NIGERIA. INDIGENOUS OPERATIONS Freedom and openness have created a more level playing field
Local producers take on the oil giants

Dominant multinationals like Shell have learned to co-operate with indigenous firms

Nigeria’s intentions to develop its energy sector include the establishment of a thriving and prosperous indigenous business community that ia able to compete with the international players in the country.
Oil production remains dominated by companies such as Shell, Chevron, Mobil, Agip and Elf – which account for some 95 per cent of the country’s crude output – but there is nonetheless a change in the air.
Though the indigenous oil industry is still in its formative stages, local firms have taken great strides in recent years to make their mark in an industry dominated by foreign multinationals.
It includes a number of local firms pumping oil both onshore and offshore, as well as support from home-grown engineering and service providers.

Many of these small, privately-owned local companies – the likes of Consolidated Oil, Dubri Oil, Atlas Petroleum, Moni Pulo – have big ambitions for the future.
The Nigerian Association of Indigenous Petroleum Explorers and Producers (NAIPEC) was established in 1992 to represent the interests of these domestic upstream oil producers.
As well as providing a co-ordinated industry voice, the Lagos-based organisation lobbies government to improve the operating environment for local firms so they are able to compete more effectively with the big names.

‘They have learned to accommodate’ Florida Okunowo

NAIPEC’s Florida Okunowo is a strong supporter of any moves that enhance the profile of the indigenous oil sector.
She says it was the government’s initiative back in the early 1990s that provided the spark for the development of the industry, but believes that Abuja must continue to nurture the sector and provide the necessary incentives to make it viable in the longer term.
“The image I would like to see Nigeria project is that of a country that manages its abundant natural resources very well,” she says. “A country that is willing to encourage its citizens to take part in managing its resources successfully with no hindrance.”

Domestic companies now produce five per cent of hydrocarbons

The government’s policy, driven by the desire for Nigeria to capture a larger share of the benefits of its oil and gas resources, has paid dividends. But Ms Okunowo believes indigenous operators have a bigger role to play in contributing to the development of the hydrocarbons sector.
“Within a space of 10 years, they have contributed about five per cent,” she says. “The production of the indigenous companies is actually five per cent of the total national hydrocarbon production. With the vision of 2010, however, it could go up to 10 per cent.”
Certainly prospects for local firms have improved with the advent of democracy, which has brought greater openness and transparency to the sector, creating a more level playing field.

Yet key technical and financial constraints remain for many local firms, underlining the need to forge business relationships with experienced players from abroad.
Ms Okunowo says that initial scepticism among the multinationals has now largely disappeared and there is a greater willingness to co-operate.
“Initially they were not too receptive of the emergence of the indigenous companies. They felt threatened somehow,” she says. “But as time went by the multinational companies knew that we were serious and they have learned to accommodate us. The cooperation wasn’t that warm, but with the passage of time it is getting better and they have now learned to work with us.”

There has been significant progress in opening up marginal oil fields for development – smaller known fields deemed uneconomic by the majors – and there are new moves into Nigeria’s deepwaters, an even greater challenge for these small independents.
A number of the more ambitious indigenous firms are also moving overseas into less-developed oil states such as Equatorial Guinea, to the south of Nigeria.

‘Internalising the wealth created here’ Joe Obiago

Joe Obiago, managing director of Global Energy Company, a Nigerian oil services firm, says that his company is now one of the leading sub-Saharan African players, not just in Nigeria, but also in Angola, Congo and other key energy nations.
The company boasts in-house specialists in geoscience, engineering and other oil-related disciplines and is in keen demand along the oil-rich west coast of Africa.

Mr Obiago, a former banker, knows only too well the importance of establishing a local oil sector. The figures are stark. Of an annual spend by the multinational oil producers exceeding $6 billion, just five per cent accrues to local companies.
“The biggest issue today for us in industry is how to internalise the wealth that is created here in Nigeria,” he says.
But there lies both the problem and the opportunity. Nigeria must first invest in its own capabilities before it can hope to secure a bigger slice of the technology-driven oil and gas industry.