Approaches and strategies to transform NOCAL into a competent world class Oil Company
Oil resources, if well managed, bring immense economic boons with cascading social and political successes attracting global attention far surpassing that of other natural resources such as iron ore, sulfur and bauxite. This being the case has caused citizens of countries with oil prospects to dream far beyond the normal complexities of oil and gas development programs.
Locating oil reservoirs, even after a very successful seismic survey, can take years to complete. Many dry holes are drilled before a success is accomplished. Even after finding the reservoir, oil installations can take additional years to become operationalized. The stages of drilling and prospecting for oil start with seismic surveys, exploration drilling, appraisal drilling, development and production; that is if hydrocarbon is found. All these stages take 10-15 years, after completion of seismic, and depending on the availability of petroleum resources.
Managing expectations in emerging oil and gas countries can be one of the biggest challenges, if not the one requiring most attention. This is because it is widely believed that oil resources uprightly transform any society economically. This myth, coupled with the prolongation of oil production, establishes the need to continuously inform citizens of how long the country has to wait before entering into the global elite society of “oil and gas producing nations.”
Nevertheless, it is the responsibility of relevant authorities to inform its people on the process of oil and gas development as means to amicably address this “social time bomb.”
Since the first drilling of a [modern] oil well in the 17th century, the process leading to oil and gas development in any society, country or locale is complex, intricate, and expensive and can be accomplished over many years. In Nigeria, for example, after many years of exploration since 1913, oil was first discovered in the early 1950s but actual production did not commence until 1958, which is shorter because of being located onshore. Elsewhere in Angola, oil production started in 1966, 11 years after it was first discovered in 1955. Interestingly, there are varying accounts of when actual exploration began before a commercial discovery was announced in 1955.
Institutional Framework for Liberia’s oil and gas agenda
When Nigeria, Gabon, Equatorial Guinea and other countries closer to the west coast of Africa started producing and exploring for oil, Liberia felt it was prudent to engender similar quest. Moving forward with this ambition, the government moved in the right step by creating the Liberia Geological Services, which was later transformed into the Bureau of Hydrocarbons in the 1970s. Situated in the Ministry of Lands Mines and Energy, the bureau function was to explore for hydrocarbons in offshore Liberia waters and, if found, manage those in a manner which accrues enormous benefits to the entire country.
The bureau first task was to create the environment for actual exploration in offshore waters, which became successful in the 1980s after drilling three “unsuccessful” wells in Liberia. The Amoco Company, which drilled the wells, found oil shows but was not commercially viable to develop and produce. This being the case and due to the political tension in the country, Liberia oil and gas quest was placed on a temporary hold till further advice. Some experts, however, believed that the technology used at the time did not possess the ability of current day advance technology with chances of locating reservoirs deeper than the former.
The prolonged civil conflict did not only delay Liberia exploration program when advanced technology was being produced, but also damage the institutional and manpower capacity to continue such. This led to the creation of an act by the 51st National Legislature to establish a corporation named and styled National Oil Company of Liberia (NOCAL) in 2000 with the sole intent to explore, make attractive, and managed Liberia hydrocarbon potential. The newly establish institution was to begin reforming the country’s oil and gas sector by offering licenses to oil blocks, negotiating oil contracts, exploring for oil and attracting international partners to invest in the sector.
NOCAL was a dormant corporation from its establishment until the ushering of a new regime in 2005 at which time the company conducted seismic survey; commenced awarding blocks to contractors; began the process of negotiating Petroleum Sharing Contract; and initiated the advancement of the core objectives of being both a regulator and an oil and gas company. Institutional reforms and manpower enhancement were given priority as Liberian geologists, petroleum engineers, geophysicists and environmental/health and safety specialists were all hired, trained and given the opportunity to improve the company’s output.
Drilling for Oil
The [reformed] NOCAL divided Liberia offshore waters into 17 blocks commencing from the coastline to approximately 50km offshore. International Oil and Gas Companies (IOCs) immediately began the process to explore for hydrocarbons. To date, two IOCs have recommenced the once inoperative oil and gas sector after completing two separate wells in Blocks LB-9 by African Petroleum and LB-15 by Anadarko. While these companies did not found commercially viable quantity of oil, consequentially, they traced a working petroleum system which clearly depicts potential existence of a reservoir.
One unique phenomenon in the oil and gas industry is that while the possibility exists to have oil in one block, another person can drill just within 50km and find a dry hole. The presence of oil in neighboring Sierra Leone does not correlate to immediate finds in Liberia waters. There is a 50-50 chance of find oil in Liberia. This is why the IOCs and NOCAL understand clearly that, as many wells have to be drilled to ascertain the availability of hydrocarbons. In the next few years, all the operators in Liberia waters will drill additional wells.
Preparing to BOOM in the oil boon
A standard practice amongst countries with oil resources is to strengthen their capacity for actual drilling program as compare to being just a mere regulator and owner of the assets. For instance, Nigeria engaged its citizens’ ability and trained as many Nigerians who took over the Nigeria National Petroleum Corporation (NNPC)–a full operating company– and later established The Department of Petroleum Resources–the regulator. In Angola, the government established Sonangol as the oil company and created the Ministry of Petroleum as the regulatory agency. In next-door Ghana, there are many agencies having responsibility within the oil and gas sector. However, after the discovery of the Jubilee field, in 2007, the government proposed to amend the prevailing laws and create the Ghana Regulatory Authority (GRA) which will regulate and negotiate contracts. This is intended to also avoid conflict of authorities and interests from the different agencies which becomes very cumbersome to manage. The Ghana National Petroleum Cooperation (GNPC) will now operate as a full flesh oil company. With this approach, the government and people don’t only gain from the revenue generated from taxes and royalties on oil licenses but also immensely benefit in profits accrue through activities of the state owned oil companies.
The new management, under Hon. Christopher Z. Neyor, is now working tirelessly to transform the corporation into a fully operating world-class oil and gas company stripping off its regulatory power and moving into drilling for oil and gas itself. While this drive seemed overly ambitious and far-fetched, the government and NOCAL’s management are committed to pursuing this vision and ensuring that all actions, which prepare the company, are taken. Moving forward, the company has created a Strategic Vision detailing activities and programs, which accelerates NOCAL transformation into an oil company. The strategic vision layout seven key objectives, which will be addressed optimally over the next 25-30 years. The seven objectives are the pillars of the company overall programs and if successfully implemented could change the “oil-curse” perception of the resource.
A long-term vision sets clearly the mark to transition smoothly to a brighter future. While some of the objectives of NOCAL strategic vision are long-term, immediate priorities have been addressed over the last months of the new administration. Under Institutional Reform, the company has managed to establish a fully operational Exploration Department with the mandate to optimize the work programs of the various Petroleum Sharing Contracts (PSCs) and enhance NOCAL’s ability to monitor exploration activities. Additionally, the company created the Social Development Department which has contributed greatly to the social needs of less fortunate Liberia even in the absence of oil discovery. Under its 3rd strategic vision objective–Training and Capacity Development Strategy–the company has made enormous progress by expanding its foreign scholarship programs, contribution to science education in Liberia, and supporting its employees and other relevant government agency to be trained in various short courses relevant to the oil and gas sector.
Progress has also been realized on Strategic Vision objectives 1 and 2–Reviewing the Petroleum Law and the NOCAL Act, and Drafting a New Petroleum Law and Amend the Act establishing NOCAL–but considering its legal ramification, this could take more time than expected. However, the company’s commitment to fully address this objective is expressed. Also, Objective 4–International Maritime Boundary Delimitation– is gradually being implemented with an inter-ministerial committee set up to steer the process. Work has already started and Liberians should expect a successful resolution to the contending issues.
One would contend that NOCAL strategic vision is not the best option for its intended transition to a world-class oil company. If we must disagree to agree, one would clearly understand that with the looming challenges deeply entrenched in our society, the objectives proffered by NOCAL clearly supports the government national reform agenda. More besides, these objectives are not illusive but practical and realistic. If implemented successfully, these objectives will address many issues and prepare Liberia to benefit enormously from its oil resources.
About the Author
Urias Goll is an environmental economist and writes on topic concerning natural resource planning and management, environmental sustainability, oil and gas operations, youth empowerment and other issues related to economic development. He currently works for the national Oil Company of Liberia as Environmental Economist.