Atlantic Energy bosses predict rapid rise in Nigeria's indigenous oil production
Joint Chief Executive Officers of one of Nigeria’s leading oil companies Atlantic Energy are hopeful indigenous companies will be responsible for producing 30 percent of the country’s oil in five years’ time.
Kola Aluko and Scott Aitken said their company has been pushing hard for increased local participation in the upstream market, while attending the African Oil Week conference recently held in Cape Town, South Africa.
Aluko said: “Nigerian companies like Atlantic Energy have pushed for increased local participation in the upstream sector.
“As recent as five years ago, six to seven international oil companies were producing over 97 percent of Nigeria’s oil and gas, now Nigerian companies are producing close to 10 percent.
“I believe we can have 30 percent of Nigeria’s oil and gas production being produced by Nigerian companies within five years. The time is now for companies like Atlantic Energy and other indigenous companies to step up to the plate.”
Aitken made an example of Atlantic Energy’s Strategic Alliance with the exploration arm of the Nigerian National Petroleum Corporation (NNPC), Nigerian Petroleum Development Company (NPDC) where in Atlantic Energy provides funding, technical and project management assistance to NPDC for designated assets.
He also noted that Atlantic Energy has invested more than $500 million further to the Strategic Alliance Agreement with NPDC and also noted that NPDC and its Joint Venture partner have commenced a 60,000 barrel of oil a day flow line and flow station reinstatement.
During his address, Aiken explained there are hundreds of underdeveloped discoveries onshore Nigeria and with the recent divestments of onshore assets by International Oil Companies operating in Nigeria, this would increase the opportunities and access of Nigerian indigenous oil and gas companies to eight billion barrels of crude oil and 46 Trillion cubic feet of natural Gas Gross Reserves.
He discussed the challenges to the development of existing assets and increasing production including ageing infrastructure some of which have not been replaced or maintained properly further to which he suggested a detailed evaluation and phased infrastructure replacement/upgrade.
He also noted Host Community/ stakeholder relationships and expectations were having a negative impact on production levels and suggested improved community engagement and update needs assessment.
He also reported that Atlantic Energy has made significant achievements through an increase in the reserves of the assets covered by the Strategic Alliance as well as new field development programmes.
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.