Guest of the week

FG  should develop gas to jumpstart the economy- Dr Amao

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What is the impact of the downturn on your business activities?

Significantly, because quite a lot of companies are waiting to understand the dynamics and the policy frame work of the government in energy and oil and gas industry before they commit any investment. So, in the short term, people are barely paying their operational cost and are even cutting down on expenditure to increase their revenue because of the deficit in our budget. The naira is being devalued and forex is very difficult, so, at this point in time we are talking to our clients about creative ways of achieving their goals and objectives so to reduce cost in the area of skilled human resource capital.hotseat copy

What is the hope like, looking at the crude oil price below $28 per barrel as at today? What is the hope for private investors and also with the challenge of naira steady fall now at N304 to a dollar?

The exciting news from the supposed bad news is that Nigeria is going to be forced to focus on midstream and downstream. Take for example, the Department of Petroleum Resources which doesn’t even have a midstream unit which basically shows that our dependency on the upstream has been an achilles heels and now at $20 per barrel and 170 million mouths to feed, we must focus on midstream and downstream sectors of the value chain. That means we are going to develop gas and use gas to drive and jumpstart our economy especially in IPP projects, CNG, LPG solution. That will have a multiplier effect on small medium enterprises that have enough power supply. So, this will not allow us to waste money on running petroleum or diesel generators that will have a spill off on the manufacturing and industrial sectors of the economy. Now, we can  also use gas as feed stock for fertilizer plants and use that to develop Nigeria as agriculture and make us a food basket so that we now  have an agriculture and agro allied industriy spilling off fund from the same gas.  Then looking at downstream, we look at refining and petrochemicals. That’s exciting because we have wasted too much money exporting crude and importing the product and subsidizing the price differential at $20 or $27 per barrel. We do not even need to subsidize product because the cost of the barrel of oil is so cheap that the cost of production plus the cost of price is such that a litre of PMS should be less than N60.

What you are saying is that even the current price is still…?

N87 per litre is a rip-off at $29 per barrel. So anybody should do the economics. The only problem we have is that we have signed some ridiculous contracts whereby we are exporting crude or swapping crude to bring  products or to pay subsidized products which does not make any sense. It is very important that the DPR encourages Nigerians to invest in refineries whichever type of refineries whether modular or regular. We need to invest in refineries immediately so that we can take advantage of the low cost of the product to produce finished products in the medium to long term when the price of oil rises so that we can  start exporting finished products rather than exporting crude oil.  We can  strategically position Nigeria so that in the next few years, Nigeria will become an exporter of finished products. If that is our strategy to export finished products in the next two to three years, what we should be doing now is coming up with frontline design and feasibility studies for the type of finished products specifications that will meet the market specifications in Europe and in Asia where finished products are required so that in the next three to four years, we can export finished products to Europe and Asia.

Do you think the kind of environment and policies we have in place will actually support investment in refineries and other midstream activities? For instance, about 18 licensed private refineries are still there, they are yet to…?

Yes, yes. The only reason those private refineries are not in place today is simply because government has refused to deregulate the downstream. Nobody will put a penny into refinery until the downstream is deregulated, because the petroleum economics and foreign direct investment that will come to Nigeria must be based on a deregulated environment. The environment at the moment is not conducive for investment in refinery. All it takes is for the president to announce that the downstream has been deregulated and the government is no longer paying subsidy and the market should determine the cost of product.

With the modulation announced by the GMD of NNPC recently, are you saying that that was still not enough to encourage investors?

Unfortunately, too much money went into procuring divested assets two years ago at $110 per barrel. That was where the major loss was incurred. So, a lot of people are servicing debt at the moment at the depreciated cost of asset. The people who are knowledgeable enough to have put money into refinery unfortunately are cash- strapped. They are in debt because they have taken advantage of the divestment at high price of the barrel. So what we need now is to strategically attract new investors who have the liquidity of funds to invest in downstream and midstream.

As an expert, does it imply that Shell and others who forecasted that the price of oil will come down…?

Every multinational understands that between five to eight years there is always a cycle. So, they more strategic than we are. They had every good reason apart from militancy and unrest in the Niger Delta; they have good reason based on the predictive psychos of the oil and gas evaluating that there was going to be downturn.

So, how is Nigeria ahead to reposition in the midst of this downturn and the unemployed graduates?

Our focus has always been developing people, local people and local businesses. The good news is that you will always need local talent and busineses because whenever there is crisis, wherever there is a problem, wherever there is a gap, there is always an opportunity and our business is to fill this gap by creating the right people and the right businesses to take advantage of it.

What has been the experience and current focus of LONADEC?

The current focus of LONADEC in view of the downturn in the upstream of oil and gas industry is to create value in energy, power infrastructure and oil and gas mainstream and downstream. These are places where we primarily have the major challenges in Nigeria. So, we are focusing on identifying, developing and engaging local talents in science technology, engineering and maths. And our office is strategically positioned in Yaba, near YABATECH and  close to University of Lagos, near Jibowu Bus-Stop, where unemployed graduates, youths, undergraduates and young professionals can be empowered to enjoy rewarding careers.  We are in partnership with the Energy Institute to develop internationally certified energy professionals that cut across renewable and non-renewable energy for which oil and gas is one. Having served as the chairperson for the industry advisory team of Lagos State Technology, Vocational, Educational Board, I am very passionate about developing apprenticeship and internship programmes for young people so that they will be empowered. When there is an improvement in the economy, we will have skilled human resources and capital that Nigeria requires to drive the economy.

So, since inception, can you list your achievements?

Waoh! That would be a long one. I will have to send you a CV or write up on that because I cannot start listing my achievements offhand but we are very systematic about what we have done or we have been doing systematically in the past 25 years. I can send you a list of our achievements.

Can you list some of your products?

Our products.

Yes, some of the graduates from this place.

I have trained MDs of refineries. I have trained Executive Directors in

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