Thank you for the invitation to be the guest speaker at this Triennial Conference, coming only a few months after my retirement from ExxonMobil. While I served as the HR Director in ExxonMobil, from 2006 to 2019, there were many occasions that I wished my relationship with PENGASSAN was more salubrious. But it was also not lost on me that there was nothing personal in the occasional brushes and disagreements. I had my fair share of ‘’we no go gree oh!” struggles, including two production shut-ins. It was tough! However, the good news is that both parties, Union and Management, always came out stronger, and more determined to work collaboratively. And we also did a lot of work at the national level; building local capacity, mitigating expatriate quota abuse and strengthening work place policies. So, whatever may have informed my choice as the speaker this morning, I thank you.
A few weeks ago, I was opportune to speak to a group of Energy practitioners under the auspices of Women in Energy Network, on the subject of Leadership Agility and Resilience. It was a good opportunity to remind ourselves of the turbulence previously encountered by the Oil and Gas industry and how our dogged employees, majority of whom are members of PENGASSAN, worked collaboratively with management, to push through the storm. Some of you will recall the 2007-2008 global financial crises, which had oil price crashing from US$147 to US$30 a barrel. You will also remember the period between 2014-2015, when OPEC members consistently exceeded their production ceiling, China experienced a marked slowdown in economic growth, and U.S. oil production nearly doubled due to substantial improvements in shale “fracking” technology. Businesses were roundly impacted, but somehow we were able to pull from the brink. Some of you in this hall today were actively involved in the ‘rescue mission’, and we often referred to you as ‘crises management experts’, notwithstanding the fact that sometimes, you overreached your mandate by getting involved in matters not under your direct purview, just to help. Well, you know your slogan: ‘injury to one is injury to all’!
So, while Covid-19 pandemic has been unprecedented and globally devastating, affecting individuals and corporate organizations in diverse ways, be aware that your dexterity and cooperation like you have demonstrated in the past will be required to navigate businesses out of the woods. All hands must not only be on deck, but everyone must row in the same direction. Even though I am no longer involved in the day to day management of people issues in the sector, let me quickly acknowledge that everything I have heard so far points to an understanding by the Union of the current situation, and with your members already making huge sacrifices. For example, those working in remote/offshore locations are subjecting themselves to long periods of quarantine prior to departure, and maintaining longer work schedules, just to keep production going. That is how it should be and it is quite commendable. And I know that a lot more adjustments may have to be made in the coming weeks/months.
The future of work post Covid - 19 pandemic
You have asked me to speak today about the future of work post Covid-19 pandemic and Energy Transition. Given your mandate and obligation to your members, I presume what you really want to hear from me is whether the oil industry still has potentials for growth and particularly, if the current disruption will lead to ‘excess manpower’, thereby triggering bouts of redundancy or separation. In other words, you want assurances on job security and better opportunities for your members; just as you want the Union as a body, to continue to be financially buoyant, given that the check-off dues is predicated on membership. These are realistic concerns, otherwise you may be caught napping. You may wake up one day, even in the not too distant future, to realize that the relevance of the Union has been eroded if you don’t reposition in line with current realities and evolving trends. While that is not my wish for you, it could be the case. And I will explain shortly.
It is thrilling that PENGASSAN is paying close attention to the discourse on Energy Transition. That shows professionalism. While we all appreciate the growth in the energy sector, beginning from the industrial revolution, the demand growth for fossil fuel as civilization peaked, we cannot ignore the fact that the concerns hitherto thrown up with regards to climate change had started a journey of reshaping the industry. And this will not stop, notwithstanding the position taken even by some notable world leaders.
Energy transition (also called Green transition) is the plan to zero out the dependency on fossil fuel (oil and natural gas) thereby reducing greenhouse gas emissions with impact on climate change, and transitioning into renewable energy such as, wind power, solar power (thermal, photovoltaic and concentrated), hydro power, tidal power, geothermal energy, ambient heat captured by heat pumps, Biofuels and renewable part of waste which are environmentally friendly and biodegradable (Eurostat Renewable Energy Statistics). The European Union has an objective to be the world’s first climate-neutral continent by 2050 in a deal European Green Deal (COM (2019) 640 final). If things proceed as planned, Hundreds of Billion barrels of oil and Trillion cubic feet of gas investments will be left in the ground as ‘stranded assets’ due to the transition. Many billion dollar projects will be re - evaluated and many will no longer be viable.
The good news is that Nigeria is not inactive in this space. In furtherance of her commitment as a member of the United Nations, African Union and ECOWAS, all of which have variously adopted several treatise and policies to promote the use of renewable energy, the Nigerian Government in 2015 rolled out the Nigerian Renewable Energy and Energy Efficiency Policy (NREEEP). It also set an integrated energy mix targets, under the Electricity Vision 30:30:30; of 30% generation from renewable energy sources.
At a 2018 pre-conference workshop of the Nigerian Association of Petroleum Explorationists, the then Minister of Works, Power and Housing, Mr. Babatunde Fashola, couldn’t have been more explicit on Government’s seriousness when he said: ‘’Let me be clear and unequivocal by saying upfront that our commitment as a nation and government to pursue renewable and low carbon energy at a low cost is clear, firm and unshakable. But this is not all. It is a commitment driven by necessity, contract and policy’’.
To further demonstrate seriousness, the Nigerian government has enacted a Feed- in Tariff policy to support the implementation of Renewable Energy to the overall energy mix in the country. The market is huge in Nigeria, and the country is blessed in abundance with Renewable Energy sources. In the North, we have sun and wind, in the South, we have hydro and wind; and there may be possibilities of geothermal sources in the middle belt of Jos. It remains to be seen if it would be found in commercial quantities. Additionally, and with regards to funding, Nigeria has successfully issued a green bond (which was oversubscribed) and in July 2018, the Debt Management Office (DMO) listed N10.69 Billion green bonds on the stock market at a coupon rate of 13.48%. The Federal Ministry of Environment is leading the effort to partner Donor Agencies and the private sector to ensure a steady stream of funding is available for Renewable Energy projects through the issuance of green bonds and engagement with Financial Centres for Sustainability (FC4S).
Some companies are already moving in this direction, knowing it is the right thing to do. For instance, the National Oil Company (NNPC), has a department focused on Renewable energy, while Total has retrofitted some of its gas dispensing stations with renewable energy. There are more examples to cite. A recent Deloitte 2020 Oil and Gas Industry Outlook midyear report acknowledged that the ‘’oil and gas companies of today, many of which aspire to be the broad-based energy companies of tomorrow, will need to figure out how to produce more oil and gas (and increasingly power) year after year while also being carbon-conscious and addressing stakeholders’ sustainability concerns’’.
Coming back home, the year 2020 was expected to be a good year for the industry, both for liquids and gas. In fact, 2020 was tagged ‘Our Year of Gas’. We had plans to ramp up investment in exploration and drilling activities, unlock opportunities in marginal fields (happily the Department of Petroleum Resources is proceeding with the bid process) and generally increase production. Gas reserves actually increased to a peak volume of 203 trillion cubic feet (cf.) reserve in 2020 through these increased exploratory activities. Major gas projects including NLNG Train 7 and the Ajaokuta-Kaduna-Kano (AKK) pipeline are in progress given the attendant benefits to the nation.
With the AKK project, despite a few political shots to the contrary, the benefits should not be lost on us as the completion of the project will see an increase in electricity generation, clean gas for domestic and industrial consumption, and improved supply from Ajaokuta through Abuja and Kaduna on to a terminal gas station in Kano. Also important is the opportunity of getting Nigeria’s gas into Europe, being the first part of the Trans Nigeria Gas Pipeline Project (TNGP).
While Oil (liquid) reserve target of 40bb by 2020 has not been met, (current reserve level is ~36bb), we managed to keep production steady at ~2mb/day of liquid oil. However, presently, OPEC cap to manage price through demand/supply mechanism is a major constraint on production. Overall, while fossil fuel will continue to remain attractive, at least for now, we should never forget the country’s commitment to pursue Renewable Energy, driven by necessity, contract and policy. And it is the right thing to do.
PENGASSAN - Today and Tomorrow
Resources for the future, an independent, nonprofit research institution in her May 2020 report opined that “while it is still unclear how long lasting the effects of COVID-19 will be, there is already clear evidence of its immediate impacts. As of the end of April 2020, crude oil prices had fallen more than 70% in just two months, amid cratering demand and stubbornly elevated supply. Real-time data on electricity use for the United States has revealed not only falling electricity demand…as people change their habits. Similar declines have been seen in Europe, coinciding broadly with the timing and stringency of each country’s lockdown’’. Additionally, with the world practically shut down, economic activities halted, and everyone focused on survival, the International Energy Agency (IEA) has acknowledged that this period has witnessed ‘’the largest decline in global energy demand since World War II, stretching across every continent’’. So how should PENGASSAN respond to all these?
As earlier canvassed, PENGASSAN’s immediate focus area should be the impact of COVID-19 on her members. So what should you be doing to keep the ship sailing and mitigate further damage to the industry? As Africans, I want us to be reminded of the proverb which says ‘’only a fool tests the depth of a river with both feet’. More than ever, whatever you desire to do must be carefully considered and responsibly executed. I hereby propose the following posers for your kind consideration:
What is keeping business leaders awake?
All of you seated here are business leaders. And I am sure you are not sleeping comfortably knowing what COVID-19 has done to businesses; with some hitherto rock-solid companies filing for bankruptcy, while others have either laid off many staff and or are struggling to pay salaries. You must have heard that in the US, about 40 Million jobs have been lost, while in Nigeria, the National Bureau of statistics has just released the unemployment figure in the country, showing an increase from 23.1 % in 3Q2018 to 27.1% as of 2Q2020. The number of the underemployed is much higher and it is going to get worse with those hitherto employed likely to join the labour market. What is needed most at this time is understanding and support from bodies like PENGASSAN, given that your members must reinvent and hone other skills to ensure they can fit into the new ways business will operate going forward. Every support count towards recovery. Nothing should therefore be done to increase the misery of companies.
What skills will you require in your organization?
On August 15, 2020, there was a Business Leadership Roundtable on Mindset for the New Agenda, hosted by one Effiong Esumo for the Oro nation, and he highlighted the fact that businesses are no longer looking for employees who simply carry out tasks, but those who are solution providers. How apt! The business environment has been altered and adaptability is the new marketable skill. It was Alvin Toffler, an American businessman and writer, whose works discussed modern technologies, including digital revolution and impact of culture worldwide, who opined that ‘’ The illiterate of the 21st century will not be those who cannot read and write but those who cannot learn, unlearn, and relearn’’. How prepared are your members to adjust to the current realities? What training opportunities are you canvassing for them? Most are now virtual and cost is low.
How prepared are you for the aggressive role of technology in today’s market?
More than ever, Technology cannot be wished away in today’s business environment. In the last 6 months we have witnessed a minimum manning level, with fewer personnel working in critical oil and gas sectors and getting production going in a safe manner. While projects have been scaled back, and there are no on-going drilling or exploration activities, we can be assured that various technology centers are aggressively seeking ways to re-start programs and with technology playing a much bigger role.
At a recent online ADIPEC Energy Dialogue Webinar, Philip Whittaker, Partner and Director, Oil and Gas, at the Boston Consulting Group is quoted as saying that one of her clients, working in North Sea operations, which demobilized about 40 percent of its traditional crew from the platforms because of the pandemic, was still able ‘to liquidate 90 per cent of her plant maintenance and integrity activity due to the application of wearable technology, digitized remote viewing and remote work planning’’.
Additionally, oilandgasrepublic.com has a report that Huawei has already highlighted 7 technologies that will reshape the oil business: from Big data and analytics, The Industrial Internet of Things (IIoT) and edge computing, Cloud computing, AI and machine learning, Robotics and drones, 5G networks and Collaboration tools. Will the members of PENGASSAN be ready when these tools are fully deployed?
How can the Union reinvent itself?
I foresee that the traditional role of the Union will take a natural decline, and if you must stay relevant, you need to start refocusing on getting your members, including personnel likely to be on-boarded through a virtual hiring process and working outside the traditional office setting to continue to appreciate your offerings. For instance, we know that most offices may not be fully reopened for some time, how is the Union assessing this situation and advancing engagements aimed at bringing terms and conditions of employment to be in conformity with current and evolving business realities? Why should companies continue to bear costs originally in place for a physical work arrangement? This should be a subject of conversation.
There is a Ugandan proverb that reminds us that, “It is survival, not bravery that makes a man climb a thorny tree.” The oil and gas business is capital intensive, technology driven and has a long-term orientation. No one goes in with a view to making immediate profit. We have seen many companies go-under on account of errors; drilling dry holes, project cost over-run, safety gaps, etc. We are also privy to situations where fiscal terms, community strife and general insecurity become barriers to investment. While there may have been strategies developed over the years to respond to some challenges, very few organizations thought about a response to a pandemic attack at the scale of COVID-19. This is therefore a time to meaningfully revisit the Union’s popular phrase of ‘a salubrious’ relationship. You have an opportunity to innovate, becoming advocates for businesses and rowing in the same direction, for the overall good of all parties. That’s the right thing to do. That’s what will benefit thousands of your members. And at a personal level, that’s what I want given the need to secure my pension after 30 years of hard work in the industry we all care about.
Thank you and God bless.
Udom Inoyo Retired Vice Chairman ExxonMobil Companies in Nigeria