Realities in the global oil and gas industry have reinforced the need for Nigeria to revisit its regulatory and fiscal frameworks, to optimise output and value from hydrocarbon resources for diversification, reports EMEKA UGWUANYI.
The oil and gas industry is going through challenging transition times. The dampening consumption, which is worsened by the coronavirus pandemic and the price war between Saudi Arabia and Russia further make a bad situation worse.
Like the International Energy Agency (IEA) and the Organisation of the Petroleum Exporting Countries (OPEC) said, the worst hit in this situation are emerging economies, such as Nigeria’s, that substantially depend on oil revenue for survival. The two world oil and gas organisations said they were worried by the continued fall of oil price, noting that income from oil and gas could fall between 50 per cent and 85 per cent in the year in emerging markets as a result of coronavirus.
“Many oil producing emerging economies that are reliant on proceeds from oil and gas to fund key public services will be hit hard by the drop. The continued fall in oil and gas prices will have a profound impact on the income of economies dependent on natural resources,” they said.
Certainly, the global oil industry will come out of this situation just like others in the past, but the impact will last much longer after it ends. The lessons learnt from situations, such as this, are employed to improve operations in the future, Nigeria inclusive.
To improve Nigeria’s energy landscape, oil producers offered solutions on what should be done. According to the Chairman of Oil Producers Trade Section (OPTS), a sub-group within the Lagos Chamber of Commerce and Industry (LCCI), with 29 members comprising international and local exploration and production firms, Mr. Lorenzo Fiorelli, issues on regulatory and fiscal regimes need to be addressed to enable Nigeria maximise value from its hydrocarbon resources.
Fiorelli, who is also the managing director of Agip/Eni Nigeria, said: “OPTS is the cornerstone of exploration, development and production of petroleum resources. Its members operate approximately 90 per cent of Nigeria’s oil and gas production, some in partnership with the Nigerian National Petroleum Corporation (NNPC), others with local and international lease holders.
“Nigeria with the largest oil and gas reserves in Africa still has huge untapped potentials available, which is required to advance its economic development goals. The petroleum resources have been a major contributor to government revenue and to the broader Nigerian economy but in the last two years, Nigeria has not been able to realise its full blown potentials. There are still vast resources in Nigeria and there are still a lot of opportunities.
“To unlock these opportunities, several challenges need to be addressed, and in particular, ensuring that the industry reform leads to a competitive and stable fiscal regime for Nigeria’s hydrocarbon resources, providing and customising fiscal framework to unlock its gas potential, incentivising investment in the power sector by an appropriate commercial strategy, simplifying government’s regulations to a one-stop shop and encouraging investment in technology innovations.’’
Fiorelli, who spoke at an event in Abuja, stated that the OPTS strongly believed that solving these challenges wpuld help Nigeria improve its effectiveness and competitiveness in changing the energy landscape.
The Managing Director, Aiteo Group, Mr. Victor Okoronkwo, corroborated Fiorelli. He said stable regulatory and fiscal regimes were important to drive the growth of the industry, noting that foreign direct investment (FDI) was declining.
Okoronkwo said: “Aiteo Exploration & Production is the operator of NNPC/Aiteo Joint Venture. Aiteo operates oil mining lease (OML) 29 located in the swamp of the Niger Delta with six flow stations, four associated gas gathering compressors and operates a strategic national oil infrastructure – a trunkline of 120 km, carrying crude for five other operators to the Bonny crude oil terminal.
“Oil and gas plays a pivotal role in the economy. Therefore, Nigeria is not isolated from the current wave of global energy transition. The energy transition is largely driven by three key factors – environmental, technological advancement and national policy realignment. Climate change is a serious issue that has gained ascendancy in shaping global policy discussions with respect to actualizing a less carbon intensive scenario.
“However, with the diverse applications of hydrocarbon and hydrocarbon derivatives in support of human civilisation and industrialisation, fossil fuels will continue to play a dominant role in the global energy mix within the foreseeable future. However, we see natural gas gaining ascendancy over oil.
“Consequently, there is still a window of opportunity for Nigeria to realise its hydrocarbon objectives. Aiteo Group is poised and working assiduously towards a significant contribution to attaining the national objectives of three million barrels of oil per day production and 40 billion barrels of oil reserves.
“Overall, with the continued reliance and high demand for oil and gas, prices for these commodities will remain exposed to geopolitical events, climate considerations and in this age of disruptions, unplanned events like the September bombing of the Saudi oil facilities and the current pandemic of coronavirus. They will continue to impact on the prices.
“The imperatives, therefore, for such situations, among others is creating a stable operating environment and as well as establishing a robust regulatory and fiscal frameworks. To put our current realities in perspective, in 2018, while the FDI to Africa rose 11 per cent about $46 billion, the FDI to Nigeria shrunk 43 per cent to $2 billion. Contrast that with a $3 billion FDI flow into our neighbouring country – Ghana and also our hydrocarbon resource holding and that of Ghana, you will, therefore, see there is a lot of room for improvement.”
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