Kachikwu: FG to Unveil Four New Policies on Oil and Gas Sector

Nigeria suffers $2bn shortfall in cash calls yearly
Amendment of NLNG Act will cost Nigeria $25bn, says Omotowa

Ejiofor Alike
As Nigeria’s oil and gas sector awaits the passage of the Petroleum Industry Bill (PIB) to provide clarity on the terms of investments, the Minister of State for Petroleum, Dr. Ibe Kachikwu, has stated that the federal government would finalise four new additional policies in the sector by the end of October this year.

 Kachikwu has also hinted that the proposed talks on output cuts by the Organisation of Petroleum Exporting Countries (OPEC) to ensure the rebound of oil prices would have limited influence on the prices as the cartel controls only 30 per cent of the global oil output.

Speaking yesterday in Lagos at a conference organised by the National Association of Energy Correspondents (NAEC), Kachikwu stated that the country’s oil and gas sector was faced with myriads of problems that required urgent solutions, stressing that the drop in oil prices was the least of the country’s problems.

Also speaking at the conference, the outgoing Managing Director and Chief Executive Officer of Nigeria LNG Limited, Mr. Babs Omotowa, disclosed that any tinkering of the Nigeria LNG Act of 2004 will violate bilateral agreements with international investors as well as cost the country a huge $25 billion in foreign direct investment (FDI) and fines running in billions at the international courts.

Kachikwu said the issue of cash calls deficiency had been his nightmare with $2 billion shortfalls, which had accumulated to arrears of about $6.2 billion.

 “Every year, we lose 10 to 15 per cent of the joint venture production. There have been no new projects in the last five years and most of the projects touted cannot stand the current economic realities as they were based on $90 per barrel oil price. We are losing investments to our immediate neighbours,” he explained.

According to him, the drop in oil prices is a global problem that is not peculiar to Nigeria, adding that the country has more pressing problems, arising from the renewed attacks on oil facilities by the Niger Delta militants.

Kachikwu, who spoke on the topic: ‘The Urgency of Now’, revealed that while 3,000 cases of pipeline vandalism were recorded in the country from 2010 to 2015, the country had recorded 1,600 incidents between January and June this year, representing over 50 per cent of the incidents that occurred in five years.

He said the incidents of vandalism that occurred in the previous years had led to the loss of 643 million litres of petroleum products, amounting to N51.28 billion lost in 2015.

“Between January and June 2016, 1,600 incidents were recorded, resulting in the loss of 109 million litres of petroleum products and 560,000 barrels of crude oil to the refineries,” Kachikwu added.
He added that while 850 million standard cubic per day of gas has been shut in due to the Niger Delta crisis, which has led to power outage exposure of 2,700 megawatts to 3,000MW.

The minister further disclosed that the crisis has forced a drop in the country’s crude oil production from nearly 2.3 million barrels per day to about 1.56 million bpd.
“In addition, the Niger Delta crisis has resulted in loss of lives, high cost of operations, fuel shortages and environmental degradation.

“Additional 1.1 million barrels of oil per day is required to be produced between now and end of the year to meet the targeted annual production.  We don’t have money to finance federal budget due to problems outside the control of the government. We need to produce extra 1.1 million barrels per day to be able to catch up,” he added.
The minister appealed to the Niger Delta militants to use the same level of aggression used in destroying oil and gas facilities to join the negotiation table.

“I am as passionate as the militants are on issues concerning the Niger Delta. But whatever message they want to convey, they must stop destroying pipelines and use the same level of aggression used to destroy the pipelines to the negotiating table,” Kachikwu said.
He noted that the country’s oil and gas industry requires policies to remove the challenges facing the sector.
According to him, apart from the PIB, the federal government will finalise and gazette four new policies in the sector by October this year.

 Kachikwu identified the four policies to include: National Oil Policy, National Gas Policy, Downstream Policy and Fiscal Reform Policy.
“We need to complete these between now and October, but the problem is bureaucracy. So, how do we go to the National Assembly to get the permission for the urgency,” he added.
Kachikwu said the gas policy, for instance, would “unlock the gas potentials; ensure effective development of the Nigerian gas market with adequate and sustainable gas supply to the power and industrial sectors; transit from gas flare penalty regime to flare commercialisation and shift focus from government-built to investor-built infrastructure.”

 He said apart from the four new policies, the PIB would also be split into three sections.
Speaking on the proposed OPEC talks to cut output to ensure price recovery, Kachikwu stated that OPEC’s decision would have limited impact on the oil market as the cartel controls only 30 per cent of the market.
“OPEC controls only 30 per cent. So, even if we shut down, it will have limited impact because the 70 per cent producers are more powerful. Only a handshake between OPEC and non-OPEC can solve it by inviting Russia, Mexico and the United States.

“Are we cutting volumes? I don’t see that happening. Will that meeting help lift the price? Well yes if we succeed in having conversations with Russia, the US and Mexico. If there is a handshake with individuals across the aisle, that would be the beginning.”
The theme of the NAEC conference was ‘Low Oil Price: Impact and the Way Forward’.
Omotowa, who was the chairman at the conference, has been the Managing Director for NLNG for some five years and will be handing over to the incoming Managing Director, Mr. Tony Attah, on September 1, 2016.

Speaking during his address, Omotowa said NLNG, through its expansion growth programme which involves the expansion of production capacity of the LNG plant in Bonny, Rivers , with a Train 7 and 8, could attract $25 billion, create 30,000 construction jobs, help to further reduce gas flaring and generate over $1billion to $2billion additional revenue to the country in taxes and dividend.

“In a period of huge youth unemployment and need for more revenue, this should really be a cause we should have all hands on deck for especially as NLNG has demonstrated its pedigree having attracted $15billion in foreign investment, grown from a 2 Train to a 6 Train plant, contributing to the reduction gas flaring from 65 per cent to below 20 per cent, delivering $33 billion to Nigeria from a $2.5 billion investment. This potential $25 billion in investment, creation of 30,000 jobs, reduced gas flaring among others are being put in jeopardy by attempts to renege on promises that Nigeria gave to foreign investors which enabled the historical $15 billion investment historically attracted,” Omotowa explained.