ND Western CEO, Eberechukwu Oji, talks to The Energy Republic’s Managing Editor, Ndubuisi Micheal Obineme on his company’s plan to develop Nigerian gas reserves to its maximum capacity, including the opportunities around the Utorogu industrial park located in Delta State. Excerpts:
TER: Tell us about yourself and work at ND Western?
Oji: My name is Eberechukwu Oji, Managing Director and Chief Executive Officer (CEO) of ND Western Limited. I resumed this role on 20th March 2020.
Before then, I worked with a company known as Neconde Energy Limited as their Chief Operating Officer. I have 22 years of working experience with Shell.
TER: How long has ND Western been operating in the Nigerian oil and gas industry?
Oji: ND Western is a purpose vehicle that is put together by our partner companies in 2011 to acquire 45% equity interest of Shell, Agip, and TotalEnergies in OML 34. It was a competitive bid and we were successful.
This will make it 10 years that ND Western has been in operation in Niger Delta. It is important to say that our consortium partner members also run their operations in the Niger Delta. We have NDPR, which is operating in Ogbene; We have First E&P, which is operating in the shallow offshore; and, Waltersmith, which is operating around the Obigwe field and Petroleum Trading which is an international E&P company. They are part of the consortium at ND Western. Our consortium members have various capacities and they are operating in the Niger Delta.
TER: What are the main challenges in operating in the Niger Delta?
Oji: The biggest problem is security. I have worked in many countries and more than anywhere in the world, Nigeria is where you have insecurity around the oil and gas operations.
With crude oil theft, illegal refineries, and pipeline sabotage. All these things cost serious devastation to the environment.
Sometimes, there are community problems leading to do clean-up even when vandals are responsible for causing the spill. To access the site, the community is asking for compensation. That’s what is constraining the country’s capacity and ability to produce to its full potential.
Today, Nigeria isn’t meeting its OPEC production quoter. In a time when oil prices are high, we would have expected that Nigeria will be maximizing production.
Cities like Port Harcourt are overtaken by black suites as a result of the activities of vandals. That’s the biggest challenge. For us to safely operate in the Niger Delta, we have to deploy more security agencies to protect our assets and people. These things make our cost of operation very high.
TER: What are the growth opportunities in the Nigerian basins?
Oji: There are lots of opportunities for growth in the E&P business. If you look at the value chain of E&P business, we have Seismic – where you have to go and see if oil is in this place.
One of the problems we have in Nigeria today is that we aren’t exploring enough. We are producing what we have already explored. There are few companies I know today that are shooting Seismic.
If we want to grow in the industry, we have to be shooting Seismic. There are huge opportunities there. If anybody is thinking of where to invest in the Nigerian oil and gas industry, Seismic is an area where there are investment opportunities.
Another opportunity is field development. We have the big marginal field bid rounds that were done last year. So many companies now have access to these acreages. They need to be developed and bring the fields to production. There is drilling, field development, and sub-surface study that needs to be done for all these companies.
There are very huge opportunities in the marginal field space. We also expect that very soon the country should be going out for another round of bidding for OMLs on bigger acreages. That’s also an opportunity area.
In terms of existing infrastructure, there is a huge opportunity such as asset integrity. Most plants are inherited from the International Oil Companies (IOCs) in the 70s and most of these plants need an upgrade.
This is a big opportunity area for companies that can execute and finance the work.
There are opportunities in the areas of trading, bringing liquidity into the market. Due to climate change, many institutional investors are running away from fossil fuels. We need to bridge that gap.
As a country, we need to be serious about establishing additional sources of funds. I would expect that in a very few years that we should have an energy bank where companies in the oil industry can access credit to develop the field.
I expect we should have a robust bond market for E&P companies to explore opportunities in the capital market. Though enough of that isn’t happening.
For many of these indigenous companies, I expect the companies to be listed. It will deepen the Nigerian stock market. There is enough for everybody and we should see the oil and gas industry as an engine for shared prosperity for Nigeria.
TER: How is ND Western accelerating to meet the low carbon demand?
Oji: If you look at the value chain of ND Western, we are predominantly a gas company. Our growth plan is to develop Nigerian gas potential to its maximum capacity. Gas is a low-carbon fuel.
Right now, there is a big debate that gas should be considered ‘Green Energy’. Some of the reasons are that gas is a low carbon, clean-burning, it provides cheap energy and people say it is a transition fuel. The debate is out there and whatever be the case, ND Western is committed to developing our gas reserves to reach their maximum capacity. That will give us the best value in terms of decarbonization and carbon management.
There are other things we are working on, including reducing fugitive emission, flares out and all these we have in our plan to contribute towards the net-zero ambition of Nigeria and ND Western.
TER: How is ND Western evolving under the Petroleum Industry Act (PIA)?
Oji: The PIA is the single most important piece of legislature in the Nigerian oil and gas industry. The credit should go to all the key players including the Federal Government, the President, the National Assembly, the Ministry of Petroleum Resources, NNPC, and all those that have contributed to making the PIA a reality. This is a welcome development.
The challenge now is to implement the PIA so that we can achieve all the set objectives in the PIA such as making our oil and gas industry transparent, simplifying the regulatory framework around upstream, midstream, and downstream regulation, including making the fiscal more transparent, providing incentives across the entire value chain of the industry, making the communities benefit from the prosperity from the oil and gas with the community development fund. All these things need to be worked on and I like the pace the PIA implementation is going, as there is an implementation committee already in place. NNPC is constituted, and the leaders of the regulatory agencies have been appointed.
ND Western being a key player, we are following all these trends and we are fully participating through our industry groups IPPG, and OPTS to engage with the government in ensuring the implementation is done very well. It is important to say that the whole community development trust that is in the PIA was pioneered by NDPR, one of our partner companies that came up with the idea many years ago and advocated relentlessly that a certain percentage of the profit goes into the community trust. This is a good concept because as the company prospers, the community prospers as well.
From our point of view, it is already in our DNA and we are excited the community trust fund is part of the PIA.
TER: In 2021, ND Western announced that it will increase its gas production from 360 to 400MMscf per day. What’s the latest update on that aspect?
Oji: The target is to increase our gas production to 400MMscf by 2022. We are on track to do that as there are several challenges that we faced last year that got in the way of achieving the target much earlier. One of them was the repeated force Majeure that was declared by the export terminal and interruptions from the pipeline transmission company. As you know, our gas comes with a lot of condensates and if you aren’t able to evacuate the liquids, then, we cannot grow the gas production. But, some of those problems have been resolved and I am very confident that we will reach 400MMscf by 2022. Once this is done, we will set our plant full to reach 600MMscf over the five years horizon.
The challenge with this announcement when we make them is that in the gas business, you have to sell the gas before you produce it. We have many customers who knock on our door that they want gas, but, the challenge is that we need to find enough paying customers. That’s very important.
Many people who want to use gas want to use it for free. They usually come and request our flared gas for free. But, the truth of the matter is that even though we have flared gas, we will monetize all that gas and we aren’t going to give it to anybody for free because a lot of effort went into producing it and it has to be paid for.
Till we can find enough paying customers, we will increase the gas production. We made this announcement to put it in the market that the capacity is there. If we find customers who will take the gas and pay for it, we will produce the gas.
TER: Based on our findings, ND Western contributes 20% of the gas supply to the Nigerian power sector. Are there plans to expand this gas supply to other industrial sectors in Nigeria?
Oji: For sure. Gas is a major catalyst for industrialization. ND Western is committed to supporting industrialization. We produce and supply gas into the Lagos-Agbara industrial corridor which goes to many industries aside from power.
We produce gas that goes into the Shagamu corridor and there are many industries in that corridor. There is a gas line running from the Lagos-Ibadan corridor which ND Western gas gets.
There is the Lagos free trade zone and ND Western is determined to put gas in that corridor for the same purpose. We want to make sure that gas gets to industries.
These industries will create the job that Nigeria needs to keep the young people busy.
As a company, we are the backbone supplier of gas to the power companies. We are also supplying to many commercial customers. We have a strategic relationship with key commercial gas off-takers such as Shell Nigeria Gas as well as NGNC to ensure that we give them the volume they need to drive Nigerian industrialization. We are expanding our supply base.
TER: What’s the latest update on the Utorogu refinery in Delta state?
Oji: As with these plans, we are making a lot of progress with the refinery. We are at the point where we need to take FID. The technical aspect has to be put in place such as the Front End Engineering and we have to find a reliable company that will build the plant and we need to sign off the contract with our JV partners. We need to develop the commercial arrangement of the contract to underpin the investment. We need to get the organizations that will operate the plant and we need to take care of the local communities plus the regulatory frameworks need to be in place.
To put together an FID of a mini-refinery, all the modalities have to come in place. We are working very hard. The FID would have been taken in Q4 of 2021 but with all the disruptions and pandemic, we couldn’t make the FID.
Before the end of the year 2022, the FID will be taken. The plant plot is already fenced and work is going on at the site. The refinery is coming up very well.
TER: What’s ND Western new investment focus in terms of upgrading your midstream business activities?
Oji: ND Western has a very robust midstream strategy. Soon, we will announce our investment in the Utorogu industrial park. That investment will mean that ND Western will become a very strong midstream player. We will have natural gas liquids produced from the gas that we produce. We will have Compressed Natural Gas (CNG) produced from our industrial park for those who need CNG. We will have LNG produced from the park. The Utorogu industrial park will not just be ND Western, but, it will involve other companies and we have seen some very strong interest in the industrial park.
We have received various inquiries for our Utorogu industrial park. The whole idea is to locate your plant close to the source of gas. It will save the cost of transporting the gas. Warri has a port and whatever is produced can be easily transshipped into the vessel. Warri has a rail line and this means whatever is produced can be sent through the railway to a different part of the country.
Warri has a very good road network to port Harcourt, Onitsha, Shagamu, Ikorodu, and other parts of the country. So any plant you locate in our industrial park will do well in terms of access to market and energy source. ND Western, Transcorp, and Deltasteel Company are there, and other companies. But we want more companies to come there.
Our industrial park will be the trigger to create massive job opportunities. There will be a lot of job opportunities such as construction jobs, among others. We will employ many youths who are jobless to work in the plant. This is lifetime employment.
We are excited about the concept and how it is coming into place including the subscription from people who are interested in our industrial park.
TER: Are there plans to expand your assets towards hydrogen, and renewable energies among others?
Oji: As I said earlier, the gas business is a business-driven by customers. Once you drill a gas well, you can’t close it. It has to go somewhere. You have to find where it is going to go before you drill. The same thing with hydrogen and all the gas derivatives, you have to find a client and then you make the production.
We are speaking with some people who are interested in hydrogen and other renewable energies. With time, we will make the investment.