Building human capacity for Nigeria's oil and gas business sector

Apr 24, 2009 02:00 AM

These are excerpts of the speech delivered by Chima Ibeneche, MD/CEO Nigeria LNG Limited, at the South-South Economic Summit, Tinapa, Cross River State, April 22, 2009.

Introduction
It's been said that anyone who seeks success or greatness should first forget about both and seek only the truth, and the rest will follow. Well, none of us here today, including the organisers of this summit, can argue with that kind of logic, which I dare say is a variant of the biblical injunction of "seek ye first the kingdom of heaven..."
Religion and science might sometimes conflict, but they are never diametrically opposed to each other. They are both in search of the truth.

So what is the truth?
In these times, where the truth is sometimes a moving target, I would like to set the premise for my thesis, the first being that Nigeria is a poor country, despite its huge population and abundant natural resources! Jeffry Sachs in his famous book "The End of Poverty... how to make it happen in our lifetime" said that extreme poor countries lack six major kinds of capital:
-- Human capital: health, nutrition and skills needed for each person to become economically productive.
-- Business capital: the machinery, facilities, motorised transport used in agriculture, industry and services.
-- Infrastructure: roads, power, water and sanitation, airports and seaports and telecommunications systems that are critical inputs onto business productivity.
-- Natural capital: arable land, healthy soils, bio-diversity and well-functioning ecosystems that provide the environmental services needed by human society.
-- Public institutional capital: the commercial law, judicial systems, government services and policing that underpin the peaceful and prosperous division of labour.
-- Knowledge capital: the scientific and technological know-how that raises productivity in business output and the promotion of physical and natural capital.

Nigeria has not fared well on all these benchmarks. If we need further evidence of Nigeria's poverty, we should look at her membership of the club of Least Developed Countries, (LDCs).
With about $ 1,000 per capita GDP, Nigeria occupies a lowly position of 193 out of 208 in World Bank's league table of nations.

Nigeria's oil production
Nigeria is ranked 6th among the oil exporters of the world. It also accounts for 10 % of all traded LNG in the world, exporting about 3 mm bpd and 15 mm tons of LNG per annum. If we looked at oil alone, assuming that 90 % of the value of produced oil accrues to Nigeria (and we know it is less) at $ 50/bbl, Nigeria would earn $ 135 mm per day. Assuming that there are 140 mm Nigerians, this translates to less than a dollar per person per day.
You can double this either by doubling the price assumption or the volume assumption, but the conclusion is the same -- oil does not make Nigeria rich. What Nigeria does with its oil could indeed make her rich. So far she hasn't done anything with the oil that would make her rich, so she remains a poor country.

Investment in education: Current status
The period between 1960s and 1980s was not only the golden age of university education in Nigeria, but also the golden age of research. In fact, it was unanimously agreed by the World Bank, the National Universities Commission, the Nigerian academic staff union and industries, that in terms of quality and quantity of research output of tertiary institutions, Nigerian was the best in Sub-Saharan Africa (Karani, 1997; Okebukola, 2002).
The Association of Indian Universities comparing the growth of tertiary education between India and Nigeria in 1981 praised the remarkable progress made by Nigeria. It said that "except for Nigeria in the last half a decade, or so, no other country in the world has had a growth rate of 13-14 % per year."

However, this head start was lost because of lack of foresight, changing directions, poor funding, and poor quality and quantity of research emanating from its ever expanding national university system. Today, no Nigerian university is listed among the top 500 universities in the world as ranked by the 2007 THES-QS World University Rankings. The University of Cape Town, South Africa is the only African university in the top 500.
The place of Nigerian universities in the African rankings is more pathetic because they trail universities from Kenya, South Africa, and Ghana, countries endowed with fewer natural resources. Only four Nigerian Universities -- Obafemi Awolowo University (OAU), Ile-Ife (44th), the University of Ibadan (65th), the University of Benin (79th) and the University of Lagos (90th) -- made the list of top African universities.

This reflects the poor staffing and funding situation in our schools. There are only 16,000 teachers in universities, a shortfall of 30,000 according to Chairman, Ahmadu Bello University (ABU) branch of the Academic Staff Union of Universities (ASUU), Mr Muazu Maiwada (2005).
These are not credentials of a rich country. The most generous description of Nigeria would be a potentially rich country inhabited by poor people who are hardly able to meet their needs of food, power, water, good roads and adequate health care.

South-South
The South-South region shares the same fate with the rest of the country. For instance, investment in education is especially lagging behind. There are not enough quality schools and not enough teachers. There is a preponderance of poor performing students.
Of the state universities accredited by National Universities Commission (NUC), the South-South region performed badly. It is obvious from the above that the South-South is as poor as Nigeria, if not poorer. The implication is that oil and gas has not made the region rich either. It is also clear that a different strategy is required to change the situation.

Wealth is human capital
In his book "The Origin of Wealth", Eric Beinhocker asks the following questions: "But where does wealth come from in the first place? How does the sweat of our brows and the knowledge of our brains lead to its creation?"
Implied in these is the truism now accepted by all economists that wealth is the product of people's efforts and the interaction of people in exchange and trade. It is not the endowments of minerals, land, geography, or even population. Without investment in human capital development, no economy has ever moved from agrarian to industrial stage.

It is therefore necessary for Nigeria, and yes, the South-South region to focus on the development of human capital as the only viable route to wealth. Converting the limited rent derived from mineral resources to human capital is the only strategy that will lead to wealth creation. This is the route followed by all emerging nations.
How this can be achieved will be my task this morning. I would like to propose a plan of action, strands of which include:
-- Establishment of elite secondary schools;
-- Establishment of shared facilities (just same as schools sharing stadiums for sports development);
-- Establishment of specialist institutions for shipping, aviation, etc., such as Maritime Academy, Oron;
-- Establishment of regional specialist schools;
-- Establishment of vehicles for effective Public Private Partnership (PPP) schools;
-- Secondment of professionals to schools;
-- Sabbatical for teachers in the oil and gas industry.

To benefit from the numerous opportunities presented by the oil and gas industry, we must have the right skill set and the requisite education. It is evident that investment in science education is critical to getting a significant toehold in the industry. The key skills needed through the life cycle of an oil and gas field are based on science education or on science related crafts and technology.
Of course there are other skills, which play secondary roles: Finance, legal, medical, media, etc. But the numbers of specialists needed are fewer and they, in general, play supporting roles.

The key to quality human capital lies in provision of good secondary education. Secondary education is critical to building human capital. Deficiencies in primary education can be remedied at the secondary school level by dedicated teachers.
But it is far more difficult, and almost impossible, to repair the damage of a failed primary and secondary education at the university level. At the tertiary level, it is assumed that the child has learned how to learn.

Two pronged strategy for education
Two strategies are required for the growth of human capital.
First is for the development of leaders and professionals. The second is the development of the executors in industry -- technicians and crafts people.
Any successful economy will need both.

Elite secondary schools
The development of leaders and professionals will require the creation of institutions that cater for the talented and the best. For this group, a few elite secondary schools must form the heart of the strategy. The pull of these elite schools will encourage excellence in primary schools as teachers and students work hard to earn admission into the elite schools.
Here I wish to commend the foresight of Governor Chibuike Amaechi in sponsoring students from Rivers State to elite secondary schools in the country, and for his initiative in building model schools in Rivers State.

Good elite schools act as magnets and bring about competition that rubs off well on both students and the general level of education. This has been the role Kings College and other Federal Government colleges played in the 70s and 80s.
To wrap up on this, I must emphasise that an elite school is not made of brick and mortar. Rather it is more of dedicated and motivated teachers equipped and supported to foster learning.

If there is a need to trade off because of the limitations of funding, it must be said that one good school is better than a thousand worthless ones. However, it may be necessary to share facilities to ensure that the region can fund the number of elite science secondary schools it needs.
Science laboratories and equipment can be shared by schools located in the same locality to reduce the cost per capita of each student. Information Technology centres can also be shared by giving schools in the same vicinity access to the Internet and to online libraries. This done, the elite schools should be able to feed the universities with bright students.

What applies to secondary schools applies even more to universities. One good university in the SS region will do more good than the many we have today that simply do not work. Universities need to focus on a few subjects in which they become centres of excellence. Effective universities are both purveyors of and creators of knowledge. Knowledge is created in the process of problem solving, hence the need for elite universities to get involved in solving the economic and social problems of the region.
An example of the right focus is the case of IPS of the University of Port Harcourt. The Institute of Petroleum Studies (IPS) is an international post graduate institution established through collaboration between Ecole du Petrole et des Moteurs (IFP School) France and the University of Port Harcourt Nigeria in 2002. The Nigerian National Petroleum Corporation (NNPC) / Elf Petroleum Nigeria Limited (EPNL) Joint Venture as part of its sustainable development Programme sponsors the collaboration.

IPS offers post-graduate training programmes for both the upstream and downstream sectors of the petroleum industry. Instructors are drawn from Nigerian universities, IFP School and the petroleum industry (from Nigeria and abroad).
The University of Port Harcourt and IFP School France award the joint degrees in conjunction with IFP Continuing Education, ENSPM France, and other local content services providers. The Institute offers broad-based continuing education programmes to professionals in the petroleum industry. The courses are designed to meet the needs of managerial, engineeringand technical staff in oil, gas and refining, petrochemical and chemical companies. IPS is planned to become an International Well Control Forum (IWCF) Certification Centre in Africa.

Middle level manpower
The second strand of the strategy is aimed at the majority of the population who are as endowed as the group of leaders and professionals. For these, vocational and trade schools are needed. These schools will focus on City and Guilds level of qualification in trades like welding, catering, scaffolding, fitting, bricklaying, tiling, auto mechanics, sea faring etc.
Is it not a shame that when we were fitting out Bonga in Nigerian waters, we had to import fitters, welders and scaffolders from the Philippines and the UK?

The oil and gas companies have taken the lead in the production of middle level manpower by setting up specialised schools to equip the students with the right skills for today's labour market. The schools include:
-- Shell Intensive Training Programme (SITP) was designed to develop the skills of young Nigerian graduates and technicians to prepare them for employment in the oil industry. Over 100 trainees are selected after a competitive test for each of the sections to run a 44-week session.
SITP has two streams: SITP/1 for Science Graduates and SITP/2 for school leavers with technical background. Both courses are based in Warri. There are three areas of specialisation; Instrumentation Engineering Technology, Electrical Engineering Technology and Mechanical Engineering Technology with Production Operations common to all of them. The training is provided by the Aberdeen branch of the IPEDEX Group. At the end of the training, beneficiaries receive the City and Guilds Technicians Diploma. The affiliation/accreditation with City and Guilds International, London enables graduates of the programme to obtain its internationally recognised Technicians Diploma.

-- Bonny Vocational School (BVC) is an NLNG/Bonny Kingdom partnership project designed to promote vocational/entrepreneurial skills acquisition, development of technical competencies and self reliance in youths in Bonny community in particular and Rivers State in general. It is geared towards meeting the needs and aspirations of community through three tier curriculum.
On successful completion of training, the trainee is awarded the International Technical Vocation Level 3 Certificate of London City and Guilds and or the Nigerian Skills Technical Certificate. The centre, which started in 2005, has trained over 500 youths in various technical vocations and competencies.

-- The Petroleum Training Institute (PTI) was established in 1973 by the Federal Government as a prerequisite for the membership of the Organisation of Petroleum Exporting Countries (OPEC) to train indigenous middle level manpower to meet the labour demands of the oil and gas industry in Nigeria and the West African sub region. It awards National Diploma and Higher National Diploma certificates. Its main task is to improve the knowledge and practical skills required within the oil and gas industry, both downstream and upstream.
It is my contention that the focus of PTI on the award of qualifications of HND, which competes with degrees awarded by universities makes this institution irrelevant and unsuccessful.

-- The Maritime Academy of Nigeria Oron, formerly known as the Nautical College of Nigeria, was established in 1979 as an integrated institution for the education and training of shipboard officers and ratings and shore-based management personnel. It provides education, training and upgrading of officer cadets through the development of knowledge and skills necessary to enable them perform duties at sea as Deck and Engineering officers in compliance with the stipulated international conventions for the training of such officers.
The education and training enable cadets to perform creditably, the functions required of junior managerial staff in the operations department of shipping companies, shipping agencies, portsand other organisations in the maritime industry.

-- NLNG is supporting the Nigerian Maritime Academy, Oron, to train manpower for the industry. The Warsash Maritime College, Southampton, was engaged to review the academy's STCW 95 courses. Warsash Maritime College also provides accreditation to the Nigerian Maritime Academy, Oron, through the Maritime and Coastguard Agency (MCA), United Kingdom. NLNG has contributed to enhancing training and providing equipment for the Nigerian Maritime Academy, to help it achieve the recommended standards. To date, NLNG has employed over 160 graduates of the Maritime Academy, Oron.
In 2008, 28 cadets were recruited from the academy by Nigeria LNG Limited. They commenced their cadetship training at Warsash Maritime Academy and Glasgow Nautical Studies in the UK in January 2009.

Opportunities in oil and gas business
It is trite to repeat the cliche that oil and gas is the mainstay of the Nigerian economy. It is however pleasing to note that despite the global financial and economic crisis, oil and gas industry remains robust, taking the ups and downs in its stride.
Not withstanding the prophesy by doomsayers, and even President Obama's crusade to break his country's addiction to oil -- USA's annual oil consumption per capita is 25 barrels -- the global energy demand in the medium and long term will continue to grow, regardless of the present economic recession.

Indeed, in the latest World Energy Outlook, the International Energy Agency believes the current economic storm has not changed the market's long-term outlook. It sees world energy use growing more slowly to 2030 than it projected last year, but still expanding by 45 % between 2006 and 2030 with an average growth rate of 1.6 %.
Fossil fuels will account for 80 % of the global energy mix in 2030 with oil being the dominant fuel. China and India will account for more than half of the incremental energy demand by 2030, it said. China's per-capita consumption of oil, for example, climbed from 1.58 barrels in 2003 to 1.75 barrels in 2004. This trend is expected to continue.

The petroleum landscape in Africa is changing rapidly, and experts say that confidence that the continent can develop into a worldwide petroleum centre remains unchanged. The optimism has been substantiated repeatedly: bringing new acreage offers, substantial onshore/offshore hydrocarbon discoveries, commissioning of numerous fields, and development of much needed infrastructure.
A push to divert the United States' oil dependence from the Middle East has also led to a new rush to Sub Saharan Africa and to the marginally tapped reserves of Angola, Equatorial Guinea and Nigeria, where major discoveries receive fast paced development programmes.

IHS reports that although Africa's oil reserves are estimated to be only eight % of the world total, great potential remains. Past capital investments are paying off handsomely; further flow of capital is expected and analysis suggests that investments in the Gulf of Guinea will soon exceed expenditures in the Gulf of Mexico.
Saharan Africa is a growing region of hydrocarbon exploration and the region is a proven giant in terms of gas and oil production and export. Activity in Sub Saharan Africa is principally concentrated offshore with the highest success rates in the central and southern Gulf of Guinea.

Nigeria still presents a chaotic yet compelling picture. Political maturity is taking sometime to arrive, especially with the legislature trying to stake out its turf and the executive and judiciary struggling to get their acts together. Yet Nigeria still remains one of the big hitters in terms of global oil supply, something that is expected to continue into the future.
Oil-hungry nations without exception pay close attention to the availability of Nigerian low-sulphur crude. In addition, Nigeria is becoming central to the global LNG trade -- Nigeria LNG Limited is today supplying 10 % of world's LNG.

The energy industry in the 21st century is at the very centre of the challenges the world faces so we must endeavour to rise to these challenges wisely, confidently and rationally. Among the numerous things that could afflict the oil industry in the coming years -- equipment shortages, barriers to access, ill-considered taxes -- the one that seems the most intractable is the perceived shortage of new talent with which to replace today's ageing work force, many of whom will be retiring in the next decade.
Recently Schlumberger Business Consulting (SBC) published a study titled "Surviving the skills shortage: Results of a global survey quantifying supply and demand of petrotechnical expertise". SBC used databases from 115 universities and public sources as well as that of its own and other companies and leveraged its considerable network of recruiters to quantify the number of graduates in petroleum engineering and geo-sciences.

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