By Adewale Sanyaolu

THAT Nigeria’s oil and gas sector is going through a turbulent period is not in doubt. The sector, which accounts for over 70 per cent of the country’s revenue, is presently gasping for breath as a result of the crash in crude oil prices.

But the Managing Director and Chief Executive Officer (CEO) of ABM Global Services Limited, Prince Alex Mbata, is not happy about the dwindling fortunes of the market as he laments the lack of a clear government blue print to grow the sector.

‘‘The lack of direction for the oil and gas industry has crippled the sector. Today, there are no more exploration and production activities going on. And for us in the service sector of the oil and gas industry, that poses a huge threat to our operations as many are being forced to cut down operations, which may ultimately lead to massive job cuts.

“Our firm is a leading indigenous oil and gas company specialising in sales, supply, servicing of OCTG and drilling tools to major oil and gas exploration companies and have executed many jobs but the current state of the industry is negatively impacting on our operation.’’

Mbata who is also the Special Adviser to the Imo State Governor, Rochas Okorocha, on Energy, is also the Chairman of Commercial Committee of Assa North Ohaji South Gas Project (Shell) and Chairman, Committee on Solid Minerals Development in Imo State.

The ABM CEO who is also an entrepreneur of repute providing over 5,000 jobs in over nine companies operating in the downstream sector of the oil and gas sector, manufacturing and transport sector, wants the government to address the dearth of infrastructure in order to provide the desired boost for the real sector.

Excerpts:

Assessment of oil, gas sector

The oil and gas industry is a global business. And what the country is facing in terms of the challenges in that industry cannot be isolated from happenings in the global context. At the moment, the low price of crude oil at the inter­national market is impacting negatively on the industry. Regrettably, the direction of the gov­ernment concerning the sector is largely un­known. At the moment, the industry is almost at a standstill. There are no new developments going on anywhere. Exploration activities are at their lowest ebb. And to make matters worse, International Oil Companies (IOCs) that are our major clients are cancelling con­tracts while those not cancelling are requesting for unrealistic discounts on existing contracts.

These developments have forced many indigenous firms getting contracts from the IOCs to fold up while those that are still in op­eration have reduced drastically the number of their workforce.

But despite these operational challenges confronting operators in the oil and gas sector, government has been unable to come up with a clear cut policy on how it intends to run the sector. But the idea of the government keep­ing mute about its policy direction remains a source of concern to operators and stakehold­ers alike is not acceptable. All the same, we are waiting for government to unfold its agenda for the oil and gas sector so that operators can begin to key into it.

Looking at the price of oil for now, this has been fluctuating around $47 to $50 a bar­rel, which cannot be said to be too bad. Dur­ing the regime of former President Olusegun Obasanjo, oil price was around $38 to $42 per barrel and the government did well. Nobody complained of any issue.

So as it stands now, Nigeria is still in a good stead. This is the best time to get involved in more exploration activities and discovery of new fields in a bid to increase our reserves. We are depleting reserves, yet there are no at­tempts to beef it up. This is not the best way to go for any country. But like I said earlier, we are still waiting and believing that the government would understand what the country is going through to be able to make fresh investments in exploration. For us as stakeholders, we ear­nestly await the blueprint of the Federal Gov­ernment in this regard.

Effect of low oil price on the economy

To say the slide in oil price is not impacting on our operations and largely the economy would be far from the truth. There must be a balance in the economy of any country in terms of export and import earnings.

Nigeria is totally dependent on oil and can not be insulated from happenings in Venezue­la, Iran, Arabia and a host of other OPEC mem­ber countries because if we don’t export, we cannot earn foreign exchange. Presently, there is a glut in the global oil market and until this subsides, oil prices will continue to remain low.

We can also look at it this way; had it been the way we export oil is the same way we ex­port other products, the country will not be in this current situation we have found ourselves because the earnings would not be monolithic in nature.

The slide in crude oil prices has equally af­fected the real sector of the economy because manufacturers cannot import raw materi­als. The shortage in forex exchange earnings forced the Central Bank of Nigeria (CBN) to delist about 41 items from accessing foreign exchange. This measure was put in place to safeguard the economy of the country while also protecting the country’s foreign exchange reserves.

But that policy had its own negative implica­tion because when manufacturers cannot ac­cess forex to import raw materials, they had to disengage over 80 per cent of their workforce, thereby returning people in their thousands to the labour market.

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Remember that Nigeria’s trade account turned negative in the first quarter of 2016, as lower prices for crude oil slashed government revenues and caused the economy to contract.

Also, the value of exports, mostly crude, plunged 52 per cent to N1.27 trillion in the three months to March from a year ago. As a result much of the hard currency the nation needs to finance imports evaporated. With limited manufacturing capacity, Nigeria im­ports most of what it consumes. First quarter imports dropped 15.8 per cent to N1.45 trillion, pushing the trade account into the red for the period. The balance of trade for the first quar­ter was -N184.1 billion, down from +N937.4 billion in the same period a year earlier.

“The total value of Nigeria’s merchandise trade at the end of Q1 stood at N2.72 trillion. This development arose due to a sharp decline in both imports and exports,”

Exports fell 34.6 per cent by March from the last quarter and imports declined 7.8 per cent. The decline in crude oil exports, which accounted for 64.7 per cent of total domestic exports, hit the economy the most, as it shrank by 0.36 per cent in the first quarter, compared with 3.96 per cent growth last year. The dollar restrictions also caused inflation to spike.

Way out of the doldrum

We need a blueprint from the government to guide the oil and gas industry. We also need the government to come out with a template on the direction it wants to go. We need to make new discoveries that would bring the country back on track.

But for now, we are still depending on the old discoveries and it is affecting the industry because there is no service or drilling, which has led to a shrinking industry. Though we are still waiting to see what the government would come up with, nothing is happening because there are no fresh ideas.

ABM’s area of operation

ABM Global Services Limited is a leading indigenous oil and gas company specialising in sales, supply, servicing of OCTG and drilling tools with its head office in Lagos.

ABM is registered with the Department of Petroleum Resources (DPR) to operate as an oil services contracting company in the provi­sion of customised tubular and casing to the oil and gas industry.

It is our wish to contribute our quota to Ni­geria’s economic growth, especially in the oil and gas sector, as our policies are geared to­wards human and societal development. This dream will be enhanced by our broad network of partner companies spanning across Nigeria, Africa, United States of America, Europe and Asia.

Our company is a major supplier of OCTG to major oil and gas exploration companies and has executed many jobs for IOCs includ­ing Seplat, Addax, Septa Energy, Shell, Conoil, Oando and Agip. Others are Niger Delta Petro­leum Resources Limited, Sahara Group, Total, ExxonMobil and Pillar Oil.

The company has soared to an enviable height leading to several local and interna­tional awards in the oil and gas sector. Some of these awards include Best Casing and Tubular Company of the Year 2011 given by The Afri­can Energy and Infrastructure; Best Oil and Gas Tubular Casing Services Company 2012, which was given by the Institute of Govern­ment Research and Leadership Technology, and the Indigenous Company of the Year 2013, awarded by Nigerian Advancement Group.

Govt’s effort in a low oil price regime

I will give credit to this current govern­ment because the last administration had an oil boom with high oil price. The price was so encouraging that they depended largely on the boom and shoved aside what they ought to do, thinking the boom would last forever.

But the present government has come to manage what is available, bearing in mind that the last government had oil going for up to $110 to $114 per barrel.

Unfortunately, when this present govern­ment came on board, oil price dropped to about $28 per barrel. This downward trend in oil price affected the economy and they had the difficulty on what to do.

The current reality on ground now is that oil price may likely remain where it is for some time. So, we expect government to come up with ideas on how to stabilise the economy.

The current administration is not doing badly but the only aspect we stakeholders are concerned about is the aspect of having and knowing government’s direction. Government should come up with a clear direction for the industry as that would help the local and for­eign companies to have a sense of direction.