked one of the top 10 most improved economies in the world. While these early successes must be acknowledged, it is imperative that the focus on every opportunity to improve efficiency; reduce waste and remain globally competitive. Some of the critical focus areas are:
- Continue to drive initiatives in effective utilization of the nation’s abundant gas for achieving the goal of energy security
- Enact fiscal terms that encourage the development of small to mid-sized assets/reservoirs as well as non-associated gas fields.
- Establish a competitive Deepwater gas fiscal framework
- Support and enable ‘willing buyer – willing seller’ gas pricing model
- Develop and communicate strategy for legacy payments for gas sold to the domestic power market
Reserve Replacement/Growth and Frontier Exploration
Since I am talking to a room full of Explorationist, you already know that Nigeria still has significant opportunities to find new oil and gas resources. The industry has an opportunity in rejuvenating old frontier basin exploration, to discover impact resource additions for strategic reserves replacement and growth. These could be achieved through Regional Geological Assessment of the Niger Delta basin; new thinking and technology in seismic acquisition and seismic processing; Deep drilling and Prospecting, as well as Cost-efficient future developments.
It is evident that there is significant unpenetrated and undiscovered hydrocarbon resource and reserves just below existing infrastructure. Average drill depth below mudline in the Niger Delta is approximately 10,000 to 12,000 feet. We therefore need to build a robust inventory of drill ready prospect portfolio in readiness for more favorable oil price and globally competitive fiscal policy.
NAPE’s Role in achieving Oil and Gas industry objectives
NAPE has always played a pivotal role in the cross-pollination of ideas and exchange of best practices. We must recall that NAPE championed the discourse that helped to drive policies and reforms such as Nigerian content and marginal oil fields development. NAPE is well-positioned to encourage industry-academia collaboration for local research and development and provide a platform for the articulation of ideas that will help advance the Oil and Gas industry and the nation’s economy.
Chevron Nigeria Limited’s Commitment to Sustained Production and Gas Development
For us at Chevron Nigeria Limited, we have continued to sustain efforts towards delivering Exploration and Production projects and activities as well as making significant investments in gas projects. Our accomplishments in this regard include:
- $1.2 billion-dollar gas and condensate project scope that include drilling, major rig workovers and associated facilities
- Two rigs running in our JV operations–in offshore and onshorefieldswith32 wells drilled and completed to date.
- Sustained high quality gas supply to the domestic market and commitment to Nigerian Government’s efforts to monetize liquid rich gas reserves.
- Reduction of routine flaring by over 90% from 2008 to 2017
- Significant Nigerian content development and utilization: We believe that diversifying the economy also entails capacity development for Nigerian businesses. At Chevron Nigeria Limited, we have helped in building the capacities of several Nigerian businesses by by working closely with the companies to build their capabilities and to ensure they could deliver the substantial scope of work that was needed for our major capital projects. We do this, not just because it is required by the law, but because it is the right thing to do and in the long run the companies will be able to deliver services at a more competitive price. In fact, Chevron had already established its Local Community Content policy before the enactment of the Nigerian Oil and Gas Industry Content Development (NOGICD) act.
Distinguished ladies and gentlemen, there is no doubt that Nigeria is set on the path of steady growth and development. The Economic Recovery and Growth Plan provides a framework for diversifying the Nigerian economy. The Oil and Gas sub-sector has and will continue to support the efforts of the government to grow the economy, but there are opportunities to achieve even more by improving existing processes, such as the contracting process , and sustaining value creation through innovative technology.
For us in Chevron Nigeria Limited, we are proud to be partners with the Nigerian government to actualize progress in Nigeria’s oil and gas sector and we have been active in the country’s upstream energy business for over 50 years. We will continue to engage in lasting, collaborative partnerships with the relevant stakeholders to effectively increase Nigeria’s global competitive edge in the energy equation.
Once again, let me thank the organizers of this conference for the opportunity to give this keynote address. I wish you fruitful and robust deliberations throughout the duration of this program.
Thank you for your attention
.Excerpts from Keynote Address by Jeffrey Ewing, Chairman & Managing Director, Chevron Nigeria Limited at the Opening Ceremony of the 2017 Conference & Exhibitions of the National Association of Petroleum Explorationists on Tuesday, November 21, 2017.