July 23, 2024

Okwuosa, others x-ray challenges indigenous oil firms face in acquiring IOC- divested assets

Adebayo Obajemu

Sir Emeka Okwuosa, Group Chief Executive Officer of Oliserv Group of Companies has highlighted the challenges indigenous oil service companies face in securing IOC- divested assets.

He made his submission in a presentation tagged: Financing Africa’s Energy Companies at the 8th Sub-Saharan Africa International Petroleum and Exhibition Conference on Tuesday in Lagos, organised by the Petroleum Technology Association of Nigeria (PETAN) with the theme: “The Next Steps: Accelerating African Content”.

Okwuosa spoke extensively on the challenges independents and Indigenous Operators face to secure those assets.

According to him, the greatest challenge is the financial constraints. He noted that securing divested assets often involves significant financial resources, upfront payments, investment commitments, & OpEx. This has been a constant hindrance to acquiring those assets, noting that a sizable number of indigenous companies lack the financial capacity to compete or access financing on favorable terms

He especially emphasized the limited access to capital, given the difficulty of accessing capital from traditional sources such as banks, private equity firms, or capital markets who prefer Green energy

Okwuosa stated that the apparent difficulties in accessing capital imited access to capital has drastically affected ability to fund acquisitions, exploration, development, and operational activities

Of note, he said the acquisition of IOC assets often involves a significant technical and operational capacity to effectively optimize fields, facilities, and infrastructure.

He took a swipe at the regulation and compliance, which he said may have inadvertently added complexity to acquiring and operating divested assets

In order to make a success of this labyrinth, he advised indigenous companies to come out with a mechanism to navigate these frameworks effectively in order to secure and maintain ownership of divested assets

He also mentioned stiff competition from long established players tiff competition from established players who often may have greater financial resources, technical capabilities, and political influence

He also hinted at the political and security risks which have the potential to affect indigenous companies seeking to acquire divested assets

These risks deter potential investors, delay project approvals, increase operational costs, and disrupt development and production. He did not shy away from mentioning other hindrances such as Inadequate infrastructure, including transportation networks, power supply, and port facilities

He especially noted the logistical challenges facing indigenous companies operating in remote or underdeveloped areas where divested assets are located

Another thorny issue is in the area of social responsibility . In order to succeed he mentioned the need to maintain the balance in the complex community relations and social responsibility issues associated with acquiring and operating divested assets

Because of history and geography, he mentioned the need for indigenous player to have significant exposure in terms of engagement and security owing to the historical/legacy matters and socioeconomic challenges

There is need for Due diligence and risk management skills, especially ones associated with acquiring divested assets require robust processes, and access to reliable data

Some of these indigenous companies according to him, lack of capabilities and resources to perform comprehensive due diligence, assess risks effectively, and implement risk mitigation

He also mentioned the need to build value and promote investment through capacity building, charging operators to embrace new trends.

it added, that there is need to change…Research and Innovation, Certification and Compliance and Training and Mentorship Programs

He mentioned NOC and government initiatives to empower and enhance competitiveness, recommending some approaches such as

Nigerian Content Development and Monitoring Board (NCDMB); which he noted
promotes the participation of Nigerians and indigenous companies in the oil and gas industry, in order to Implementing policies and programs aimed at increasing local content in the sector

Another one Okwuosa mentioned is the Nigerian Petroleum Exchange (NipeX), which he said is an
electronic marketplace and contracting platform established by NNPC and JV Partners. This, he said facilitates the procurement process and bidding processes for contracts and procurement opportunities

He praised the Local Content Act initiative, which enhances the participation of Nigerians and indigenous companies in the oil and gas sector,
prioritizes the use of local goods, services, and personnel in their operations

In his own submission, the Minister of State for Petroleum Resources (Gas), Mr Ekperikpe Ekpo reiterated the Federal Government’s willingness to foster collaborations and partnerships that would engender national goals and aspirations for domestic gas utilisation and export.

Ekpo, who was ably represented by Mrs Oluremi Komolafe, Director of Gas Ministry of Petroleum Resources, stated that the Ministry had recognized that finance and investment in infrastructure are critical to the development of the gas sector.

According to him, as part of the tools to address this problem, the Midstream and Downstream Gas Infrastructure Fund, was put in place to enable government make equity investment in gas Infrastructure.

“As we gather to harness ideas to develop our energy sector, let us not forget the various incentives put in place by the government to encourage the gas sector development.

“These include three years tax waivers for companies that build and operate gas pipelines, and could be extended to five years at the satisfaction of the ministry.