Despite its huge oil reserves, Nigeria attracted only four percent of Africa’s $75 billion oil and gas investment in four years (2015-2019) because of the delay in the passage of the nation’s Petroleum Industry Bill, PIB into law.
In a document obtained by Vanguard, weekend, Director General, Lagos Chamber of Commerce and Industry, LCCI, Dr. Muda Yusuf, stated: “The oil and gas industry is a major contributor to the Nigerian economy and government revenue. Nigeria, with the largest oil and gas reserves in Africa, has huge untapped potential to achieve its economic development goals including gas-to-power ambitions. However, despite having the largest reserves in Africa, Nigeria only received 4% ($3 billion) of $75 billion invested in the continent between 2015-19. This underscores the need to create a competitive environment to attract investment to the oil and gas sector.
“The fundamental shift in global energy markets driven by advances in unlocking unconventional petroleum resources and increasing traction for cleaner energy sources has resulted in a global oversupply of crude oil, putting pressure on prices. This has been further worsened by the COVID-19 pandemic, potentially putting at risk the viability of ongoing and future projects and driving fierce competition for scarce investments around the world. Further to the above, Nigeria’s petroleum industry faces many country-specific challenges, including Joint Venture Funding and Arrears, regulatory overlaps, insecurity and inadequate infrastructure for domestic gas development.
“The Lagos Chamber of Commerce & Industry is fully supportive of the Government’s efforts to drive industry reform through a new Petroleum Industry Bill. The key objectives of the PIB 2020, amongst many others, including reforming the institutional and fiscal framework, developing Nigeria’s gas sector further, creating a framework to support the development of host communities and foster sustainable prosperity, and further bringing in new investments to grow the country’s production capacity.”
He said: “The current Bill marks positive steps toward achieving its stated goals. The Bill mandates that ministries, departments, and agencies to consult with the Commission prior to introducing overlapping legislation which will impact the oil and gas industry. It also allows for consultation with industry stakeholders before making regulations. The commercialisation of NNPC aims to improve business efficiency and effectiveness, especially in relation to Joint Venture activities.
“However, some of these improvements appear insufficient to deliver the true value to Nigeria, which the Bill aims to achieve. Some provisions in the bill could adversely affect the growth of the industry and the overall economy. We firmly believe that based on constructive co-operation between the Nigerian Government and other stakeholders, Host Communities and Industry, the objectives of reform can be successfully met.”
However, he said: “The PIB should seek to protect existing investments from value erosion. The assets and operations from these investments are the foundation upon which new projects can be built. It is therefore crucial that projects already underway be able to maintain the conditions under which they were designed and approved. Doing so will incentivise the launch of new projects; grow production and revenue for the government and stakeholders, thereby guaranteeing long term sustainability of our oil and gas industry.”
However, the Director General pointed out some specific areas that need to be amended in the PIB, including the Preservation of base business &rights (Sections 92.3, 92.4, 93, 302.3, 311.9.c, 317.4, Third Schedule), Deepwater (Section 267, Seventh Schedule), Segregation of Upstream deemed assets (Sections 302.2 and 317.4), Capital allowances and deductions (263, Fifth Schedule), Domestic Gas (Sections 110, 167, 168) and Administrative burden of compliance.
He added: “The Lagos Chamber urges the National Assembly to put in place a law that will promote a more effective and efficient governance, administration, host community development and fiscal framework for the petroleum industry. A competitive Bill would help preserve the integrity of the existing projects, whilst also encouraging future growth of production and make Nigeria an investment destination of choice.”
Vanguard News Nigeria