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TUC president, Festus Osifo
The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, has stated that indigenous oil companies do not have the financial strength to fund the assets they acquired from divesting international oil companies.
He spoke Tuesday in Lagos while presenting the association’s communique recommendations from the last energy summit to pressmen.
While acknowledging divestment would boost local capacity in the petroleum sector, Osifo urged the regulators to carry the union along in any divestment process.
According to Osifo, some companies bought the assets but could not manage them, leading to job losses.
“On divestment, the challenge we have is that we have practical cases of companies that bought some of these assets and these assets are depleting today because they can’t manage them very well. Some that purchased some assets from Shell can’t even meet their cash call.
“It is a challenge. You heard the case of a company that was forcefully taken over by the Nigerian National Petroleum Company Limited. The company bought some of the Shell assets those days. So, these companies are practical cases of local companies that bought over some of the fields hitherto managed by the IOCs. But they couldn’t operate because all they were doing was extracting oil till it got dry.
“You know, the oil and gas business is not cheap. The oil and gas business is a petrodollar business and is highly capital-intensive. TotalEnergies built one field alone with $16bn. How many banks in Nigeria would be able to fund a project of that magnitude? If you join all the banks’ capital bases, I’m not sure they can fund a $16bn project. That shows you how capital-intensive the projects are,” Osifo posited.
He explained further that most of the IOCs had strong technical and financial partners all over the world, giving them easy access to funds.
“An ExxonMobil can come and bring a business of $20bn and put it in Nigeria, and they will get partners because ExxonMobil is listed on the New York Stock Exchange, the London Stock Exchange and all great exchanges in the world.
“They can easily attract funding because, over the years, they have developed that partnership. They have developed their creditworthiness. But it will be difficult for a local company to go to Bank of America or go to Bank of China to attract funding,” he stated.
According to Osifo, the union supports the Nigerian Upstream Petroleum Regulatory Commission’s efforts in running a check on prospective investors.
“Part of what the NUPRC is doing that made us adopt their six cardinal frameworks is because before they allow you to come into the field, they will check your finances. They will check, ‘Will you be able to fund this project? Will you be able to develop this field? Will you be able to manage it?’ Because a crude oil field that was producing 100,000 barrels per day will not be able to produce 20,000 barrels if you don’t do the right maintenance, the right investment, the cleanup, stimulation, and well performance enhancement. So, you must invest in it,” Osifo maintained.
He confirmed that though local companies like First E&P and Seplat Energy were doing well, there were very few because a lot of them had not done well.
He stressed that the union wanted the companies to do well to employ more workers instead of retrenching.
“So, that is why we are sceptical because we want them to do well. When they do well, they will employ more people who will be our members. When they do well, PENGASSAN will also flourish. But when they don’t do well, a few years down the line, they will tell us that they want to do retrenchment.
“That is why we are interested in who buys these fields. That is why we are interested in how they regulate the divestment processes to ensure that the assets are sold to capable people, not just political cronies or political friends,” he submitted.
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