International Oil Companies (IOCs), have expressed worries that the alarming cost of doing business in Nigerian oil and gas industry may pose serious challenges that will frustrate growth of the petroleum industry in the country.
Speaking in Abuja at the ongoing Nigerian Oil and Gas Conference, Mr. Mark Ward, Chairman, ExxonMobil noted the challenge of cost ineffectiveness precipitated by aging infrastructure, crude theft and difficult contracting processes remain a major disincentive to investors in the sector.
Ward noted that facilities that are used in the early days of oil discovery in Nigeria are still being used in the sector, which, according to him, is also a driver of cost. The ExxonMobil boss described this as a serious challenge, which made it very difficult for operators to make meaningful efforts towards growing the sector.
Also speaking, Mr. Mutiu Sunmonu, Managing Director of Shell Petroleum Development Company, said issues of cost inefficiency were capable of killing the oil industry.
According to him, the major drivers of costs are delay in the contracting process, the security situation and the challenge of funding.
Similarly, Mr. Adams Okoene, Chief Executive Officer/Managing Director, Midwestern Oil and Gas, expressed regrets over the high tax regime in the sector and the issue of limited assets.
On the side of independent, small or marginal fields operators, Mr. Victor Briggs, Managing Director, Nigerian Petroleum Development Company (NPDC) said the ability of small producers are constrained.
He said the small producer’s ability to drive sustained growth in the sector was constrained by limited assets, inadequate technical and financial resources.
All these factors and a number of others, according to Group Managing Director, Access Bank Plc, Mr. Herbert Wigwe, are responsible for the inability of the oil companies to get support from banks in the country.
Wigwe said banks look at a number of factors before extending loan facilities to oil companies, such as the impact of taxation on the companies, ability of the companies’ cash flow to support their spending and the governance structure of the companies.
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