Page 5 - AfrOil Week 01 2021

AfrOil COMMENTARY AfrOil

“Nigeria needs to pass the PIB as soon as possi- inability to allow industry to optimise,” he said.
ble to ensure the country gets maximum benefits “Additionally, the industry has been increas-
from its petroleum resources,” she commented. ingly burdened by a plethora of fees, taxes and
“Crude oil dominates Nigeria’s economy, levies [that] amount to 10% cost increases. A
accounting for around 80% of export earnings. PIB [that] drives down the cost of doing business
Nigeria has the largest oil and gas reserves in alone would increase the pool of value availa-
sub-Saharan Africa, with an estimated 37bn bar- ble to both industry and government, such that
rels of oil and 188 trillion cubic feet [5.32 trillion even at lower government takes, [the] govern-
cubic metres] of gas.” ment would realise higher incomes attributa-
Another was Omowumi Iledare, a professor ble to cutting waste and increasing growth by
at the Institute for Oil and Gas Studies, which is attracting capital.”
part of the University of Cape Coast in Ghana. The expert also urged Abuja to improve
He said that it was in Nigeria’s best interest to use conditions in the natural gas sector. “[Multi-
the new legislation as a selling point. ple] issues along the gas value chain need to be
The country’s oil and gas sector needs to addressed to maximise gas potential (e.g., com-
attract new investment, especially now that petitive gas terms, resolution of gas investment/
low prices, the coronavirus (COVID-19) pan- revenue currency-mismatch, free market prices,
demic and other factors have impaired the fed- infrastructure availability and adherence to con-
eral government’s ability to support new capital tractual obligations),” he said.
expenditures and other programmes, Iledare
told Vanguard. A business group’s critique
The newspaper also quoted an industry The PIB has also drawn criticism from other
expert as saying that the country needed a new sources.
oil and gas law. “The PIB is very important, For example, the Lagos Chamber of Com-
especially as the oil and gas industry is the main merce and Industry (LCCI) said in a statement Nigeria has been
pillar of Nigeria’s economy. The Industry con- earlier this month that the current version of
tributed 65% of all revenues for the government the bill laid the groundwork for much-needed trying and failing
of Nigeria and 88% of Nigeria’s foreign exchange reform in multiple areas but would not suffice to to pass a new oil
as of 2018. Several enabled projects created job make the country as competitive as one might
opportunities for over 600,000 Nigerians in the hope. It urged the government to go further by and gas law for
last decade, improving the conditions of many ensuring that the new oil and gas law promoted
people. The industry has shaped Nigeria into the efficient, effective and fiscally prudent govern- more than two
largest oil producer in Africa and the fifth larg- ance and administration practices in the indus-
est LNG producer in the world,” said the expert, try, while also promoting the development of decades
who spoke on condition of anonymity. host communities.
Additionally, it called on Abuja to work
A more critical perspective harder to protect the existing programmes and
The same expert also indicated, though, that he projects that can serve as the foundation for new
believed the version of the PIB now under dis- growth.
cussion was far from perfect. “We firmly believe that based on construc-
For one thing, he said, the legislation did not tive co-operation between the government and
do enough to make more Nigeria a more com- other stakeholders, host communities and the
petitive destination than other oil- and gas-pro- industry, the objectives of reform can be success-
ducing states. Specifically, he said, it does not fully met,” it said. “A competitive bill would help
keep the federal government’s total take from preserve the integrity of the existing projects
hydrocarbon projects – in the form of taxes, and also encourage future growth of production
royalties and the share of profit oil reserved for and make Nigeria an investment destination of
state-owned Nigerian National Petroleum Corp. choice.”
(NNPC) – within a globally competitive range.
If no action is taken on this front, he said, oil An industry association’s concerns
and gas projects are less likely to reach the final LCCI issued its statement shortly after the
investment decision (FID) stage. “The current Punch newspaper reported that an industry
2020 draft PIB does not improve the investment association, the Oil Producers Trade Section
environment for new project FIDs to be taken,” (OPTS), had also expressed reservations about
he told Vanguard. “As it is currently, govern- the PIB. It quoted a document issued by the
ment’s take on Nigeria’s pre-final investment group as saying that the bill “does not improve
decision joint venture oil projects are among the investment environment for new project
the highest in the world. Also, the PIB terms for FIDs to be taken.”
Deepwater could lead to Nigeria foregoing over OPTS went further, commenting: “Uncom-
30% of its production potential in 2030.” petitive fiscal terms, increasing cost, unsettled
He also called on federal authorities to reduce deepwater disputes, and upcoming deepwater
the cost of doing business in Nigeria, saying that lease expiry increase risk for investors and pre-
Buhari’s government ought to do more. “This vent new investments. Nigeria’s government
is attributable to high security costs, significant take exceeds that of other countries for prolific
administrative costs associated with overlap- deepwater basins. Government take on Nigeria’s
ping government department oversight and pre-final investment decision JV oil projects is
duplicity of demands, approval delays and the among the highest in the world.”

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