Royal Dutch Shell Group .com We Are Putting a Lot of Money Into Nigeria -- Shell MD: "MR. Basil Omiyi needs no introduction having made history as the first African to be appointed Managing Director of Shell Petroleum Development Company (SPDC), a multi-billion dollar business concern with vast interests in the Nigerian upstream oil and gas industry." ( Posted 1 Dec 04


Vanguard (Lagos)

Hector Igbikiowubo


MR. Basil Omiyi needs no introduction having made history as the first African to be appointed Managing Director of Shell Petroleum Development Company (SPDC), a multi-billion dollar business concern with vast interests in the Nigerian upstream oil and gas industry.


In Port Harcourt last week, he gracefully presided over an unprecedented event - the hand over of twelve oil blocks to indigenous marginal field operators. It would be noted that indigenous participation in the sector in the past has always been marked by discretionary awards by the government of the day.


However, this time around, the process, Farmees (benefitting companies) themselves admit, was marked by the highest level of transparency. After the handover ceremony, Mr. Omiyi spoke with Hector Igbikiowubo, the Vanguard Assistant Business Editor on his company's disposition to work with the Farmees to ensure they succeed. He also spoke on the violence in the Niger Delta, and the rising incidence of crude oil theft.




How do you feel about handing over the marginal field blocks to indigenous operators?


I am very happy you were there today to witness the handing over of marginal fields. I think it's a great milestone and I am really looking forward to seeing one of those marginal fields operators actually producing oil. That will really be the fulfilment of the Federal government's dream about local participation via the marginal fields. So we wish them well and we pray for them.


Is it going to be a continuous exercise?


I can't answer that question because we are not the determinants of that. As you know we, by the decree, could initiate a process and the government could initiate a process. I think when you set an objective and you go out with the trial process, I would imagine you will want to see things take-off and you will want to see people make a success of it. I think it is how much success they make out of this process that will actually determine how you proceed with it.


How would you address some of the concerns raised by the beneficiaries of the marginal field blocks awarded today?

They had three concerns, I think one was they feel that the tax regime imposed by government are so high and I imagine that they will continue to negotiate with government on that. They wanted to be sure that we will work with them, especially in finding access to terminals for their crude, especially when they are not working very close to the company that granted them the marginal field. Obviously, I imagine that they will have to work closely with those companies and the DPR to do that.


The third one was a negotiation point, that they hoped that the tariff they will have to pay for processing their crude through our pipeline to the terminal will be reasonable and I can say yes we will always be reasonable for everyone. Reasonableness means both sides are happy - win-win situation. I think we will work on those issues.


This is a little outside the scope of handing over of marginal fields. It has to do with the recent heightened tension in the Niger Delta occasioned by the violence there and how it affected your operations.


Do you have any contingency plans in the event of a recurrence?


I must say that the federal government as you know actually got involved and brought some peace to the region and I must say that we are very grateful to Mr. President for this and we keep following up the process and we are part of that process to look at long term sustainable peace in the region and on Thursday I will be in Abuja meeting with the Presidential Adviser on Petroleum and Energy together with the stakeholder group that has been set up to be part of the process to see how we get sustainable peace. There is no doubt that the region needs development, but that development can only come in an atmosphere of peace an we are a partner in that.


Let us look at the incidence of crude oil theft, is it rising or going down?


I would have liked to say that crude oil theft is going down but it hasn't and again we have brought this to the attention of government and I imagine that something will be done about it. It is a waste of the nation's resources. Apart from the loss of production, you also have collateral damage-the pipe they break into, the oil spillage that follows, the clean up cost and of course the danger to the people themselves.


You know we have a lot of them burnt or killed as a result of this and that is certainly not desirable at all and the really why something needs to be done. What I am looking forward to is to read in one the newspapers that somebody has been convicted. That has not happened yet.


What is the current level of loss?


I would say we probably lose between 50,000 to 70,000 barrels per day on the average. You can not be very accurate about this and that is a lot of volume. Recently we found something that had been camouflaged as a juju shrine and by the time they opened up the shrine, it was a very sophisticated arrangement of pipes and valves for taking crude out. So we really have to go search for them and stop it. I don't think it helps anybody. It doesn't help the reputation of Nigeria. When people invest here they would like to be able to like to depend on the resources of law and order to provide a peaceful conducive and controlled environment for working. Crude oil bunkering does a lot of damage to the reputation of our nation and we don't deserve that.


Your predecessor had talked about finger printing crude oil for easy detection of that which is stolen, what has become of that initiative?


The whole idea behind finger printing crude that if you could finger print our crude, then if it goes outside as rogue crude, then somebody could say this is crude oil from Nigeria, how come it is not coming through the right process of international crude oil marketing.


That might help. By the way I hope you know that crude oil bunkering affects all the oil companies including NNPC as well and that is the reason why crude oil supply to the Warri refinery is not flowing because people keep breaking into that pipe, they won't allow it to be fixed.


What is the state of affairs between management and the in-house unions, especially as it affects the ongoing restructuring of the organisation?


I must say that between us and our unions and of course our staff, we have complete agreement on the case for change. The fact that we need to put our business on a stronger footing to compete better in the future, to strengthen our company, still asset focussed but with functional excellence - we are fully aligned on that and the whole objective. There are times we are not fully alligned on the tactics-how to actually get it done. We are talking and I am sure we will resolve it.


Given the relocation of the Shell EP Africa headquarters to Lagos by January, what are we to expect to come out of that development?


Two things you will see- we will move the headquarters of the Shell Petroleum Development Company to Port Harcourt, we will probably have just a few people in Lagos. Then we will have to focus on our core business; upstream in Nigeria of course, in the onshore and offshore acreage. Consolidating our strength in Port Harcourt. That should make us more nimble, save us a lot of cost, keep us closer to our stakeholders- the government and the people. The regional office coming to Africa brings in a completely new dimension. It means Nigeria will get that prominence for being the headquarters of Shell E&P Africa.


The team that works in E&P Africa will be in Lagos, a small team, about 30 people and it means the whole of Africa regional headquarters of Shell, when they say they are going to their headquarters, they are going to Lagos. That itself is not a mean feat and I think it is good for Nigeria's reputation and it will also help us to see the opportunities that are available in the region and see how as a business of Shell we can integrate our business across the region.


By your own estimation, how soon do you think some of these marginal fields operators can bring their fields on stream and how far has Shell gone with its Offshore Gas Gathering System (OGGS) as part of efforts to monetise and utilise its gas resources?


To be frank, I do not know how much work most of these companies have done. Quite a lot probably have done a lot of work and if the Presidential Adviser says by the end of the year we should have some production, then it means they have done so much already. But I will think on the average, if they work very hard, I will say they need at least twelve months to be able to run a sustainable operation. I am not saying you can not have production within twelve months, but when you say really sustainable, long term business, I will say if they work very hard, a year. There is a lot to be done.


You know that we have major gas projects ongoing for two reasons and one of them is that we have to meet the gas flares out deadline and we are also building programme to support the trains 4, 5 & 6 LNG project which are major investment programmes for us. I would say that they are doing well and quite a lot of our investment are in that region. This is the reason we are putting a lot of money into Nigeria we are hardly taking anything out for quite some years to come - in the sense that whenever profit is made from our current operations, we are investing it and more on new projects. So we are at the moment a net importer of funds, really taking nothing out.


What type of company would you like to see come January next year?


I would like to see a company that is number one in professionalism, that is most respected, admired, with staff who are really proud to work. That is the type of company we want to create.

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