Banks’ capitalisation inadequate to finance oil and gas industry

 

The Director of Petroleum Resources (DPR), Mr. George Osahon has said that the banking sector is not capable of financing exploration in the oil and gas industry. According to him, the banks have very low capital base to finance exploration in the country.
Speaking at the 19th Offshore West Africa Conference, held in Lagos, Osahon, who was represented by the Assistant Director, DPR, Wole Akinyosoye, stated that the recapitalisation scheme was a brilliant idea in the banking industry but still does not match the financing of the exploration and production, E&P project.
He said, “Recapitalisation is very important but when you are talking about recapitalisation of the banks, it can only apply to some extent breakthrough to production activities. Our banks have very low capital base to carry out exploration financing.

 
“In terms of financing E&P activities, the country’s banking sector liquidity is very low, especially when you are talking about exploration. There are three stages of development after discovery and the banks are not able to carry industries along. They don’t have the muscle that is required for them to fill the gap in the industry.”
On local content, he noted that, Indigenous companies have advanced a little bit forward. “The IOCs are divesting and most of the companies that are buying these blocs are Independent companies.
Specifically, he noted that the country has had some success stories to tell in the developing of oil and gas industry.
In his words “Over the years we have been able to come up with crops of competent and technical set of Nigerians to run the fields which was not so before now.
“The recapitalisation of banks has also contributed immensely to ensuring these successes in the industry, as well as helped reduced a lot of banks and provided more confidence and better abilities for the banking sector.
“Perhaps without recapitalisation, local companies would have found it difficult to show the same zeal in acquisition of assets recently by some operating companies.
“20 years ago, it was difficult for the banks to partner with the industry because they don’t understand the industry and finance is very key to the activities of independent and also marginal fields,” he said.
He also said that the indigenous industries are contributing immensely in the production sector.