Topic: Opportunities and Challenges of Divested Asset Management - NPDC's Experience
July Technical Meeting: NAPE’s July Technical Meeting was held on July 26, 2017 at the Grandball Room, Eko Hotel and Suites, Victoria Island, Lagos. The technical presentation was made by Mr. Kareem Folorunso,Manager, NPDC Onshore Assets. The topic presented was "Opportunities and Challenges of Divested Asset Management – NPDC’s Experience”.
The event began with the traditional safety briefing anchored by Emmanuel Egbele, NAPE Publicity Secretary. He stressed the value of vigilance and safety awareness in the work place.
Mr. Kareem’s presentation chronicled the beginnings of the oil industry from the late 1950’s up until the creation of NNPC tasked with managing Government’s majority interests in existing assets operated by the IOC’s and how this participation morphed into the creation of Nigerian Petroleum Development Company (NPDC). He highlighted the perspective of NPDC with regards to the opportunities in managing divested petroleum assets as well as the plethora of challenges that they encountered in achieving success in the operations.
He started by listing the reasons for divestment as: production decline, high operating costs, community unrest etc., while highlighting the key attractions the assets presented.The divestments began from 2009, asset sales by SPDC, BG, NAOC, Total, Petorbras, Chevron, ConocoPhillips assets comprised OPLs 232, 284, 286; OMLs 4, 26, 30, 34, 38, 40, 41, 42 and 60. These opened opportunities for indigenous companies to take on key role in growing the Nigeria oil and gas industry through exploration and production operations. At the time, many industry watchers welcomed the move as a boost to the Nigerian content initiative. The attractiveness of the divestments was seen in opportunities for quick wins in already existing production capacity, quick cash flow, an abundance of field data enhancing further development, gas potentials, proximity to third party facilities as well as anticipated growth of support institutions (local oil field service providers, banks, insurance etc).
However, four years down the line, the resolve of the NPDC to deliver value on these assets was tested.Key among these challenges included: poor condition of inherited surface facilities across the OMLs, youth unrest, militant activity, vandalization, insecurity, no community development projects; while from the NPDC internal standpoint, challenges such as organizational structure, leadership structure, poor data quality, etc. compounded the dilemma. In addressing these challenges the NPDC worked out mitigation strategies that yielded results and scored successes in delivering value such as: growth in status to become a medium player in the industry; highest gas producer with the 4th largest gas reserves in the country(reserves growth from 2Tscf to 18.4Tscf); grew oil reserves from 313MMstb to 3.168Bstb; condensate reserves from 60MMstb to 330MMstb; repairing and returning the 87km Trans Forcados Pipeline to operational efficiency, supply of stable, constant power to host communities etc.
For the Presentation, Click Here.
For the meeting pictures, Click Here.