Upstream Operators Urge FG to Address Fiscal, Security, Regulatory Bottlenecks to Enhance Investment in Oil Sector

 Peter Uzoho

For the umpteenth time, operators in the upstream segment in the Nigerian oil and gas industry have reechoed the need for the government to take urgent steps towards solving the fiscal, security, regulatory and other issues discouraging investments and operation in the nation’s petroleum sector.

Some of the operators who spoke at the just-held 2023 Annual International Strategic Conference of the Association of Energy Correspondents of Nigeria (NAEC) in Lagos, stated that Nigeria at this time needed to take measures that would push its oil and gas production to a minimum of three to four million barrels per day (bpd) and three billion cubic feet (bcf), respectively.

The theme of the conference was, “Nigeria’s Energy Transition: Enhancing Investment Opportunities and Addressing Challenges in the Oil and Gas Sector.”
Speaking during a panel session at the event, the General Counsel/ Company Secretary of the Nigeria Liquefied Natural Gas Limited (NLNG) and President of the Nigerian Gas Association (NGA), Mr. Akachukwu Nwokedi, opined that the fundamental issues of insecurity, assets vandalisation and community unrest must be addressed to make Nigeria an investor destination.

Nwokedi, also emphasised the need for the sanctity of contracts and a properly structured fiscal framework to encourage investors, saying the recent memorandum of understanding (MoU) signed between the Nigerian Content Development and Monitoring Board (NCDMB), the Nigerian National Petroleum Company Limited (NNPC) and the five international oil companies (IOCs) to shorten contracting cycle must be replicated across board.

Admitting that the Petroleum Industry Act (PIA) has done a lot to bring good fiscal terms to the industry, he, however, contended that there was a need to focus more on implementation of the Act in a manner that restores investors’ confidence, boost oil and gas production and ultimately increases the country’s earnings.
He stressed the need to streamline the regulatory environment in order to make the process of activating investment from project delivery, production all the way to the market smooth.

According to Nwokedi, the contracting cycle in the industry needed to be streamlined, adding that petroleum industry regulators need to change, as they can be overreactive and discouraging, leading to threats to investors.

“Investors need an enabling framework and the government should test regulations against investment coming into the country to ensure their viability. Some regulators must set KPIs to attract the right investment and increase production output,” he noted.

In his intervention, the Executive Chairman of AA Holdings and Pioneer Chief Executive Officer of Seplat, Mr. Austin Avuru, stated that Nigeria would need about $25 billion of annual investment in the next 10 years to achieve crude oil output of three to four million barrels per day and three billion cubic feet per day of domestic gas production.
Avuru, suggested that Nigeria should focus more on energy security and optimising the value of its oil and gas resources before committing to its energy transition agenda.

He explained that the energy transition agenda was a lot more serious than an issue that has to do with carbon emissions in the country.
He added that the country should have achieved domestic gas production of four billion cubic feet per day between now and 2030.
Avuru stated, “By 2030/2050, when we say gas is our transition fuel, Nigeria should have retained the value of the crude oil and gas resources and thereby be in the right standing to position itself for the energy transition agenda in 2030 and 2060.

“However, Nigeria is, unfortunately, doing the opposite at a time when it should be doing 3 mbpd of crude oil, we are doing less than 1.2 mbpd.
“At a time when domestic gas production should be heading towards 3bcf per day, the country has stagnated at 1.1bcf per day for the past five years. This is happening because investment has not come into the sector since 2012.

“Our average investment in the sector had peaked between 2011 and 2012 at about $22 billion per annum. It has tapered down to about $5 billion per annum.”
He maintained that even if Nigeria has the cash to achieve the four million barrels and three billion cubic feet daily production in 10 years, the country would still have to possess the technical and execution capacity to achieve the kind of production level that the country desires.

“Where are the rigs and the service companies with the capacity to achieve this goal? There is a lot of deep thinking that has to go into this process.
“We have to reconstruct our energy transition agenda, otherwise Nigeria and Venezuela would be the two countries with both oil and gas resources stocked to the ground when the rest of the world has moved on,”Avuru added.

On his part, the General Manager, Government, Joint Venture and External Relations, Heritage Energy Operational Services Limited, Mr. Sola Adebanwo, reechoed the call for the government to create an attractive environment for investment to thrive in the Nigerian oil and gas industry.

Adebanwo, argued that capital always favours environments that have enabling business policies, adding that difficult investment, regulatory, and unprotected legal environments would naturally drive investment away.

He suggested that the government should strengthen the ease of doing business and provide a legal and policy framework that provides predictability in terms of the investment cycle to attract investors.

Adebanwo, who pointed out that fiscal regime was a major policy issue that had been addressed in the PIA, however, called for more clarity and government’s commitment to further its implementation.

He noted that the PIA had provided attractive tax regimes that were likely to enhance and invite investment but stated that the policy must protect investors in such a way that would ensure that investment funds were recoverable.

He also stressed the need to make business entry and exit attractive, adding that reducing the bottleneck of business registration in Nigeria would help attract investors into the country’s oil sector.

“We need to intentionally position the Nigeria’s investment landscape in such a way that it is attractive foreign capital,” Adebanwo said.