Can you give an overview of Ofserv’s recent activities?

Over the past four years, Ofserv has been heavily focused on geographical expansion, particularly prospecting the rapidly developing Uganda and Côte d’Ivoire markets. The company has also undergone expedient restructuring in reaction to the Nigerian service market becoming highly fragmented and proliferated. In Nigeria, we are now focusing more on our consulting-type work and less on the equipment-enabled services, as we believe that consulting and human capital expertise will be the differentiators in helping clients realize value. Lately, we have also been involved in supporting the country’s energy strategy and outlook by working with some government agencies. 

How can Nigeria reverse its declining oil production? 

The government should focus on improving key metrics such as production output relative to the installed capacity and unit operating cost of production. Nigeria's production has declined by approximately 40% over the past 10 years, which is significant for a country that relies on its oil sector for 90% of its foreign exchange. The impact of this production decline, particularly on the day-to-day Nigerian, cannot be overstated. 

The provision of petrol has always been a social issue for Nigeria, and the government did what is now looking like a double whammy – removing fuel subsidies and floating the Naira at the same time. Unfortunately, by floating the local currency, the expected gains have not been realized as the NNPC continues to plug the difference between landing and trading costs at the pump, leaving the deficit growing. The NNPC projects a deficit of approximately US$8 billion by December 2024.. The government must look urgently into truly restructuring the NNPC. Fixing NNPC will fix the economy.

Every incremental percentage improvement translates to tens of millions of dollars. Nigeria thus has to focus on aggressive growth in the production of crude along with associated gas which fuels NLNG, as there are great opportunities to monetize LNG for the benefit of the country and its economy. There are two operational, and three Floating LNG (FLNG) projects in development across the continent, but Nigeria does not have an active FLNG project yet. Using existing upstream infrastructure, the government should accelerate the process of determining the valuation of its gas resources and fast-track the monetization of these molecules via export into the global market. 

How can operators also play a part in increasing Nigeria’s oil and gas production?

The relationship between operators and the government in Nigeria is testy. In the US where mineral rights belong to the landowner, what drives efficiency is the expediency to offer the best returns to shareholders, In Nigeria, the onus is on the government to drive the efficiency by setting the parameters of play, otherwise operators will continually take advantage of the lax system.

IOCs are divesting their onshore and shallow water assets because Nigeria is not as competitive as it once was. It is becoming harder for these companies to sell Nigeria to their investors in their portfolio of opportunities as they need to invest in less risky areas, where they have lower carbon production, and where they can get the best returns for their investments. The government has a huge responsibility to catalyze things, drive efficiency and sustain it so that the Nigerian oil and gas industry can thrive. 

Are IOC divestments creating opportunities for local service providers such as Ofserv?  

No doubt, IOC divestments have created opportunities for local operators and service providers, however, weak governance eventually stifles everything. Unfortunately, this is what is happening in Nigeria. For example, some local operators have established a bad practice of essentially stealing from themselves. They create mechanisms whereby the supposed owners of the oil company begin to work for themselves – for example, I am the operator, but I also own the drilling rig business and my one incentive is to cream off from the service provision. Eventually, they do all these gymnastics to the point where value is completely eroded in the oil company and production cannot be sustained. This is one of the main reasons for the perennial underperformance and poor asset stewardship in the Nigerian oil and gas sector.