The announcement of Udobong (Udy) Ntia as a member of NNPCL’s government management, chargeable for overseeing Upstream operations, was met with a collective sigh of reduction throughout the trade.
“Lastly,” one trade colleague remarked. “Whew, that’s a giant one,” stated one other. “Now, we transfer,” was the easy however optimistic message I acquired from a 3rd pal, who then instantly picked up the cellphone for a twenty-two-minute dialog. We speculated on how Udy got here to be appointed, what he understood concerning the present state of affairs at NNPCL, what his mandate may entail, and—most significantly—what key efficiency indicators (KPIs) would outline his success within the position.
Nonetheless, this piece isn’t about Udy, as a lot as his appointment symbolizes the bigger situation dealing with Nigeria’s oil trade. The actual story right here is the nation’s sluggish strategy to addressing the challenges in its key financial sector, by entrusting the destiny of its “golden goose” to these least geared up to drive change—particularly amidst the rising financial disaster.
Outsiders to the sector may discover the trade’s euphoric response to Udy’s appointment puzzling. In any case, because the previous English adage goes, “a tree can not make a forest.” But, on this case, the appointment of this single chief to a pivotal position throughout the underperforming NNPCL is a significant and symbolic step ahead. Because the late Martin Luther King Jr. famously stated, “The time is all the time proper to do what is true.” Ideally, the proper management ought to have been put in place at NNPCL years in the past. The subsequent finest time is now. The significance of getting the proper individual in the proper place—particularly inside NNPCL’s upstream division—can’t be overstated. Right here’s why:
Upstream Operational Excellence Drives Profitability
The efficiency of the upstream sector is straight tied to the profitability of your entire oil and gasoline worth chain. In an trade below growing strain to provide extra oil at decrease prices, operational excellence is non-negotiable. For NNPCL, the nationwide oil firm tasked with managing Nigeria’s huge hydrocarbon assets, the objective needs to be to optimize returns from its upstream property.
But, regardless of holding world-class reserves, NNPCL has persistently underperformed in comparison with its international friends. Take Petrobras, the Brazilian NOC, for instance. With simply over 10 billion barrels of oil reserves, Petrobras produced 2.24 million barrels per day (bpd) in 2023. In stark distinction, NNPCL, with over 37 billion barrels in reserves, has struggled to keep up a manufacturing charge above 1.3 million bpd over the previous 17 months. This discrepancy underscores the underutilization of Nigeria’s oil assets and highlights the inefficiency of NNPCL’s operations. As manufacturing prices rise and Nigeria’s fiscal breakeven worth climbs, it turns into much more important for NNPCL to enhance effectivity in its upstream operations.
Probably the most profitable nationwide oil corporations (NOCs) have realized to undertake the working philosophies of worldwide oil corporations (IOCs), who relentlessly pursue operational excellence to maximise earnings. These corporations compete by driving effectivity of their upstream operations the place they make vital earnings, which in flip helps their downstream companies. To realize related success, NNPCL should entice and retain the perfect expertise—particularly these with expertise in IOC-level operations. The clock is ticking, and a management overhaul couldn’t come quickly sufficient.
Nigeria Is Sitting on Gold—Ready to Be Mined
Nigeria is actually sitting on huge reserves of oil and gasoline, a lot of which stays underexplored and underdeveloped. NNPCL holds full or partial pursuits in over 50 oil mining leases throughout the Niger Delta, which give entry to over 20 billion barrels of oil and greater than 100 trillion cubic ft of pure gasoline. Regardless of this, the nation’s oil manufacturing has been in regular decline over the previous decade.
A significant factor on this decline seems to be the gradual switch of oil and gasoline possession to native corporations, which started in earnest about ten years in the past. This shift in possession has coincided with a 40% drop in manufacturing and a 70% lower in funding within the sector. Because the divestment course of continues, native corporations might be chargeable for over 80% of home oil and gasoline operations and round 50% of Nigeria’s whole oil manufacturing. NNPCL, now a three way partnership associate with the remaining IOCs and a rising variety of native impartial operators, holds vital operational and strategic affect over how these assets are exploited.
What’s sorely missing, nonetheless, is the management able to steering these property towards most worth. Nigeria is at a important juncture in its oil journey, and with out clear, decisive management, the total potential of those assets will stay untapped.
High quality Execution Should Match High quality Technique
To unlock the true worth of Nigeria’s upstream sector, the standard of execution should match the standard of strategic pondering. Structural reforms, innovation in contracting fashions, and alignment of incentives between NNPCL and its JV companions are key to driving operational fluidity. However technique alone won’t suffice—execution should observe. It’s important that NNPCL develops the capability to not solely design a successful technique but additionally ship on it successfully, guaranteeing that Nigeria’s hydrocarbon assets generate substantial worth through a nicely thought out useful resource to manufacturing technique.
Drill, Child, Drill
Within the oil trade, there’s just one technique to create worth: by drilling to extract hydrocarbon from the subsurface. Drilling new wells, re-entering current ones, and restarting shut-in wells—all whereas doing so effectively, safely, and cost-effectively. Whereas getting the oil out of the bottom is crucial, guaranteeing that it reaches the market—“getting the rattling oil within the rattling tank,” as my colleagues in Texas would colloquially put it—is much more important.
At this important juncture, the appointment of Udy Ntia to guide NNPCL’s upstream operations is symbolic of a bigger want for pressing, efficient management in Nigeria’s oil and gasoline sector. Nonetheless, true transformation will solely come when NNPCL is empowered with the proper methods, the proper expertise, and the operational excellence wanted to unlock the total potential of Nigeria’s huge oil and gasoline assets. Time will inform whether or not the trade’s collective optimism is well-placed or whether or not the lethargy that has plagued the sector will proceed to carry the nation again.
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Concerning the Creator
Dimeji Bassir is an oil and gasoline government with over twenty-five years international expertise working with multinational operators and oilfield service corporations. In the middle of his profession, he has held numerous operational, consulting, and business roles with numerous multinational operators and repair corporations. Bassir at the moment leads Ofserv, an impartial consultancy specializing in subsurface engineering, venture administration, drilling efficiency enchancment, and reliability providers. Earlier than Ofserv, Bassir was the Nation Supervisor for Nigeria at GE Oilfield Know-how and a Drilling Reliability Guide at GE Power Providers. He additionally served as a Drilling Efficiency Engineer for shoppers akin to BP, Shell Worldwide, and ConocoPhillips, and held area engineering positions in each onshore and offshore drilling operations with Baker Hughes, Halliburton, and Chevron.