"Investors from the vasty deep" - Nigeria and the quest for new Oil and Gas Investors

Reading the news report in the Tuesday papers that the Special Adviser to the President on Energy: Dr Emmanuel Eghogah was seriously lobbying for new investors at the Offshore Technology Conference ("OTC") holding at Houston and assuring them of the security of their investments in the nation's Oil & Gas Sector, I was reminded of a dialogue in one of William Shakespeare's plays: Henry IV.

In Part 1 of the Play, two characters (and bitter rivals): Hotspur and Glendower had this very interesting conversation:

Glendower (boasting):
I can call spirits from the vasty deep.

Hotspur (responding):
Why, so can I, or so can any man;
But will they come when you do call for them?

The moral of the dialogue is that anyone can wish upon or command anything he desires, the critical thing is whether the desired outcome/wish will occur. This dialogue seems all the more relevant, when one considers the fact that the Nigerian government is currently seeking new foreign investors for the upstream Oil and Gas sector while the deep-seated investment-inhibiting issues plaguing the sector remain unresolved.

The security situation in the Niger Delta, which was alluded to in Dr. Egbogah's statement at the conference, is abysmal and has led to a situation of near anarchy with various "packages" (i.e. human beings, preferably Caucasian) being kidnapped at will and huge ransoms being demanded and, almost invariably, paid to secure their release. A kidnap and ransom industry has blossomed to complement the already established bunkering industry in the Delta, culminating in the emergence of large numbers of young men with criminal careers that are so lucrative, and near risk free, as to make the pursuit of any legitimate career or trade unrewarding and unreasonable in comparison. All this happens despite the launching of various "expeditions"(with often scary names) by the police and armed forces which seem not to make a dent in the seemingly impenetrable armour of militants motivated by quick riches. To solve the Niger Delta crisis, we need to go beyond sloganeering and begin to tackle the structural issues which have made lawlessness second nature to the youths of the region. The problem at hand has gone beyond that of ensuring a nice and friendly neighborhood, it has become a matter of national economic survival. The activities of these "restive youths" have led to severe losses in Crude Oil production (Nigeria's lifeblood), reducing our current average daily production rate to about 1.78 million barrels as against 2.6 million in 2006 and a 2009 budget benchmark rate of 2.29 million. Yet no end seems in sight to this crisis as our politicians seem incapable and/or unwilling to make the tough choices and concessions necessary to maintain our collective security and prosperity.

The security situation in the Niger Delta is by no means the sole militating factor against foreign investment in our Oil and Gas industry, equally troubling is the incoherent and often volatile policy regime of the current administration. In the last 2 years, various companies have watched their concessions and/or contracts being revoked, with the Korean National Oil Corporation (KNOC) being the latest company to join the "revocation club". KNOC is currently contesting the revocation of its Oil Prospecting Leases (OPL) in the federal courts and if the antecedents of our justice system are anything to go by, the company faces a long, hard and tortuous road to justice. The government cites the non-payment of US$ 231 million out of the US$ 323 Million required for the leases as the reason for its revocation order, while KNOC maintains that the US$ 231 million balance being cited by the government had already been written off by the immediate past administration in return for the construction of much needed infrastructure (such as a power plant and gas pipelines) by the Company. This incidence just adds to the string of policy somersaults and reversals that have plagued our country in the recent past, how can we begin to think seriously about attracting investments into the country when companies can't be sure that agreements survive the transition into another government of the same political party!. I don't want to sound unduly alarmist, but it is increasingly beginning to seem as if agreements in this country are not worth the paper on which they are written.

Until we begin to adopt investor friendly policies; strengthen our judicial and other independent institutions and improve the security of lives and property, we may struggle to attract serious investors with long term investment horizons. And like Glendower, we may continue to boast of the ability to call "investors from the vasty deep" but it is far from assured that they will come!