STRATEGIC OPPORTUNITIES IN THE NIGERIAN OIL/GAS SECTOR -1
INTRODUCTION - THE NIGERIAN OIL & GAS MARKET SCENARIO
The current trend in Nigeria is that a lot of International Oil Companies (IOCs) are moving offshore due to the
following:
 More favourable fiscal incentives for offshore exploration/production.
 Strategy to avoid community related issues/challenges.
 Low level of exposure to militancy (but some issues with piracy exists though abating).
 Relatively larger oil and gas reserves/finds.
 Low level of local competition due to inadequate expertise/funding/technology in this terrain.
 Utilization of mobile/movable production and offloading facilities, which can be deployed to other fields
when the current one is depleted, as opposed to fixed production/offloading facilities, jetties, associated
sea depth, silting and dredging challenges.
In view of the above, we have of recent witnessed a lot of IOCs selling off onshore assets to indigenous
companies (E&P) and investing more in offshore assets which previously attracted lower investment interest,
due to the volume of funds/technology required. With the current trend for preference of investing offshore, by
the IOCs (International Oil Companies) in Nigeria, particularly the on-going/proposed development of major
offshore fields e.g. Bonga South West/Aparo - $10 Billion, Zaba-Zaba - $13.5 Billion (other proposed assets for
further development are Bosi, Bonga North, Erha North, Usan, Oge, Nsiko, etc.) between 2020 and 2025 (over
$70 Billion in offshore investments, is projected between 2020 and 2025), the demand for Offshore
Pipelines, FPSO/Semi-submersibles/Drillships, Drilling Barges, Workover Rigs, etc., are headed for a major
increase.
Another evolving trend is that NNPC (National Oil Company) and its exploration subsidiary – NPDC have
woken up to the realization that they may not be able to fund their share of development costs for their oil and
gas assets solely thus, have opened up to the possibility of partnering with the private sector via Financial &
Technical Service Models/Agreements, to fund their portion of cash-calls or to further develop their existing
oil and gas assets (many of which are drilled and proven but yet to be produced and/or optimized). Also, they
are open to Alternate Funding Models/Arrangements to finance other key projects.
SOME SPECIFIC STRATEGIC EPC POSSIBILITIES
In view of the above, we may wish to consider the emerging EPC opportunities in the Nigerian Gas sector as
follows:
1. INVESTMENT IN THE 7 CRITICAL GAS DEVELOPMENT PROJECTS (7CGDP) OR
ASSOCIATED/FLARE GAS COMMERCIALIZATION:
Firstly, some major emerging opportunities in respect of the Seven Critical Gas Development Projects
(7CGDP) scheduled to deliver about 3.4 billion standard cubic feet of gas per day, on an accelerated basis, to
bridge a projected medium term gas supply gap, are being planned by NNPC/NPDC.
Delivering the paper “The Nigerian Oil Industry in a World of Changing Energy Supply: Are We
Prepared?” at the annual Society of Petroleum Engineers’ Oloibiri lecture series, The Ex-Group Managing
Director of NNPC - Dr. Maikanti Baru who was represented by Engr. Bello Rabiu – Ex-Chief Operating
Officer, Upstream Directorate NNPC, disclosed that the 7CGDP would be executed aggressively on a sustained
level.
The proposed 7CGDP includes the development of the 4.3 Trillion cubic feet (TCF) Assa North/Ohaji South
field (this particular proposed project seems already committed), development of the 6.4 TCF Unitized Gas
fields (Samabri-Biseni, Akri-Oguta, Ubie-Oshi and Afuo-Ogbainbri) and the development of 7 TCF NPDC’s
OML 26, 30 &42. Others include; development of 2.2 TCF Shell Petroleum Development Company (SPDC) JV
Gas Supply to Brass Fertilizer Company, cluster development of 5 TCF OML 13 to support the expansion of
Seven Energy Uquo Gas Plant and the cluster development of 10 TCF Okpokunou/Tuomo West (OML 35 &
62).
He informed that the anticipated rise in domestic gas demand to about 7 Billion Scf/d (standard cubic feet per
day) which is envisaged to outpace gas supply development trajectory, necessitated the urgency for NNPC to
identify short, medium and long term gas resources to bridge the huge supply gap.
The above strategic projects would have massive gas processing plants and pipeline EPC components. These
EPC opportunities could be discussed with NNPC.
2. EPC FINANCIAL & TECHNICAL SERVICE AGREEMENT WITH NNPC/NGMC:
Secondly, Nigerian Gas Management Company (NGMC) being a key industrial gas supplier and major owner
of gas infrastructure is saddled with enormous responsibilities to meet the industrial gas needs of industries/
projects in Nigeria. Due to insufficiency of funding, particularly in relation to the urgency to deliver critical gas
projects, there exists EPC project opportunities based on Alternate Funding Models/Agreements to
partner/support NGMC’s project dreams.
An EPC contractor may wait to bid for jobs when advertised or elicit to be pro-active by offering preferential
transactional terms to NNPC/NGMC, to encourage them to consider the EPC contractor on a Single Source
EPC Contract Basis. Proposed project models would allow for project cost recovery under an Alternate
Funding Agreement, for NNPC/NGMC/NPDC/IOCs access to gas processing capacity and/or providing
pipeline infrastructure/services via the following suggested options amongst other possibilities:
 Tolling Fee Project Model (e.g. pre-agreed gas processing fees per 1,000 scf (Mscf) of raw/rich gas
processed on behalf of NNPC/E&P Companies or for providing pipeline feedstock through-put
capacity/services).
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Project Finance Model (e.g. NNPC provides about 20% - 30% of proposed project cost while, your
EPC Project Consortium provides 80% funding to complete the project, with the outstanding 80%
Contractor Finance component, repaid under pre-agreed arrangements).
Cost Recovery/Profit Share Model (turnkey project costs are recovered and resulting profits shared in
pre-agreed ratios between project stake holders).
BOT OR BOO Model (Operation of a Build-Operate-Transfer Model or a Build-Operate-Own Model
based on pre-agreed transactional terms acceptable to all project stake holders).
These models would help to reduce the upfront CAPEX outlay for NNPC/NGMC/E&P Companies who can
now concentrate their limited funds on further exploration, expanding their oil/gas reserve base and sourcing
markets for industrial gas (Nigeria currently flares massive quantities of associated gas).
3. MARGINAL FIELDS
Thirdly, NNPC/NPDC’s need for funding to fully optimize their assets opens up opportunities for Alternate
Funding Agreements with competent private sector investors to fund these developments. For example, OML
98 is more of a Marginal Field currently outside the Marginal Field Bidding process. This implies that an
investor could approach NPDC for a Financial & Technical Service Agreement in respect of this field.
Also, many successful bidders in the recent Marginal Field bidding round are seeking Financial Investors to
partner with to progress their project. This is a current area of opportunity (why not own your crude oil supply
asset instead of going cap in hand appealing to people to sell crude oil to you?).
CONCLUSION
In view of the above, you may wish to pursue any of these opportunities further, as may be deemed fit by your
organisations, in line with your investment risk appetite.
Best Regards.
Michael Osode
About Michael Osode:
o Ex-Pioneer Head of Credit Operations, Standard Chartered Bank Nigeria and built relationships with HNIs over time.
o Ex-Regional Head SME - FCT/Northern Nigeria, Ecobank Nigeria Plc.
o Ex-Managing Director – Great Waves Global Energy Ltd (still on their Board membership).
o Chairman – Miltec Resources (Finance/Mining/Oil & Gas Consulting outfit).
o Director – Delta Oil and Gas Engineering & Compressions Ltd (owns a 100 MMscf/day gas processing plant)
o Technical Adviser - Selcon Airlines Ltd (Dormant airline being slated for reactivation. Previous did Hajj lifting)
o Technical Adviser - Resource Petrogas Nigeria Ltd.
o BSc, MBA, CFC Canada and loves to research new trends of interest.