22 August 2017

Nigeria: State Positioned for International Oil, Gas Dominance Despite Challenges

Photo: Vanguard

By embracing a digital revolution in its oil and gas facilities, Nigeria could propel itself from the shadows of persistent underperformance to become a global energy powerhouse. This will be a catalyst for industrialisation and growth in many other economic sectors too.

Digitalisation in the energy sector involves the better use of data to manage and control multiple operations. It drives efficiencies in energy management and automation systems. Importantly, workers in a digital industrial environment enjoy a massive increase in skills and productivity.

Digital development is not confined to new oil and gas facilities. Existing oil and gas infrastructure, from pipeline to refinery, can easily be upgraded to digital automation. This means that Nigeria's ageing oil refineries in Port Harcourt, Warri, and Kaduna can be optimised with digitalisation.

These facilities were built as early as 1978 but could be made far more efficient and productive, thereby significantly reducing Nigeria's dependency on imported petroleum products. The benefits of this investment would be measured in billions of dollars.

Effective integration of digital technologies could reduce capital expenditure in the oil and gas sector by up to 20 per cent, cut upstream operating costs by up to five per cent and downstream costs by up to 2.5 per cent.

Nigeria's best approach will be a combination of local skills and knowledge, and the expertise and experience of a proven international partner able to deliver digital technologies and automation, together with traditional instrumentation and controls, across the entire energy value chain. This further supports backward integration of skills and technical competence in Nigeria's limited skilled workforce.

A recent PricewaterhouseCoopers (PwC) report suggests that by end-2019 Nigeria could assume the status of the largest producer of refined petroleum products in Africa. The projection sees Nigerian exports exceed 300,000 bpd by 2019 - up 350 per cent from 2016 production of 65,000 bpd.

In this scenario, Nigeria becomes an international trading hub similar to Australia, Russia, Europe, and the U.S. Gulf Coast, while the entire West Africa region becomes energy self-sufficient by 2019, thus eliminating the need to source refined oil products from the U.S. and Europe.

Despite dwindling crude oil sales to the West, West African demand for Nigeria's crude oil is set to rise dramatically. The region annually consumes 22 billion litres of petrol, and Nigeria's domestic market accounts for 17 billion of those litres, yet the country still imports around 80 per cent of this energy.

With 37.2 billion barrels of proven oil reserves, Nigeria could easily meet this demand locally through modernisation and continued exploration. The country's refining capabilities are currently underperforming and notoriously inefficient, due to lack of maintenance and underinvestment in technology.

Nigeria also struggles with ongoing vandalism of its oil and gas infrastructure. Pipeline insecurity has a devastating effect on oil production, with a staggering financial impact. Technology is a significant part of the solution to this challenge, as it enables real-time monitoring of infrastructure and quicker incident responses.

Port Harcourt refinery, for example, has capacity for 150,000 bpd of oil production but has been running at just 10 per cent capacity for the past three years. This is mainly due to its reliance on 1980s technology now regarded as obsolete in the global oil and gas sector.

The consequence is lack of preventative and reactive maintenance, inaccurate forecasts and allocations, and soaring energy costs. To boost productivity and returns, Nigeria's energy operators should rapidly adopt and integrate digital technology that improves efficiencies and up skills staff.

Instead of being a threat to the workforce, digital technology redefines the role of the worker, and it has the potential to bridge the blue and white-collar worker, to create what is termed the 'grey-collar' worker. Humans and machines are therefore not competing for jobs, but working together to create a new type of talent, which is a vital component to sustained sector growth and maturity.

In the near future, Nigeria's oil and gas operations will have real-time access to data at the click of a button, from any location on earth. This essentially connects a team of global experts collaborating in real-time to drive improvements in exploration and extraction, health & safety, pipeline security, distribution, refining and transportation of the finished products.

And with a potential $300billion added to the African economy by 2026 through the adoption of digitalisation, Africa's largest economy will receive a significant portion of that figure to advance its burgeoning oil and gas market.

This in turn addresses the triple threat of unemployment, inequality and poverty - paving the way for a society where business success leads to socio-economic advancement, such as new business development and job creation, and essential new infrastructure projects that include schools, hospitals, transportation networks and housing.

To make this a reality, the Federal Government of Nigeria should include a robust digitalisation policy and supporting legislation in connection to its Economic and Recovery Growth Plan 2017-2020 (ERGP), which sets out the medium-term structural reforms to restore economic growth, invest in people and build a globally competitive economy.

One of its key priorities is to ensure power and petroleum product efficiency, which can only be achieved through a digital transition in the oil and gas sector.

Oil and gas operators in Nigeria should be early adopters of technology, their employees should be proactively trained in the application of the new technology, and the industry should be supported by an original equipment manufacturer (OEM) with proven global experience across the entire upstream, mid-stream and downstream value chain.

Tifase is the Chief Executive Officer, Siemens Nigeria, and a key player in the country's push for investment and growth in the oil and gas sector

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