The CEO Interview
Why Total E & P keep investing despite non-passage of PIB – Proust
Elisabeth Proust is the managing director and CEO of Total Exploration and Production in Nigeria. In this interview with Olusola Bello, she spoke on a number of industry issues and the next level she intends for the company while she presides as the chairman of Total Group of Companies in Nigeria. Excerpt:
How long will it take to Total stop gas flaring in the country?
Ofon is the only major installation where we have gas flaring and we will stop flaring there in January 2015. All the other installations, onshore on OML58, on the FPSO and on other platforms that we have, are all connected already for a gas utilisation solution designed to inject or commercialise the gas.
So we will achieve zero flaring, though installations will maintain a small steady flow of gas to maintain a safety flare. All gas flaring associated with oil exploration will be stopped by January 2015. There will be a formal flare out ceremony to which you will be invited.
What is your programme towards domestic gas?
We have invested in a 24-inch wide 50km long pipeline onshore starting from OML58 to the Imo River. Here we already have a contract with the Alaoji Power Plant and this is our first customer and we will be ready in 2015 to deliver 100 million cubic meters per day.
We have contacted other industrial users, not just power plants because when you have the energy it stimulates development. My plan is that by 2017, we should evacuate 300 million cubic feet of gas through the pipeline.
It’s a huge pipeline crossing several communities. So it was not so easy. The cost of the pipeline is now around $900 million. To get return on such investment in pipeline, we need effectively good clients and an improved gas price.
The improvement on gas price is good but it cannot cover the budget of the pipeline. I hope that with increased industrial uptake we will be able to achieve a better price and we can offset the cost of investment in the pipeline. To stimulate the development of gas facilities, we calculated that the average price of the gas will be between $5 and $7 per million btu. If fiscal terms change, then it will affect the price.
Why is Total coming up with new projects despite non-passage of PIB?
Nigeria is one of Total’s biggest affiliates. One of Total’s attributes is boldness and we took a bold attitude to commence the development of Egina as we are reasonably confident that for the existing production and projects, the government and legislature would look at the risk and very heavy investment we have undertaken and decided not to modify initially agreed investment and fiscal terms.
However, on PIB, we don’t really know the content of the draft in circulation as at now. This was because the last time that the industry had access to the draft was during the public hearing of April 2014. Since then, we have never had any official access to the terms.
What we understand could be in the actual PIB draft is a big worry for Total. This is because we have started all these deep offshore projects on the economics of existing terms and condition of our production sharing contracts or the PSCs we signed with NNPC and the government.
We took the risk in accordance with the terms of the PSCs, which many people don’t realise meant that we make all the investment with the government paying nothing. If we didn’t find oil, then we lose everything without compensation or any recovery from the government.
We took the risks but on the other hand when you take a risk you want your reward and the real reward is to be able to maintain our investment in Nigeria and our commensurate returns in line with the contracts.
For the joint venture projects like Ofon 2 and OML58, we are very close to concluding the development of those projects but for Egina which is a deepwater PSC project, we are just at the relatively early stages and we will continue based on the actual fiscal and PSC terms that we know.
On other projects I want to say that Usan is my baby. I was involved in Usan right from when I was in charge of project architecture and engineering for E&P at Total headquarters and I was happy that Usan was on-stream by the time I came to Nigeria as MD.
We have discovered more fields like Ikike, Ubeta, and on the deep offshore we are conducting appraisal oil well. We still have a lot of projects in our portfolio. Some need to perform. Some are undergoing appraisal but I will say that my major objective as MD in Nigeria is to perform exploration.
I am concerned that most of the companies in Nigeria are involved only in maintaining production with very little exploration. But the future of Nigeria is in exploration to renew reserves and to find development opportunities. For us, it is clear that we have to continue exploration.
What is your take on crude oil theft?
The issue of oil theft is a major concern for everybody. We need to be very precise for Total. Total Trading Company lifts our own share of oil. We don’t lift oil for any other organisation or government. Therefore we cannot be accused of contributing to oil theft.
We produce oil onshore on OML 58 and transport it to Bonny Terminal through the Trans Nigeria Pipeline operated by SPDC. We have installed metering to know the quantity we inject into the pipeline and we equally measure what is delivered on arrival at the terminal.
Using simple arithmetic we know what has entered and we know what has arrived. The differential is what has been stolen in transit from point of injection to point of arrival. These are precise calculations. Between 2010 and 2014, I will say on the average, we have lost 7 percent of Total’s operated production, which works out to about a minimum of 3,000 barrels of Total operated oil production stolen daily.
This is something that has been documented. However, there are some fields without metering. So we much ensure that such fields have measuring facilities installed to ensure that we know exactly what is going into the pipelines in order to know exactly what we get.
For Total, the oil theft is a big concern because we are not only moving the oil through the pipelines, we are also transporting gas, so when this pipeline is stopped, we also have to stop gas production. In order to minimise production losses, we have put in place a 42-inch O.U.R pipeline so called because it starts from Obagi through Ubeta to Rumuji (O-U-R). This is in order to allow us to still be able to produce gas when the Trans Nigeria Pipeline is stopped for any reason.
We are partners in the Shell Petroleum Development Company (SPDC) operated joint venture which has a much larger onshore presence with movement of crude oil through a much larger network of pipes. The oil theft from those pipelines is much more dramatic and we also suffer losses based on our interest in the production from that joint venture.
IOCs are playing politics with the issue of PIB. What is your position on this?
At Total, we don’t play politics. It is the role of the government and legislature to produce laws. But it is difficult for us to understand why we should not be aware of what is going to happen especially as we are investing billions of dollars in this sector under agreed terms which may change without any consultation. Total has taken the risk to launch projects because we believe that the conditions will remain the same but with improvement through the PIB.
Among the major things we seek in the PIB, apart from stable fiscal conditions that promote investment, is reduced bureaucracy. Today, getting approvals is very complex. The duration of getting approvals in Nigeria is the longest globally with the complexity in the number of agencies that we have to face. This is one of the areas we expected that the PIB will address. The other is on Gas terms. The PIB should address both fiscal and non-fiscal policy that will accelerate the development of Gas. And this is our expectation of the PIB.
What would you do if the terms in PIB does not favour Total?
There was a South American country that suddenly made big changes to existing fiscal terms and conditions. Many IOCs left the country. Total is still working in this country but at a very low level and we have been unable do any new project in that country because of the change in its fiscal policies.
Government revenues dropped dramatically and the government is now reviewing their current policies to bring back investments. We sincerely hope that it is not going to be the case in Nigeria. This is because the dialogue is still there, and because the magnitude of our investment is such that I hope that we will be able to convince all stakeholders that it is important to first, sustain the existing contracts and conditions and second, to increase investment and production.
There is the problem of skill gap in the industry, what is the contribution of your company towards addressing this problem?
We have a special programme setting out what we want for every position. We determine the skills gap between what we have and what we need. Often, we have competent Nigerians in position already that may need additional training or who are working in another position.
Then we establish competence metrics to close the gap. Part of our Total culture is that we rotate staff through different positions to build competency. This varied experience helps to prepare staff to handle whatever positions we propose to them.
We are also building up a pool of Nigerian technical specialists that will be available not only to Total in Nigeria, but will be on call by Total companies worldwide to address specific specialised technical and operational issues. We have some Nigerian specialists in place already and we have identified some other candidates to join this pool.
Some universities are in collaboration with IOCs on this issue of skill gap, companies like ExxonMobil, Chevron bring foreign experts to train lecturers and students on new innovations and technologies, is Total also doing same?
Total established a post-graduate Institute of Petroleum Studies at the University of Port Harcourt in 2003 in collaboration with Nigerian National Petroleum Corporation (NNPC) and IFP to prepare Nigerians for positions in the oil and gas industry. The Institute of Petroleum Studies (IPS) has been an incredible success story and has turned out many graduates who have gone on to contribute strongly to the growth of the oil and gas industry in Nigeria.
For Total staff, we have an extensive training programme which has been established between us and our headquarters. Our preference is that trainings be done locally and even foreign trainers come here to run the courses because Total has a big training centre in our Port Harcourt premises.
We use internal resources, the French Petroleum Institute known worldwide to perform this training and some other local and international companies to perform both management, technical and operational training. Each staff has access to a catalogue of training opportunities but most importantly is to be sure that these trainings correspond to what we want for development of the person.
We also have training for other Nigerians who are currently not in the employ of Total. As at the last count, Total has trained about 26 Nigerians through an innovative teaching improvement initiative in partnership with Google and the prestigious Massachusetts Institute of Technology (MIT) in the United States.
We also have a strong scholarship scheme, especially for people that we would like to develop their competence and expertise. The only thing is that compared to other countries, we need to put more effort on the Nigerian universities. The system to send them abroad for training is good but it has limited impact compared to when we develop IPS and other institutes, schools and universities dedicated to oil and gas in Nigeria.
We should also make effort to develop capacities in Nigerian universities especially where we found such specialities for the oil and gas industry. This will be achieved while not limiting the scholarships for training abroad.
How are you implementing the local content policy of the government?
I am very focused on what I call the real local content. The real local content is to have construction capability; companies delivering services for Nigeria, by Nigerians and in Nigeria. This is a little bit different from the notion of Nigerian shareholding; Nigerian shareholding is merely financial operation.
What we seek is to build capacity in the various sectors of oil and gas exploration. It can be construction, it can be reservoir, engineering studies and we are providing assistance to achieve this capacity within the pool of talents available in the country.
As an organisation, we have started an initiative to register all Nigerian companies to know the actual capacity of these companies, so that we can help them to develop the standard that we require from them. That is the best way to increase competition and break monopoly.
However, I will say that the local content in Nigeria has started very well but there is room for improvement. As at now, there are not enough companies or facilities, which are contributing to the high cost because there is a tendency towards a monopoly and monopolistic pricing.
Still on local content, what measures is your company putting in place to monitor the compliance of your contractors?
We know exactly what is required by the Nigerian Content Development & Monitoring Board (NCDMB) in our contract. On every project, we have been increasing the local content.
For example the OML 58 upgrade, we have achieved an average of more than 70 percent local content. In Ofon 2 we are at 65 percent local content and for the first time the deep-water project will be more than 60 percent local content with some items fully done in Nigeria for example the well heads for Egina and integration of the FPSO.
We have set targets for local content and when we need to assist, we will assist the companies to develop the capacity. And so we need to take some risks sometimes to contract a company with a new untested yard, at the same time we need to run the project.
The facilities must be developed. So this is a huge risk on our part, but this is the only way to push and constantly increase slowly but surely the local content. It has to be a long term process. So, in some of our projects we may achieve low Nigerian content, while others it may not actually be good. However, we have ensured with each project, local content is increased and this is what is sustainable.
Total is one of the most vibrant downstream operators in Nigeria; when is it likely to set up a refinery in the country?
Nigeria is the third largest market for downstream. We started in Nigeria in 1956. We are the number one company in Nigeria in distribution. So on the contrary we are looking at how to reinforce our position. All countries are difficult. But we are not going to sell our downstream.
This is very important to us. The Group has an aggressive, dynamic policy. So really it is important to show our commitment to remain in the downstream. Total downstream is on the stock exchange. This has gone down well with shareholders and we want to continue this trend.
For now, we do not intend to build a refinery. Not yet I will say. The midstream has been reserved for a long time for the National Company and how to insert us in this business is particularly difficult. So not yet. But I will not want to say never. This is because it depends a lot on how we understand the chain from the upstream, midstream and downstream.
Is your company providing an alternative energy in the country?
Total in Nigeria has decided to focus on one type of alternative energy which is Solar. We started in many countries in West Africa, Asia and the Middle East by providing energy to the people with no lights and no electricity. We also bought one of the leading developers of solar panels, called Sun Power. It is good to see that CSR can lead to an industry change.
Total has developed what we call the Awango solar lamp for personal use where electricity supply is not constant. We sell this through Total filling stations in Nigeria but hope to also move it into commercial stores.
There are two types of solar energy depending on how electricity is generated from the sun. The first type are photovoltaic cells. This has special cells which capture the sun radiation even where you have clouds. This was the case in Indonesia and it is also the case for Nigeria – you need to use photovoltaic cells.
The second one uses a system of direct mirrors.
We used this in Abu Dhabi because we have constant direct radiation from the sun. But for Nigeria, if you want everyday electricity, the photovoltaic system is the right technology to use as it works even in a rainy country though it is obviously more effective if it gets direct sunlight.
Total has developed industrial solar plants in several countries and in Nigeria we started three years ago. We identified five projects that we could do in collaboration with other companies and some institutions that provide funds to assist in the creation of such projects. The funds are not from us but they provide for our partners.
At the present, we are planning to launch one of the projects in 2015. This requires a lot of measures because you need to effectively identify the best location with high intensity of radiation.
The North of Nigeria is the best place because it has the most sun. We have a project in Katsina because it is an ideal position with a lot of sunlight and less clouds and rains. We work with authorities to achieve our objective. We are targeting plants of about 200 to 300 megawatts so we can reach something around 1,000 megawatts.
So, this is really an industrial development. We have a big organisation on solar energy in Total in Nigeria and we have a special team that are ready to assist on the special technical side to address any challenges.
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