Nigeria’s Oil Industry Is Sick — Aruwajoye

Nigeria’s Oil Industry Is Sick — Aruwajoye

Tuesday, November 18, 2014 12:17 pm

Akinboro Aruwajoye, who retired as the first Nigerian deputy managing director of Nigeria Agip Oil in 2007 after a career spanning 35 years in the company, speaks with FUNSHO BALOGUN and BOSUN OLADIMEJI on the problems and prospects in the Nigerian oil industry

Would you say that all is well with the Nigerian oil industry?

I am sorry to say the industry is not well. As an oil man, I would say the very simple indices to know the health of the industry is reserve replacement. This means, with the oil and gas you are taking out, how much are you discovering to replace it so that you can have a sustainable economy.

Today there is no emphasis on exploration. To find oil you have to do some exploration. You have to do the seismic and drill exploration wells. It seems as if the government of today does not focus on that fundamental which is very vital for the survival of the industry. And because there is this major disparity between government and the operators, when it gets to the development of policy it seems as if the two sides are talking but neither of them is hearing each other. I believe that if there is a honest discussion between the sides involved–that is, the government as regulators, the oil companies and the independent producers–the industry can get back to its prime place to meet the aspirations of the country.

The way we are going now, which just emphasises bringing in products and subsidy issue, is not what supports the industry. The support of the industry is based on the amount of exploration works going on and the amount of training. If you have positive results in these two aspect then the industry will be healthy. From the upstream to the downstream.

What was the situation concerning the issue of local content when you started your career?

The issue of local content has always been there. When I joined the company in 1972 even common operators, people who opened and closed values or changed chokes, or who were just patrolling the lines to see that they were clean, were all expatriates. And it was obvious that the expatriates were the captains of the manor.



When I came into Brass in 1975, the only people I knew in the plant were the Italians; because I had never worked in Nigeria and I did not know my Nigerian colleagues. At the mess, Nigerians would sit on one side while the expatriates sat on the other side. Because the people I knew were Italians, and I could speak Italian and could talk to them, I started sitting with them to eat. And some of my Nigerian colleagues would say: ‘What’s going on with that guy? Does he think he is superior to anybody here or what?’ There was that issue of being accepted even by your people. And at that time we would do three months and get on month’s leave; whereas today you do two weeks on, two weeks off. It was difficult at that time to find a Nigerian who would have a company-assigned vehicle, whereas all the expatriates, including those working with you or working for you, had these company vehicles. And at that time too, the mess was not offering Nigerians food. And a lot of Nigerians did not like that. I am emphasising these little things to let you know where we came from. Participation was really minimal. And to find somebody who had a clear-cut responsibility of being in charge of aspects of the activities was not very common. And these were the things we had to fight. The union became stronger and things started changing. And the industry has now changed completely.

The efforts of the Nigerian content development people must be commended, considering the opportunity now being given to Nigerians to participate in the commanding heights of the industry. It is something worth celebrating.

Why has government and the international oil companies not been able to find a solution to the issue of gas flaring?

The international oil companies, IOCs, and government have not been able to get themselves to be on the same page. I laugh when I hear people say ‘Shut them down’. But when you shut these facilities down, the government itself bears 50 per cent of the losses. And all the tax derivable from the operations of the IOCs also ceases.

Flaring is an economic decision. If the gas price is right, then there will be investments in gas utilisation. But if you want to collect the gas for free, then nobody is going to invest in it. And that is what has been holding things back. But there is some light in the horizon now from the new power policy that allows a free market environment through the willing buyer willing seller initiative. This is more realistic than just decreeing it.

The growing preference for shale oil is affecting the demand for the sweet crude that Nigeria produces. How real is this threat, and what will be the eventual effect on our economy?

The effect is real and it is on. That is why you find oil price crashing to just a little bit above $80 a barrel. But I think it is the novelty that is resulting into the price crash. Demand for crude oil and gas in the developed economies outstrips the incremental or decremented quantity that America is not taking. So if we do an energy balance, we will still find that there is enough demand to support the production of today. But this is not saying that the American market has evaporated for now from Nigeria. And it is going to be like that for quite some time because the quantities that shale gas and shale oil are putting on the American market is significant enough that they might not need to import. Our salvation still lies in China, India and the Asian axis, because they still have energy demand that can support what is being produced in the oil market today.

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