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“There’s more convergence than divergence in PIB” – Osten Olorunsola

By on June 4, 2013

Regulation has been identified as key to future industry growth and development, the Director, Department of Petroleum Resources, DPR, Mr. Osten Olorunsola in this interview with Clara Nwachukwu and Sebastine Obasi, in Houston Texas, USA, speaks on the role of the regulator under a new PIB. Excerpts:

A lot of opportunities have been identified even in spite of the criticisms against some of the fiscal provisions in the Petroleum Industry Bill, PIB. In the light of all the views that have been expressed, how do you think these opportunities and prospects can be realised?

My view is that you cannot take away the importance of dialogue. The more we discuss and the more we share, the more the chances that we will get to a common ground at some point. In my view, I am quite happy with what has happened this morning. It shows there is still a lot of an interest.

Two, the mere fact that people are speaking their minds is even the more important thing. If people keep quiet over their views, it does not help. It is nice that people came up with their views. And the key areas of gaps are narrowing down. If I take the words of the honourable gentleman, Honourable Osagie (House of Representatives, Deputy Chair on PIB), we will soon see the end of the PIB.

In view of the divergence of views, do you really think we will have a convergence such that the National Assembly will come up with a bill that protects the national interest even as it ensures returns on investments?

The bill has several hundreds of pages. The areas of divergence you are talking of are less than 10 pages. People have been repeatedly talking about these 10 pages, and completely undermining the 200 pages that are the areas of convergence. We should focus more around where we have actually agreed. People can choose to look at a cup as half empty. I personally like to look at a cup as half full. Let us give attention to the 200 pages that we have convergence, and then address these little areas that are remaining.

In my view, there are three or four things people are still talking about. If they don’t talk about fiscal gaps, they talk about host communities, or institutional authorities. But there are several other parts of the PIB that we can actually run with today. We should not stop talking about these little areas that are remaining. In any case, after going through these for 12 years, if it is only three or four areas that are remaining, we can try and resolve them. My personal view is that we should not spend another 12 years trying to fix these three or four items. Where we are today, we are ready to go. I think half PIB is better than none
One of the worries raised here today was that rather than reducing or streamlining regulations, we are having multiple regulations instead?

It is true. It is an area that still has to be looked at, not from the point of what can be resolved in Nigeria alone, but actually looking at the benchmarks across the whole world. Apart from fiscals, one thing international investors look at is the robustness, simplicity and transparency of your regulation. The National Assembly is aware of that. I think they will look at it very well.

However, in looking at it, we also have to take our local environment into consideration. The mere fact that there is only one regulator does not mean that we cannot have another two or three. The only thing is that it has to work, and it does not have to become a bureaucracy to the industry. That is really the point. Any institution you have too many regulations, it is a recipe for disaster. I think the National will look at that angle.

In that case, are you not worried that with these streams of regulations, that the DPR and some of its functions are being whittled down?

It is not just the DPR; even the PIB itself has addressed it to some extent. Even some of the extant regulators that have been around, they have been somehow addressed in the PIB. However, we have to wait until it becomes an Act. If it does not become an Act, all of them will still continue to parade themselves as regulators. We have made our views known very well. In any case, we were part of the team that put the bill together as an executive arm. We have to wait and see the wisdom of the outcome from the National Assembly.

Coming down to specifics, we have been going on and on about new acreage allocation especially for the marginal fields operations. Is it fair to say that it is not materialising? If it is, what are those areas that you see as threats?

It is not proper to say that it is not materialising. We are working through it. It does take time to press go. Those are the things we are basically looking at. One of the major challenges is the fact that most of the fields that probably will come out as the next round, they are in assets that we are still trying to renew for the licence holders. If you don’t renew the licences, there is no point going ahead with fields people don’t even have titles to.

Some of those fields are within leases that are going through renewal right now. You need to renew the leases first before you give out the fields within the leases to other people as marginal fields. That’s what we are doing basically. The leases have expired. It is like building a house without putting a foundation. You do the foundation first before you start raising the walls.

Would it be correct then to say that some of these lease holders are hanging on to them deliberately?

It is not their baby, it is our baby and it is left for government to renew. They have applied for renewal, and government is going through the process of renewing them. Looking at marginal fields operations, we have been told that they contributed only 12 percent of total production. And here we are, trying to give them more acreages as they have demanded. Yet there are still so many of them that are not into production yet. Is it then wise to give more to people who are not utilising these assets?

Let us correct it first and foremost. The 12 percent you heard is not from marginal fields. It is from all indigenous producers including Nigerian Petroleum Development Company, NPDC. The marginal fields are far below that. The marginal fields are doing only 50,000 barrels per day out of 2.5 million barrels. Their cry for more is legitimate. It is their right to do so. After 50 years of production in Nigeria, we cannot be going about to say that the indigenous production accounts for only 12 percent. It should be far more than that.

Even the government policy of encouraging indigenous participation is in that direction. They should all be supported.
If you look at the marginal fields specifically, nine out of 24 are already producing today. Another four or five will soon be producing. They are doing pretty well. Don’t forget that the first four or five years, they all had issues because it was a new law that came up.

So, you don’t expect them to start from day one. They had all sorts of issues like funding. Most of the banks in Nigeria did not know how to fund long term projects like oil and gas. It is not an ATM where you put in your card and get money immediately. They needed time to understand the industry before putting in their money to support any investment in that direction.

The second was that they also needed to build capacity. They needed to get the right people to help them to move those huge capitals in the right direction. The third thing was that quite a few of them had some litigation among themselves as regards partnership issues. Some of them went to court. Now they are all coming out of court gradually, we will see a lot of actions going forward.

In all of these, do you think they are adequately able to overcome these challenges you mentioned?

That is the point I am making; they are already in that direction. If you go to some of the marginal fields in Nigeria, you will be shocked by what you see. What some of them have put on ground will rival any international company in the world. I have been there myself. I am not talking of pictures.

You said about four or five marginal fields will come on stream very soon. Could you please tell us their names?

I cannot give their names now. I know that Sogenal is one of the marginal fields companies; they are almost coming on stream very soon. Frontier has just come on stream, they are producing. There are three others.