The Energy Year talks to Engr. Sarki Auwalu, director and CEO of Nigeria’s Department of Petroleum Resources (DPR), about how the country is strategically implementing OPEC-mandated production cuts and the unprecedented co-operation among industry stakeholders to fight the pandemic. DPR is the regulatory body for Nigeria’s oil and gas industry.
How has DPR managed to ward off some of the negative impacts of Covid-19 on Nigeria’s oil and gas industry?
The president and government authorities have rolled out a wide range of policy directions in response to the pandemic. DPR has put a lot of new directives and initiatives on trial over the last two months to protect the country’s oil and gas operations because the pandemic came at a time when the local industry was about to kickstart some major developments.
Starting in March, we have issued at least four industry circulars on management of Covid-19, which highlighted measures such as social distancing, curfews, modified work processes, use of online resources and electronic media to support operations, as well as curtailment of the workforce at project/construction sites, all in line with federal government’s directives.
This circular on workforce management at offshore/remote locations has changed the work schedule for offshore personnel from a 14-day, on-off cycle to spending 28 days offshore and having to stay 14 days in quarantine before embarkation and other variants thereof. If necessary, these periods can be further extended upon evaluation on case-by-case basis.
These actions have been effective so far. We recorded only a couple of new Covid-19 cases among platform and plant workers, and we have had zero fatalities within the industry thus far. Drilling, well intervention and production activities are continuing without disruption, and we have not had any shutdowns or even a single incident. DPR enhanced collaboration with relevant state authorities and issued special permits to ensure that industry workers are able to move to locations unhindered.
We continue to encourage mutual collaboration among industry players. All of our licences are being issued online and our directives are also accessible online. Similarly, our meetings, technical reviews and evaluation exercises with industry players, including some inspections that do not require physical presence, are being conducted through various online platforms. Those that require physical presence and are not critical have been delayed until the situation improves.
We are also constantly working on improving the general industry guidelines on operations in remote locations during the pandemic. If one looks at Nigeria’s oil and gas industry, there are a lot of remote locations, and these locations are easily vulnerable to Covid-19 and have to be protected to safeguard the health of personnel and continuity of operations. DPR created a situation room that is fully dedicated to COVID-19 response, and we have been using enterprise resource planning tools to monitor and sustain operations within the industry.
This situation room includes all of DPR’s operations controllers and heads of departments, and we pretty much work 24/7. We have meetings every morning to discuss the latest updates and see what new measures must be taken to protect people and operations. We also invite all industry stakeholders to join our situation room talks and share the lessons they have learned. We must continue monitoring the situation on a daily basis to provide the leadership the industry needs during this precarious time.
What steps has Nigeria taken in response to the unprecedented oil production cuts made by OPEC and its allies?
The falling global oil demand caused by a slowdown in most economies around the globe has negatively impacted crude oil price. In response to OPEC’s directives to deliver oil production cuts, Nigeria has accepted the reduction and is implementing the volume cuts.
However, we did ask ourselves whether it was a commercial volume or a volume that has yet to be extracted. In any case, we decided to reduce our production in areas that come with higher cost-per-barrel and maintain production volume in fields that can be developed at lower costs. This approach has allowed the country to establish an equilibrium with respect to income as opposed to applying the reduction equally across all our producing assets.
Over the past two months, we have seen sharp drops and increases across the global industry, but we have pretty much managed to maintain consistency in terms of the country’s production, which include condensate that is not subject to OPEC cuts.
What initiatives have the country’s key stakeholders and DPR implemented to confront Covid-19?
Many of the industry players have been giving back to fight Covid-19 and donating to the federal government and state authorities as well as local communities. Some have contributed to building isolation centres and are exploring various ways to help the populace combat the pandemic.
The most difficult challenge we all face is community transmission. Once that starts, Nigeria’s health sector can easily be overwhelmed. We studied the statistics in every major city across the globe, and it is imperative that countries take preventive measures to stop community transmission of Covid-19.
DPR and the NCDMB [Nigerian Content Development and Monitoring Board] have come together to attack Covid-19 rather than react to it. We have realised that we need to start the mass disinfection of our cities, most of which are densely populated. Combatting Covid-19 by applying mass disinfection practices can help us stop the spread of the pandemic instead of dealing with large groups of internally contaminated people.
We will soon embark on this ambitious programme, focusing first on the linear cities that are used for transportation of food and emergency shipments to communities. These cities are greatly exposed and can easily become epicentres of the pandemic within the country. We have so far received some good responses on this initiative, and our goal is to get at least 20 trucks with sufficient chemicals for the next six months to spray disinfectant through the cities of Lagos, Abuja, Port Harcourt, Kano and many others.
How has collaboration among all levels within the industry accelerated to combat Covid-19?
The collaboration between the country’s key stakeholders has been very productive so far. We are all working towards finding the best solutions, and it is only when we overcome this challenge that the industry can be stable again. Thanks to digitalisation, we have been able to maintain production, as well as continue to maintain export and import. We achieved everything we wanted to achieve to stabilise the industry; however, we have yet to get to the end of the battle and win the war.
We do not know if the pandemic will reset and whether there will be a second or third wave. With the easing of the lockdown, one can see the number of cases rising again, so we must carefully monitor the statistics to see how the easing of restrictions will affect Lagos, Abuja and indeed other cities.
In the downstream sector, trucks are leaving Lagos every day to deliver petroleum products to other parts of the country, and that is an area we have to protect. We have been checking the daily movement of every truck and making sure that all drivers are protected. Because of these strict directives in place, we have so far been able to reduce the underlying transmission patterns of Covid-19.
Combatting the pandemic has really been an “all-hands-on-deck” effort, including all licence/permit holders, IOCs, indigenous companies, industry workers, unions and associations. This is the first time the entire industry has really been acting as one. We enjoy working together and we are taking a holistic approach to understand what more can be done going forward.
What message would you send to international companies that will have to make hard decisions about where to invest post-Covid-19?
The world needs to know that Nigeria is more of a gas province than an oil province. Our proven gas reserves have increased to 203 tcf [5.75 tcm], and gas is without a doubt the future source of the world’s energy needs. The signing of the Nigeria LNG Train 7 EPC contract is a clear testimony to the country’s huge undiscovered gas potential. We have great in-country capacity and potential for gas-based industries that need to be developed.
The three critical projects that will put Nigeria on the map of global gas developments include the domestic gas transmission hubs – the OB3 [Obiafu-Obrikom-Oben] and AKK [Ajaokuta–Kaduna–Kano] gas pipelines – and the Nigeria Gas Expansion Programme (NGEP). All of these undertakings will be game changers, not only for Nigeria’s economy but the global gas market.
The volume of gas that will pass through the OB3 and AKK pipelines will create opportunities to further strengthen our local energy value chain. NLNG Train 7 will take us from producing 22 million tonnes per year of LNG to 30 million tonnes and will increase our production by 35% along with our competitiveness in global market.
At the moment, there are only a handful of world-class petrochemicals companies in the country. These three projects will not only allow for the expansion of gas-based industries but will cater to Nigeria’s immense internal market potential. Virtual pipelines will be used to make sure gas will get to all remote locations of the country. Nigeria has over 40 million households that require energy to survive, and gas is the easiest and cheapest source of energy out there.
Despite the current global economic turmoil, Nigeria’s energy industry has been making significant progress, and there is no doubt that the country will offer massive potential to international investors. We firmly believe that our country will continue to add significant value to the ecosystem of the global energy industry.