Nigeria has abundant gas potential with discovered gas put at about 170 trillion cubic feet (TCF) while undiscovered gas is believed to be in the same region. In view of the development government aspires to earn as much revenue from gas as from oil. The Chairman and Managing Director of ExxonMobil upstream subsidiaries in Nigeria, John Chaplin confirmed that Nigeria is a gas province and will become a leading LNG exporter in future but noted that government and the oil firms have to collaborate to achieve the industry’s goals, EMEKA UGWUANYI writes.

With the expansion ongoing in the liquefied natural gas (LNG) unit of the oil and gas industry, Nigeria’s LNG export capacity is expected to exceed 50 million tonnes per annum (MTA) making it the second largest exporter of the commodity after Qatar.
Currently, Nigeria ranks fourth in the world with export capacity of about 22 million tonnes per year after Qatar, Malaysia and Indonesia.

The oil firms in the country are also demanding that government put in place effective regulatory process as well as guarantee contract sanctity. "Government has to maintain stable fiscal and regulatory frameworks, provide access to resources and allow markets to operate freely. This is crucial to ensuring development of future energy supplies. These elements are vital to our industry, and we’ve seen that energy is vital to economic growth. Countries that want to expand or develop their energy industry and compete globally for investment capital must have these elements in place to allow them to compete."

Chairman and Managing Director Esso Exploration and Production Nigeria Limited and

Mobil Producing Nigeria Unlimited, John P. Chaplin, said it is achievable as Nigeria is more of a gas province with about 160 trillion cubic feet (tcf) of discovered gas and about 130 tcf yet to be discovered. He noted that ExxonMobil is committed to ensuring that the nation’s aspiration to achieving energy security is attained.

"The growth that is anticipated in LNG export capacity through 2015 is to fill the supply gap created by demand growth and, in some countries, decline in pipeline supplies. With the planned expansion of Nigeria LNG and the addition of the Brass and OK LNG projects, Nigeria will be second only to Qatar with over 50 MTA of LNG capacity.

"Since the start-up of NLNG in 1999, Nigeria has also become one of the largest exporters in the growing LNG trade. With the start-up of NLNG train 6 this year, Nigeria ranks 4th in the world with LNG export capacity of about 22 million tonnes per year, behind only Qatar, Malaysia and Indonesia," Chaplin said.

He also said that the sustained growth in Nigerian energy exports is an amazing achievement which the country should be very proud of adding that similar success stories have been repeated in developing countries around the world, and at the heart of making this possible is the relationship between international oil companies and national oil companies (NOCs).

Chaplin who spoke on "Building International Partnerships to Fuel Nigeria’s Growth" at the Nigeria Oil and Gas conference in Abuja noted the importance of mutual relationship between the government through its national oil companies like the Nigerian National Petroleum Corporation (NNPC) and the multinationals or international oil companies (IOCs) in achieving industry goals.

"As it becomes more and more challenging to meet the energy demands necessary to sustain economic growth, the NOC-IOC relationship is becoming more vital than ever to the success of energy projects because of the unique contributions made by both sides.

"National oil companies can offer access to resources, the ability to effectively manage the regulatory process, historic knowledge of local reservoirs and projects, and an advanced understanding of their country’s vision for human and resource development.

"IOCs offer access to state-of-the-art technologies, financial strength, experience at operating in a wide range of environments, and a highly skilled workforce. IOCs also have proven abilities in effectively designing large and complex projects; completing them on-time and on-budget.

"By bringing together experienced people, technology, standards of excellence in operations and project management, IOCs are able to work collaboratively with NOCs to achieve project success, while maintaining an unwavering focus on safety and operational integrity. The key to strong working relationships between IOCs and NOCs is fair dealing, mutual trust and respect, underpinned by a shared understanding of the expectations and responsibilities of each party.

For instance, he said that NOC-IOC collaboration manifested well in MPN / NNPC JV project - the AOR / NGL II project which is just coming on-stream. The project, he said, involves recovering Natural Gas Liquids (NGLs) from the gas produced along with crude oil and then reinjecting the resulting dry gas back into the reservoirs to increase oil production. In addition to significantly increasing oil recoveries, this project will go a long way towards minimizing gas flared in the JV’s operations.

Besides, NOC-IOC partnerships will be particularly important for the next tranche of deepwater developments in Nigeria which will require advanced technology and huge investments to enable commercialization, he said, adding that in 2006, ExxonMobil spent more than $1billion in technology applications, research and development which has made access to resources like these possible.

"Despite the contributions of the NOCs and the IOCs, governments also play a vital role in the industry’s success. The projects our industry undertakes can span decades between initial exploration, development planning, construction and production. They require huge investments, and utilize cutting-edge technologies that evolve throughout project lifecycles. Accordingly, long-term planning is critical – planning that looks beyond the current business cycle and relies on stable frameworks. Taking this long-term view in policymaking decisions is, therefore, an imperative for our industry. Policy decisions made in reaction to normal commodity volatility, like we experience today, helped to sustain the industry.

"For instance, in the mid 1970’s, the United States regulated gas prices, and in the winter of 1976-77, gas demand exceeded the available supply capacity leading to severe shortfalls in the market. The producing industry could not respond to these shortfalls because they could not afford to invest in the incremental capacity necessary to close the gap due to the low regulated prices. As a result, the government deregulated prices, and the U.S. market has since witnessed substantial demand growth over the past 30 years without any significant supply disruptions. There are many other similar examples around the world of governments having to remove regulations put in place to insulate consumers from market prices due to the unintended consequence of constraining supply development and creating shortages.

"Creation and maintenance of open, competitive markets, international commerce, diversity of supply and the strengthening of relationships between producing and consuming nations pave the way for long-term sustainable national development and energy security for both domestic and export markets.

"The energy industry has proven time and again that it will accept reasonable risks, even for projects that require multi-billion dollar investments that take decades to pay out. But only if measures are in place that provide fiscal stability, allow us to operate in the most effective and efficient manner possible, and ensure issues can be resolved fairly for all parties.

He emphasized the importance of energy in economic growth and noted that history has shown that economic growth, and the prosperity it brings, goes hand-in-hand with access to affordable energy. He diagrammatically illustrated the close relationship between energy use and economic growth and showed how the global economic output (GDP) grew in tandem with energy.

"For resource rich countries, like Nigeria, revenue from exporting energy is also a powerful engine for economic growth. Over the past 40 years, Nigeria has established itself as one of the largest exporters of crude oil, ranking number fifth in the world according to data from the International Energy Agency."

He said in enthroning effective regulation, government must ensure non-discriminatory administration of laws and regulations; impartial dispute resolution; minimizing obstacles to building or operating facilities; minimal import or export restrictions; freedom to negotiate commercial arrangements; and sanctity of contracts. Investor confidence in these elements is critically important given the huge scale of the investments in our industry and the long time horizons for our projects. The environment must be one that makes investments attractive in order to compete in a global competition for technical and capital resources.

The IOCs besides bringing technology, project management experience, operational excellence and financial strength to ensure the country’s resources are developed as efficiently as possible, also have a duty to manage their relationships responsibly by being good corporate citizens, maintaining the highest ethical standards, complying with all applicable laws and regulations, and respecting local and national cultures.