Sylva: Frontier Basins’ Fund is Critical for Nigeria

Minister of State, Petroleum Resources, Timipre Sylva, last week spoke on issues and controversies surrounding the just-signed Petroleum Industry Act (PIA). Emmanuel Addeh, who was at the event presents the excerpts.

Now that the PIA has been passed, do you have any plans for roadshows abroad to look for foreign investors?

After the passage, the next thing is to ensure that the PIA crystallises for investments in the country and we have taken that on board. But of course, all these initial housecleaning has to also be done. And then as you hinted, we might be going on some travels around to ensure that we speak to potential investors.

But then my position on this is very clear. The first port of call will be to investors that are already in the country; the international oil companies that are here, we have to engage them, to ensure that this PIA translates to more investments from the International Oil Companies (IOCs) in the country.

There are a lot of projects that are on the verge of crystallising. But of course, even some of the IOCs that are in the country took a seat earlier than now because they were waiting to see the final outcome of the PIB before they took investment decisions.

Now that the PIB has been passed, they can see and a lot of engagements were ongoing between us and IOCs that led to the passage and what is passed was mostly part of the engagements that we had with the IOCs. So, we believe that most of their concerns have been taken care of in the PIA. So we expect them to react positively, as well.

So, I will not want to say how many other countries will go to. But at least we will talk to the IOCs that are already in the country before we now take a decision on where else to go for other investors that are willing to come. There are a lot of other investors that have reached out to us, even post-PIB.

These past few days, I’ve had a few contacts, and a few people have called indicating a lot more interest in our environment, but we ‘ll start with the IOCs that are in the country, with the investors that we know we’ve had a long relationship with and then we will look for the other investors.

You are aware that a number of IOCs have indicated their interest to divest from Nigeria’s onshore operations. What are your thoughts?

The IOCs are leaving the onshore, but there’s still a lot of prospects offshore. Not all the IOCs are leaving onshore. Some of them have indicated their interest in the deep offshore. Some of them are still onshore. Even the ultra deep, because the offshore that we have been exploring up till now is just about 2,000 metres. To go deeper than that , we have not really done a lot of work.

There are a lot of prospects in the ultra-deep offshore. So there’s a lot of potential still within the Nigerian setting. I don’t think we’ll have a problem. We will deal with those oil companies that are thinking of leaving onshore since showing interest in the offshore of Nigeria and even the ultra deep water, which is still a frontier territory.

So, what’s the update on Dangote refinery?

Of course, for the Dangote refinery, the Federal Executive Council (FEC) has given the approval for us to plan ahead, and the processes are right now ongoing between NNPC at the technical level with the Dangote refinery officials. I really cannot tell you exactly where they are, but it is fully on course. We are going to take our stake as approved by FEC.

You have made comments to the effect that the planned upstream commission , a regulatory agency will be involved in crude handling. Doesn’t that mean its involvement in commercial activities?

Yes, when I gave that answer yesterday, I didn’t have the opportunity of saying everything.

The other question should be whether NNPC as a commercial body, registered under CAMA can be in charge of federation crude. We have to find a way out of this. That crude belongs to the federation of Nigeria and when it is sold, it has to go to the federation account.

So, the commission is not necessarily going to sell the crude, but will handle that crude. So if NNPC sells the crude on a commercial basis, the revenues accruing from the sales of the crude will now go through the commission to the federation account and NNPC will charge commission for that role.

As a commercial activity, it will just sell and it is doing that as a commercial entity and the fund will be moved through the commission into the federation account. And of course, those are all part of the issues that we’ll be discussing at the implementation level so that we have a seamless way of doing things.

Could you give us an estimate of how much the 30 per cent frontier basins will translate to in terms of actual monies annually?

On the issue of what is accruing to the host communities, the Group Managing Director of NNPC, just mentioned a figure. It was an example explaining that last year this amount was spent as operational expenses. We cannot hang on to that example. Next year it may be lower or higher.

But if you ask me about the 30 per cent, how much is likely to accrue, I don’t want to make the mistake that the GMD made so that I won’t be quoted. But we all know that 30 per cent will come from profit oil from NNPC crude. So, you can always check what the NNPC crude is.

And of course 30 per cent of that crude is what is going into investment fund we call frontier exploration and it’s a reinvestment fund because we have to commit to find more oil in the frontier territory.

The ultra deep offshore is also a frontier territory. You have the Anambra basin to explore and there’s already some gas finds in the Anambra basin. The Calabar basin is also a frontier basin. The Chad basin is also a frontier territory.

So there are a lot of other territories out there. So, these funds will be available to invest in these frontier areas so that we can find new oil especially at this time when we actually need to urgently produce the oil in Nigeria, because the oil era is almost getting to a close.

So, we need to have this money so that we don’t look for money or don’t need to be going around looking for money when we want to invest.

What are some of the projects that you are looking at right now in-country?

There are a lot of projects, like the Bonga North, Bonga South-west, Agip is already looking at Zabazaba, Total is looking at some projects etc. So, now with the fiscal environment provided by this PIA, we believe that most of these projects will be fast-tracked, and of course, in the medium term, a lot of other projects will come on stream.

What happens to the licences that have been renewed under the PIA?

Licences are renewed for a tenure of 20 years. So, if a licence has been renewed because we wanted to raise money, nothing will happen to it because it has been renewed until it expires.

There’s a provision of grandfathering in this Act which means that everything that has happened before, will be taken along, so that we don’t because there’s a new law, we’re not changing the environment. So if something has been done, it will be taken on board as far as the PIA is concerned.

So, there is no problem at all. Any renewal that has been done under the petroleum act of 1969 will still fall within the ambit of this law and there’s no problem. The PIA recognises everything that has already been done under the 1969 petroleum Act.

What about the issue of gender equity in the PIA steering committee that has just been set up?

You know that the minister of finance is a woman. You all know that. She nominated someone, but I will discuss with her. But we have a working group and at that level, I can assure you we have so many women, but we will take this on board.

You also seem to be the only person from the south-south…

You see, this situation, let us not over-flog it because it is offices that are represented in the nominations. I represent the ministry of petroleum resources as minister of state.

There’s no way because of gender equality that I am going to look for a gender and if we say the executive secretary of the Petroleum Training Development Fund (PTDF) is the secretary of the committee, there’s no way that I can go and change that.

Same way for the GMD of NNPC, we cannot be looking for a South South GMD or South East GMD. So, these are issues that you have raised to take on board and of course, these are some of the issues that the PIA also seeks to correct in terms of the transparency and the inclusiveness.

Governors have raised issues about the ownership structure of the proposed NNPC Limited. What’s your take on that?

You must agree that there’s a federal government and there’s a federation. The federal government of Nigeria can always hold something in trust for the federation. Depending on which side you stand on, you want to introduce complications on this matter.

But I can assure you that we are already discussing, and we are clarifying some of these issues. In this case, what the federal government is doing is to hold this equity in trust for the federation.

This is not the first time this has happened. The federal government of Nigeria is currently holding the equity in trust of the federation in Nigeria LNG in Bonny. There are a lot of other examples I can give you.

So, if the federal government holds the equity in trust for the federation, it means it is holding it in trust for the states, for the local governments and by extension, also the communities.

We are one country, everything flows out from this country, let’s not make it look like we are not one country. The federal government of Nigeria is the preeminent government among the tiers, the levels of government.

So now, the federal government of Nigeria is in a position to hold equity in trust of the rest of Nigerians. And this is what we’re doing in this case, and this is what federal government has also done in other cases.

Why does the autogas programme, which was launched last year by the government seem to be losing steam?

We rolled out the auto gas programme last year. Some Compressed Natural Gas (CNG) stations are already functional, a lot of them in Edo, same thing in Port Harcourt.

But the success of this programme is when we have a critical mass of CNG stations, and a critical mass of converted vehicles. If you have CNG stations all over the country, and you don’t have enough vehicles converted to use CNG, the investment in the CNG stations would have become stranded because there will be no vehicles going there.

And if you have a lot of converted vehicles, and you don’t have a commensurate amount of CNG stations, then those converted vehicles will not have a place to fill up.

So, this is why we have to ensure that the growth from the two sides, go on together. So now you must have a critical mass of CNG stations and a critical mass of converted vehicles. And that process is still very much ongoing. I have announced several times, even in our last press briefing that the vice president is leading an effort to ensure that we have these 1 million conversion kits coming into Nigeria.

And of course, we will liaise with the Central Bank of Nigeria (CBN) that is giving some funding for the development of the critical mass also. So this is a process, it has already begun since last year and a lot has happened since then.

But now, I can assure you we are getting to a point where things will move even faster because the discussions at the level of the vice president have been very advanced and you will soon see a lot of activity in this period of CNG conversion kits and CNG dispensing stations.

Do you foresee a likely unrest in the Niger Delta as a result of the 3 per cent, which they say is not enough?

Frankly, I don’t know why there will be any unrest in the Niger Delta. I know that there are a lot of politicians who have taken this as a political issue. And they are politicising it, but I have not heard the leaders of the Niger Delta that I respect speak against this.

I see a lot of politics, a lot of politicking, but I’ve not really seen very senior Niger Delta people that we all respect, that are apolitical speak against this. If you look at it very well, you cannot really say it’s only 3 per cent. This per cent is on top of so many other things.

If you are talking about 3 per cent to host communities, you talk about what is going to the Niger Delta Development Commission (NDDC), the 13 per cent derivation and others and when you put this together, it amounts to a lot of money.

When we started NDDC, people wanted more for NDDC, but what the national assembly approved was 3 per cent. We have seen what that can do. Let’s be patient and see what the 3 per cent can do. There are agitations and things are being done to assuage this agitation.

I can assure you that well-meaning Niger Deltans are not against this. It is the political Niger Delta that is speaking. And if the political Niger Delta is speaking, I am a part of that political Niger Delta and I will not want to join issues with them yet.

What is the role of government in the management of the host communities fund, especially against the backdrop of recent comments by the minister of Niger Delta Affairs to monitor the funds.

I am not aware of that and there’s no role specifically for the Niger Delta ministry that I am aware of. Maybe that’s an arrangement they are already proposing, I don’t know.

But if it’s the PIB that has been passed to PIA , I don’t see any role. It’s between the communities and the companies. This is a targeted fund and it’s because other funds have failed to target the host communities.

The NDDC is not specifically targeted at the host communities, same with 13 per cent going to the states. The PIA has sorted that out. So, there’s no space for anybody else, not even for the Niger Delta ministry.

What’s the state of the refineries? Has work begun in earnest?

Rehabilitation of Port Harcourt refinery has commenced. Having said that, FEC only approved the rehabilitation of Warri refinery about two weeks ago. So, its too early, but I can assure you that a lot is going on.

Once FEC has approved a contract, it will have to be complete because the contracting process will not even be completed until FEC approves it. So, FEC approves the contract, then the paperwork has to be completed, which can take at least a week.