FG Vows to Award Oil Assets to Only Companies with Proven Capacity during Future Bid Rounds

·      Says era of delay of licence extensions, ministerial consent over

·      Assures producers of enabling policies to attract investments, ramp up production

·      How Tinubu lobbied heads of state over Nigeria’s OPEC quota raise

·      Presidency: $13.5bn investment expected in energy sector in 12 months

·      Investor uncertainty persists two years after PIA, IPPG bemoans  

Peter Uzoho

The federal government has said henceforth, only energy firms with proven capacity would be prioritised and considered for award during bid rounds.

The move is expected to halt the mistake of selling Nigeria’s oil and gas exploration and production assets to companies lacking funding and technical capacity to optimise the valuable resources.

Minister of State for Petroleum (Oil), Senator Heineken Lokpobiri, made the assertions at the 2023 Annual Dinner of the Independent Petroleum Producers Group (IPPG), held in Lagos.

Lokpobiri assured players in the Nigerian oil and gas industry that the present government had put an end to the era of delay of license extensions and ministerial consent.

He promised the oil and gas producers of enabling fiscal and regulatory policies to attract investments into the petroleum sector and, ultimately, ramp up production.

The minister explained how President Bola Tinubu lobbied heads of state of member countries of the Organisation of Petroleum Exporting Countries (OPEC) to support Nigeria’s demand for oil production quota increase.

At the occasion, also, the presidency, through the Special Adviser to the President on Energy, Mrs. Olu Verheijen, disclosed that investment worth $13.5 billion was expected in the country’s energy sector within the next 12 months.

The revelation came as Chairman of IPPG, Mr. Abdulrazaq Isa, bemoaned persistent investor uncertainty in the oil sector, despite the Petroleum Industry Act (PIA), which was enacted over two years ago.

Lokpobiri, who was scheduled as the guest speaker at the occasion, challenged the indigenous operators under the IPPG family to up their game in optimising the country’s hydrocarbon resources. He reminded them that the future of the country was in their hands, as nobody could develop the country better than them.

Acknowledging the contributions of the 29-member indigenous oil producers, whom he said were currently producing a total of about 200,000 barrels a day, Lokpobiri expressed his belief in their capacity to double that number in the near future, with the right incentives.

The minister assured the producers that the Tinubu administration would, henceforth, “not delay your extensions, we do not delay your ministerial consent, or whatever”.

He said the move was part of government’s effort to support the industry players through creation of an investment-friendly environment with robust incentivising fiscal and regulatory frameworks.

According to the minister, “In the past, minister doesn’t sign anything without seeing the face of the owner of the company. But since I came, I don’t need to see anybody’s face. And that doesn’t affect only the upstream, it also affects the midstream and the downstream.

“And this is one of the ways we want to see how we can liberalise the entire process so that businesses can easily be going on.”

Lokpobiri reiterated his earlier position that when conducting future bid rounds, only companies with proven capacity to develop the assets and bring them to production would be prioritised and considered for award.

He explained, “I’ve also said that it is important that going forward, when we want to do any bid round, the boys shouldn’t come. Let the men alone come. Part of what we have discovered is that we have so many people who have licenses and they have no capacity to be able to do exploration. So it ends as souvenirs in their cupboard.

“So going forward, the members of IPPG, please, get ready. Any other bid round, I want to assure you that you, the men, will be the ones to be considered. In fact, to me, if I give anybody any licence, and the person wears some nice suit and starts roaming around the world looking for investment, I’ve caused him more pain.

“He has spent money to pay signature bonus, and he keeps travelling around the country, travelling around the world in the name of looking for investment. Investment that will never come.

“So I believe that those of you who have already proven capacity should be the people that we should prioritise in terms of future bid rounds.”

He stated the government understood the challenges facing the operators, which centred mainly on fiscal, security, regulatory, funding and policy inconsistency, stating that the government is now expected to remove all the bottlenecks complained about by the players.

The minister said for Nigeria to meet its target of producing at least two million barrels of oil per day in 2024, the IPPG, as a group, had a critical role to play.

He said he was embarrassed when he went for the OPEC meeting and the Nigerian delegation was trying to argue that the country had capacity to produce more than two million barrels per day but OPEC disagreed.

Lokpobiri said OPEC told Nigeria that they signed an agreement that their November production would form the country’s quota for 2024, and added that if the country was producing 2.5 million barrels, instead of the current 1.3 million barrels, its quota would have been 2.5 million barrels.

On how Tinubu lobbied heads of state of OPEC nations to support Nigeria’s demand for oil production quota increase, Lokpobiri stated, “We had to argue. Mr. President, too, had to make calls to some heads of state. In fact, one of the reasons why Mr. President went to Saudi was because of this matter, because he had to go and speak to the ruler of Saudi. I was there before he came.

“The Minister of Energy in Saudi is like a Pope. He determines what happens and so we had to lobby, we had to go to Equatorial Guinea, we had to go to countries to see how they can support us.

“At the end of the day, because OPEC doesn’t consider condensates, we have OPEC quota of 1.5 million barrels. With condensate of about 300, 000 barrels, we can fund our budget for the year 2024.

“But it’s my conviction that we can do a lot more. Our problem is not capacity; our problem is other factors, from security to the integrity of our facilities. And so, by the time we start addressing some of these concerns, I believe that by 2024, we will be able to produce at least two million barrels.

“I want a situation where we can put in like 2.5 million barrels a day, so that OPEC can call us to say, look, stop producing this much! And then we can brag, we can tell them that well, we can sell some to the global community but the rest is for domestic refining and then satisfying our domestic needs.”

As part of the solution to the funding problem facing operators in Nigeria and other African countries, Lokpobiri said the continent was trying to address the challenge through the African Petroleum Producers Organisation (APPO) and the proposed floating of African Energy Bank.

He said Nigeria was fighting hard to ensure that the headquarters of the proposed bank came to Nigeria since there was no continental headquarters of any agency in the country, apart from ECOWAS.

He added, “The president himself is giving us all the support. We are making all the lobbying we need to do, so that at the end of the day, at least, the headquarters of the African Energy Bank comes to Nigeria, so that IPPG members may have closer access to the bank, and explore the opportunities of getting more funding from that bank.”

In her goodwill message, Special Adviser to the President on Energy, Verheijen, said her engagements with the stakeholders had shown that there were massive investment opportunities for the sector.

Estimated at $55.2 billion opportunities by 2030, she said investments worth $13.5 billion was expected by the energy companies in 12 months’ time.

Verheijen said the administration of Tinubu, in line with its “Renewed Hope Agenda”, remained committed to improving the business and investment climate in the country, including the energy sector.

As she had expressed at other stakeholder engagements in the sector, Verheijen said the president was fully committed to the development of the energy sector, and was actively exploring all areas to improve revenue and the economy, in general.

She maintained that the oil and gas sector remained critical in that regard, despite current production levels falling significantly short of the country’s potential.

Verheijen stated, “My office has since started work on key areas of reform to spur the growth of the energy sector, and which would also positively impact on the livelihood of the average Nigerian and small businesses.

“Recently, the president approved the Import Duty Waiver aimed at increasing the utilisation and supply of gas in the domestic market. This waiver covers the importation of all equipment related to Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG), as well as machinery, equipment and spare parts into the Nigerian market for the utilisation of Nigerian gas.”

The presidential aide added that there were ongoing discussions aimed at improving the energy landscape and security, and implementing the appropriate fiscal incentives for growth.

She stated that more incentives that would boost oil and gas investments in the country, and generally improve the energy sector were being expected.

Earlier in his welcome remarks, the IPPG chair, Isa, bemoaned the persistent investor uncertainty in Nigeria’s oil sector, despite the passage of the PIA over two years ago.

He described the law as a core element of the ongoing reforms in the petroleum sector.

Isa said investor uncertainty had been further compounded by the global energy transition drive and insecurity in the Niger Delta, which led to a significant drop in the country’s crude production.

He said PIA had been in effect for over two years and the landmark legislation had established a solid foundation for the growth and development of the industry.

As key industry stakeholders, Isa stressed the need to take a step back and understand why significant investments into the industry were yet to materialise. He said they must also identify the key imperatives to sustainably address the muted investment level and dwindling production.

Isa said the immediate priority for them, as an industry, was creating a conducive and enabling business environment to enhance the competitiveness of the industry. He added that attracting the level of investment required to fully optimise the country’s production base would require the stakeholders to focus on some key priorities in the short to medium term.

Isa listed some of the solutions to include amending critical aspects of the PIA to strengthen the regulatory framework and competitiveness of the fiscal regime as well as enhancing security across the Niger Delta.

Others, according to him, are expediting the conclusion of ongoing international oil companies (IOCs) divestments; sustaining the implementation of the Decade of Gas policy, and holistically addressing inherent inefficiencies within the industry, which had driven costs to astronomical levels.

The IPPG boss said, “Based on the vast hydrocarbon resources at our disposal and the ongoing global decarbonisation drive, achieving production targets of 4 million barrels per day of oil and 12 billion cubic feet per day of gas by the turn of the decade should be non-negotiable.

“A clear line of sight with realistic milestones needs to be defined or we stand the risk of missing a golden opportunity to turn around the fortunes of our industry within the limited window we have today.”