Stakeholders Demand Bank For Oil And Gas Sector Funding

Experts in the Nigerian oil and gas sector have advocated the establishment of a specialised bank to be called “Bank of Oil and Gas” to address the funding gap in the industry.

They said the need to set up a specialised bank for the sector had become compelling as it is becoming difficult to secure long term financing for the sector through conventional banks.

As of December 2018, the former Minister of Petroleum Resources, Dr Ibe Kachikwu had put the funding gap in the oil and gas sector at over $30bn.

Based on the Central Bank of Nigeria official exchange rate of N378 to a dollar, the $30bn translates into the sum of N11.34trn.

Speaking at the 38th International conference of the Nigerian Association of Petroleum Exploration, the Chairman, AMNI International Development Company Limited, Tunde Afolabi said that issues around financing has remained the biggest problem affecting operators in the sector.

He added that there is need for the government to put in place policies, guidelines and innovative structures like special funding mechanism that would promote the establishment of a bank of oil and gas in Nigeria.

He stressed on the need to revive the industry by investing in the future through incentives with focus on gas exploration as primary objectives.

He said, “Our biggest problem has always been financing, hence we need to form a bank of oil and gas. Though it may not solve all of our problems but it will ease the issues we are having with the banking system now.”

According to Afolabi, reviewing the unit cost of production is critical for operators to remain competitive, as the cost of oil production in Nigeria remain the highest compared to other nations.

He said, “Massive investment by the government in infrastructure to reduce the cost of doing business and government policies that are investor friendly to accommodate both the IOCs and indigenous independent producers.

“As we continue to progress in the creation and adoption of new technologies and the appropriate funding mechanisms and put in place for the industry as a whole, the possibilities remain endless with the oil and gas industry for several decades to come.

“We advocate the quick passage of the new PIB and unbundling of the oil and gas industry. We expect that the Bill will steer us in the right direction if properly executed, and will also strengthen and deepen policies and strategies critical to developing the sector.”

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari in his remark noted that it had become instructive to understand that the current market reality cannot support inefficiency and escalated costs of operations adding that the era of $30/bbl oil no longer exists.

Kyari explained that to sustain operations and making progress in the covid-19 defined market, all stakeholders must recognize the need to improve efficiency, reduce costs, eliminate wastages, entrench accountability, act with transparency and embrace technology and innovation to drive performance and value realization across strategic investment portfolios.

He said, “The Covid-19 came with a drastic decline in the demand for oil and businesses must adjust and do things differently, pull down cost and increase revenue by reviewing the local portfolio with partners.

“The Corporation had made significant progress in improving operational efficiency through the adoption of technology and deliberate effort to curtail soaring cost of operations across strategic assets.

“As a National Oil Company, our response to situations like COVID-19 is not to shut down operations owing to the linear relationship between the oil industry and our Nation’s economy. What first come to mind is how to survive and sustain our operations.”

Kyari noted that the Corporation, in the face of the energy transition, is focused on developing gas infrastructure and deepening domestic gas utilization, stressing that gas is the energy of the future.