By Lucas Xavier
A hearty
congratulations to Timipre Sylva on his appointment as the Minister of State
for Petroleum Resources.
In recent times,
Timipre has stated that he would like to see to the closure of 4 Final
Investment Decisions (FIDs) during his tenure, one of which would include the
AKK (Ajaokuta-Kaduna-Kano) Gas pipeline as part of the 7 Critical Gas
Development Project.
While this is reassuring
from the Minister, the following thoughts would need proper deliberations for
solutions, if Nigeria is to meet its mid to long term economic targets.
Fiscal & Regulatory
Environment: Currently, Nigeria ranks 146th out of 190 countries on Ease of
doing business, largely owing to lack of clarity on regulatory frameworks and
fiscal regimes, especially in the oil and gas sector.
This has stalled a
number of FIDs on projects especially in the deep-water and has a consequent
effect of dampening investors’ confidence in Nigeria as an investment
destination of choice.
Strong political
will-power to ensure Presidential assent to the PIGB, passage of the PIFB, PIAB
and PHICDB as well as clarifying the debacle on the Production Sharing Contract
(PSC) Fiscal regime that is somewhat stalling FID closure for the Bonga
South West Aparo (BSWA) deep-water project by the Minister will sure be
low-hanging fruits that will give a breath of fresh air to not only the global
investor community, but also to operators and all stakeholders in the oil and
gas sector, leading to drastic improvement in the Country’s Attractiveness
Index and hence increased attraction of global funds.
Pragmatic Reserve
Growth Strategy: While successive leadership regimes in NNPC have been upbeat
in setting reserve growth targets of 40 billion barrels by 2025, the opposite
effect has been the actual reality as the nation’s oil reserves have rather
shrunk to 36.975 billion from over 37 billion, due to a dearth of exploration
activities in the upstream space. The minister will do well to pragmatically
create enabling environment to incentivize local players into carrying out more
exploration activities.
Gas Master Plan
Implementation: There has been increasing discussion by the minister on how our
Gas reserves can be used as a pivot to drive industrialization in Nigeria.
I couldn’t agree more
with this agenda. However, there is need for the Minister to articulate a clear
and practicable roadmap for the implementation of Nigeria Gas Master Plan with
milestones and timelines.
Insecurity and the
growing cost of operations in the Nigerian oil and gas sector: Crude theft and
vandalization of pipelines have become a mainstay endemic issue in the upstream
business terrain, increasingly making it unattractive for operators due to the
increased losses.
According to the
Nigerian Natural Resource Charter (NNRC) Nigeria is now the Oil theft Capital
of the World, losing as much as 400,000 bbls/day.
The President has
given marching orders for security operatives to tackle these vices and reduce
losses due to theft, however, the Minister would be expected to play a crucial
role in driving this agenda as well as sanitize the upstream operating
environment.
FGN plans in growing
the downstream sector: Due to ailing refining capacity in the country, the FGN
currently engages in DSDP Contracts for the lifting of portions of the daily
445,000 barrels of crude in exchange for refined products by local and
international traders.
The Minister will need
to develop a roadmap to integrate our ailing downstream sector and drive value
to the market by ensuring refining capacity re-vamp in Nigeria, such that we
can become a net exporter of refined products.
Overall, the following
initiatives will of a necessity be on the front burner for the Minister:
1. Driving the Gas infrastructure gap
(7CGDP) to meet the 3.4 BCF gas market demand.
2. Driving Reserve Growth
3. Tackling insecurity and crude theft.
4. Driving stability & clarity in
Regulatory and Fiscal regimes (PIGB, PIFB, PISB and PHICDB) for increased FID
completion.
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