Page 7 - DMEA Week 27 2021

DMEA COMMENTARY DMEA

work for Nigerian companies and foreign com- their deepwater PSCs [production-sharing con-
panies in the energy sector,” he said. “I believe tracts],” he noted. “The PIB permits ongoing
that this bill will make the Nigerian energy sec- negotiations on contracts to continue provided
tor competitive again and you will see rig counts such contracts are signed within one year of the
go up. Nigeria will out-innovate, out-produce effective date. The extension of these deepwater
and out-compete those who counted out or bet licences under reasonable terms will pave the
against its oil and natural gas industry.” way for operators to sanction deepwater projects
Ian Simm, principal advisor at consultancy that have been in the pipeline.”
IGM Energy, also struck an upbeat note. “This
time around, there are signs that the PIB might NNPC’s fate (and other issues)
stick, and with growing the pressure on listed Analysts should also pay attention to the unfold-
companies to comply with more stringent regu- ing of plans for the restructuring of NNPC into a
lations, it could be make or break for Abuja,” he corporation that does not receive direct govern-
told Downstream MEA (DMEA). ment funding, he added. “The details on how the
new NNPC structure will work – particularly,
Criticism – and a measured response [on] how all outstanding liabilities will be paid
Some observers have been far more critical. – will be of interest,” he said.
For example, Chief Edwin Clark, the national When asked whether the restructuring would
leader of the Pan-Niger Delta Forum (PAN- make NNPC a more effective partner for IOCs,
DEF), has denounced the PIB’s provisions cov- Idornigie responded: “NNPC’s payment of its
ering host communities’ allotment of oil and gas share of project funding through the govern-
revenues. In an open letter delivered to Lawan ment has been a huge obstacle and has resulted
and other prominent legislators, he described in the IOCs carrying NNPC’s costs over the years
the decision to offer host communities a 3% or for a number of big-ticket projects. If NNPC is
5% share of operating expenditures as “satanic run as a pure commercial entity with no interfer-
and unjust” and called for the number to be ence from the government and can pay its cash
raised to 10%. His complaints have been echoed calls, it should be an effective partner. But to get
by a number of public figures, including repre- the full support from its JV partners, the new
sentatives of host communities in the states of entity will need to lay out a plan on how it will
Abia, Ondo, Edo and Delta and the governors of manage all outstanding liabilities.”
several southern states, according to the Nige- He also pointed to the provisions of the PIB
rian press. that called for the establishment of new state
Meanwhile, other observers have offered a agencies to regulate upstream, midstream and
more measured response. Obo Idornigie, the downstream operations in the oil and gas sec-
vice-president of sub-Saharan African research tor. “A key concern for operators is [whether]
for Welligence Energy Analytics, told DMEA by the creation of new regulatory agencies (one for
email earlier this week that it would take time to upstream and another for midstream/down-
assess the new law’s impact on Nigeria and on stream) will increase the bureaucratic process for
foreign investors as well. “We expect investors, getting approvals and extend project cycle time,”
particularly the incumbents in joint venture he told DMEA. “This will be a bigger concern for
partnerships with NNPC [Nigerian National operators looking at integrated projects across
Petroleum Corp.], to wait and see how the law the oil and gas value chain.”
unfolds before committing to new joint ven- Simm took a slightly different view, saying:
ture projects,” he wrote, adding: “NNPC’s joint “NNPC has really struggled to balance opera-
venture partnerships with the IOCs cover the tions across its integrated portfolio and recently
onshore and shallow-water sector.” resigned itself to being a bit-part player in the
One point of interest will be the fate of deep- downstream. It is possible that this legislation
water offshore projects, Idornigie commented. will herald a new era for the country’s oil and gas
“In the deepwater sector, some of the majors sector, but small steps are needed. Admission of
have been negotiating licence extensions on past failings is a good place to start.”™

Week 27 08•July•2021 www. NEWSBASE .com P7