Page 5 - DMEA Week 02 2021

DMEA COMMENTARY DMEA

government’s take on Nigeria’s pre-final invest- stakeholders, host communities and the indus-
ment decision joint venture oil projects are try, the objectives of reform can be successfully
among the highest in the world. Also, the PIB met,” it said. “A competitive bill would help pre-
terms for Deepwater could lead to Nigeria fore- serve the integrity of the existing projects and
going over 30% of its production potential in also encourage future growth of production
2030.” and make Nigeria an investment destination of
He also called on federal authorities to reduce choice.”
the cost of doing business in Nigeria, saying that
Buhari’s government ought to do more. “This An industry association’s concerns
is attributable to high security costs, significant LCCI issued its statement shortly after the
administrative costs associated with overlap- Punch newspaper reported that an industry
ping government department oversight and association, the Oil Producers Trade Section
duplicity of demands, approval delays and the (OPTS), had also expressed reservations about
inability to allow industry to optimise,” he said. the PIB. It quoted a document issued by the
“Additionally, the industry has been increasingly group as saying that the bill “does not improve
burdened by a plethora of fees, taxes and levies the investment environment for new project
[that] amount to 10% cost increases. A PIB [that] FIDs to be taken.” Nigeria has been
drives down the cost of doing business alone OPTS went further, commenting: “Uncom-
would increase the pool of value available to petitive fiscal terms, increasing cost, unsettled trying and failing
both industry and government, such that even deepwater disputes and upcoming deepwater
at lower government takes, [the] government lease expiry increase risk for investors and pre- to pass a new oil
would realise higher incomes attributable to vent new investments. Nigeria’s government take
cutting waste and increasing growth by attract- exceeds that of other countries for prolific deep- and gas law for
ing capital.” water basins. [The] government take on Nigeria’s more than two
The expert also urged Abuja to improve pre-final investment decision JV oil projects is
conditions in the natural gas sector. “[Multi- among the highest in the world.” decades.
ple] issues along the gas value chain need to be The group also urged greater protection for
addressed to maximise gas potential (e.g. com- contracts, saying: “[The] PIB does not provide
petitive gas terms, resolution of gas investment/ clear assurances to investors with regards to the
revenue currency-mismatch, free market prices, sanctity of existing contracts at conversion or on
infrastructure availability and adherence to con- how and when NNPC liabilities will be settled ...
tractual obligations),” he said. An investor’s ability to realise return on capital
under which the investment decision was made
A business group’s critique is essential to competing for additional capital.
The PIB has also drawn criticism from other Lack of contract sanctity compromises the integ-
sources. rity of investments and negatively impacts inves-
For example, the Lagos Chamber of Com- tor confidence and willingness to further invest
merce and Industry (LCCI) said in a statement and engage long term in Nigeria.”
earlier this month that the current version of If these gaps are not covered, they could pre-
the bill laid the groundwork for much-needed vent Nigeria from maximising the potential of
reform in multiple areas but would not suffice to its deepwater fields, OPTS added. “Deepwater
make the country as competitive as one might provisions in the PIB do not provide a favourable
hope. It urged the government to go further environment for future investments and launch-
by ensuring that the new oil and gas law pro- ing projects,” it said. “[The] PIB does not provide
moted efficient, effective and fiscally prudent clear assurances to investors with regards to the
governance and administration practices in the sanctity of existing contracts at conversion or on
industry, while also promoting the development how and when NNPC liabilities will be settled.”
of host communities. Additionally, it called on The fact that the PIB has drawn these types
Abuja to work harder to protect the existing of response may mean that discussions in the
programmes and projects that can serve as the National Assembly will become more heated in
foundation for new growth. the near future. It remains to be seen, though,
“We firmly believe that based on constructive whether the criticism serves to delay the bill’s
co-operation between the government and other passage any further. ™

Week 02 14•January•2021 www. NEWSBASE .com P5