Operators in Oil, Gas seek fresh funding strategy

The collapsing price of crude oil in the international market is adversely impacting on local operations, as the shortfall in joint venture funding, resulting from the slump, is persuading operators in the oil and gas sector to seek fresh funding strategy with the Federal Government (FG) to bridge the  gap on the existing projects.

This was the submission of the joint venture partners of the Nigerian National Petroleum Corporation (NNPC) who spoke during a panel session at the ongoing Nigeria Oil and Gas (NOG) conference in Abuja, with the theme; “Effective solutions driving industry change, costs, lead time and projects.” 

Elizabeth Proust, managing director of Total Upstream Companies in Nigeria, said that the industry was facing a difficult time that requires  government and the operators to engage in talks on the way forward.

“We have reason to be optimistic. We operate in an industry which can adopt and adapt very quickly. We need to be prepared to face, maybe, a long period with this level of price. It is not a short term impact, it is a long term impact that we need to be prepared for.

“In the oil industry, we have to first preserve predictions, this is important because we need to preserve most of our work programmes. We look at the future and all the companies are reviewing their business plan.

“ We need more business for our new projects, and to be sure that we have the funding and the financing, and that we have also optimised these projects and can survive the long period of high level of expenditure,” Proust said.

She also stated that the oil companies had to be sure of the fiscal environment to be able to take the risks, adding that they also needed to discuss with the government, because exploration was the backbone of Nigeria.

“We need improvement in regulations, efficiency in the tendering process and favourable fiscal terms that will make new investments attractive not only to existing operators but for new investors also,” she added 

Osagie Okunbor, the new managing director of Shell Petroleum Development Company (SPDC) and Country Chair for Shell companies in Nigeria, said there was need for the operators and government to negotiate, as most of the projects for 2015 had been agreed on before the drop in oil price.

“With all the uncertainties around, this is hardly the time for parties on the government and industry sides to be doing things differently. We need to come together and agree on priorities we have.

“We all have a programme that we have agreed for 2015; most of that essentially started before this radical drop in prices. So, both sides need to sit together and say what is the impact of this or what do we sensibly do, going forward, such that we don’t get into the business of stopping projects half-way and we end up incurring more cost,” he said.

He further observed that because they were in joint venture with the government, they needed to have collaborative shared vision on ways of going about this.

“That will ensure that we achieve the best we can under the difficult circumstances without panicking or taking irrational decisions,” he said, adding that  other critical areas that require urgent action in Nigeria were the lead time in renewal of expired licenses to oil leases and proliferation of regulatory agencies.

“If the basic issue of tenure of oil licenses and renewals is not resolved, no shareholder will agree to commit investment, especially at this period of lower oil prices,” he said.

In his own contribution, Nolan O’Neal, managing director of ExxonMobil companies in Nigeria, said that the tendering process was long in Nigeria compared to other places and that had affected project timelines and delivery.