PIGB: Prospects and Challenges to Nigerian Oil and Gas Industry

Transcription

1 PIGB: Prospects and Challenges to Nigerian Oil and Gas Industry Address By Dr. Emmanuel Ibe Kachikwu Hon Minister of State Petroleum Resources, Federal Republic of Nigeria August 2017

2 Protocol 1. It is with great pleasure that I deliver this keynote address to the forever enthusiastic and inquisitive Nigerians, at this year s Association of Energy Correspondents of Nigeria (NAEC) conference. 2. Firstly, I would like to commend the leadership and members of NAEC for sustaining platforms such as this that seeks to address issues that are crucial to the growth of the industry. I am aware that outcomes of past conferences have assisted the industry in our quest to optimally exploit and utilize the country s natural endowments for the benefit of Nigerians and other stakeholders. 3. I stand in awe as I speak to citizens whose collaboration with us right from when we started this work over two years ago has led to an increased level of transparency in the Nigerian Oil & Gas sector. You have contributed immensely towards increasing the level of oil and gas education amongst the Nigerian populace. Association of Energy Correspondents of Nigeria (NAEC) 4. The establishment of NAEC on the same day in 1987 when the African Petroleum Producers Organisation (APPO) was created has assisted in effectively covering the difficult, highly technical oil industry, which is the mainstay of the Nigerian economy and has continuously produced ingenious individuals that have served our nation greatly. 5. The founding members vision to create a platform for the correspondents to cooperate, collaborate, share knowledge and competences in the coverage of the energy sector of the country as well as the global energy sector, especially as it impacts the local industry is very commendable. 6. This has no doubt lead to capacity building amongst members, broadening of knowledge of the industry and sharpening of reportorial skills amongst members and has also exposed many of the members to international conferences, awards programmes, OPEC and others. 7. Continue perpetuating your character of fairness and thirst for knowledge, so that our nation will keep on growing. Well done NAEC. 1

3 Petroleum Industry Governance Bill (PIGB) 8. Ladies and Gentlemen, topical in our country today is the proposed transformation programme of the Oil and Gas industry driven by the Petroleum Industry Governance Bill (PIGB). You will agree with me that after over thirty-five years experience in oil and gas operations in Nigeria, we must mend our ways, reform the industry processes, align activities, create efficient structures, adopt new business practices and outline clearer rules of operations to move our industry forward for the benefit of our economy and all Nigerians as a whole. 9. This sector results in more than 80% of our foreign exchange revenues and it is via such, that our capital and recurrent expenditures are mostly financed. Hence, it is imperative that accountability, which is the heir of transparency, is present. 10. The answers to questions of accountability and alike are found in the initiating laws that birthed this oil and gas sector. Moreover, in a democratic system the concept of transparency is atomically anchored by the three arms of government. 11. Kudos to the organisers for centring this year s theme on the law that could potentially revolutionize our petroleum sector, the Petroleum Industry Governance Bill (PIGB). 12. Specifically, the PIGB and the other bills that will be passed has been articulated and designed to: establish clear and enduring good governance principles; provide for fiscal regimes that are flexible and that would guarantee optimal take for the government; support domestic gas utilization through the National Gas Master Plan enhance local content properly align the roles and functions of institutions, strengthen and reposition the Nigerian National Petroleum Corporation (NNPC) for enhanced productivity; and ensure that NNPC runs like all world class commercial entities. 13. This sector generates more than 80% of our foreign exchange revenues and it is via such, that our capital and recurrent expenditures are mostly financed. Hence, it is imperative that in our drive to achieve these strategic targets, the focus should be on re-enforcing transparency and accountability in the conduct of business activities at all levels in the industry. The industry cannot afford to remain subject of continuous criticism by all Nigerians. 2

4 14. The answers to questions of accountability and alike are found in the initiating laws that birthed this oil and gas sector. Moreover, in a democratic system the concept of transparency is anchored by the three arms of government. 15. I must appreciate the organisers for centring this year s theme on the PIGB, the law that shall revolutionize our petroleum sector. Prospects & Challenges 16. Recall that for the past ten years, the passage of the Petroleum Industry Bill has been an issue. However, this administration has succeeded where previous administrations have not given the passage of the PIGB in the upper house. The Ministry of Petroleum Resources is currently working arduously with the lower house to provide an adequate pathway for passage of the PIGB and the Fiscals Bill at the lower house. 17. The PIGB which has been on the news headlines since its passage at the upper house, is indeed in line with the Transparency and Efficiency key focus area of the 7BigWins initiatives - a roadmap of short and medium term priorities aimed at developing a stable and enabling oil and gas investment landscape, which was launched by His Excellency, President Muhammadu Buhari in October It portrays plans to create the governing institutions with clear and separate roles and establish frameworks for creation of commercially viable petroleum entities, that will eliminate bureaucratic bottlenecks, which discourage investors, hinder our growth, and prevent us from attaining the summit of performances. 19. In other countries where oil revenues have been of humongous benefits, a single regulator exists. This single regulator regulates the upstream, midstream and downstream aspects of its petroleum resources. 20. A single regulator provides a one-stop shop for investors; it removes duplicate procedures and its associated costs and therefore attracts foreign direct investments in the nation s oil and gas sector. 21. In Nigeria today, the situation is such that foreign direct investment flows into the country are at high cost. An example is the high cost of production of oil at about $32/barrel. Initiatives to reduce the cost of crude oil production to $15/barrel are ongoing; initial consultations with stakeholders have held and cost drivers have been identified. The outcome of this initiative would be a winwin for investors and the nation. 3

5 22. The PIGB specifies a single regulator, to be called the Nigerian Petroleum Regulatory Commission, with the responsibility of handling all oil and gas regulations in this country. This would ensure a high level of stability in the business environment, amongst others. 23. Investors considering our attractive gas market, will be encouraged to invest due to the development of a friendly environment. Surplus gas would be available for power generation, forcing the emergence of distribution companies looking to make profits from trading gas. 24. In addition, the need for a National Operator, which will be the National Petroleum Company (NPC) to be partly autonomous, cannot be watered down. The PIGB, stipulates that all assets previously held by the Bureau of Public Enterprises (BPE) will be managed by the National Petroleum Company and that divestments of shares by government to the private sector will gradually increase from 10%-30% within 5 years and 40% in 10 years. 25. This would entail an increased level of performance in comparison to a 100% government owned company. Therefore, Nigerian citizens will be able to buy shares in the National Petroleum Company and become part owners of its success. 26. With ownership spread to individuals and institutions, transparency and accountability will be given top priority and this will enhance performance because shareholders will seek to protect their investment. 27. This ownership concept is also being introduced in the modular refinery initiative under BigWin 4 (Refineries and Local Production Capacity) and is set to improve refining capacity in-country and foster peace in the Niger Delta. Optimising Local Refining Capacity in Nigeria: Opportunities and Challenges 28. In optimising local refining capacity, the first thing we did was to initiate steps towards revamping our own refineries in Port Harcourt, Warri and Kaduna. The refineries are not to be concessioned nor sold in whole or part because in the current state, optimal value would not be obtained. 29. We sought externally for resources to finance the rehabilitation of the existing refineries, which was a very tall order, telling someone to invest about $1bn in the refineries rehabilitation with no equity, and wait for incremental volumes of refined products to recoup their investment. 30. The actual rehabilitation work would be carried out by the original refinery builders (ORBs), with financiers funding the repair work, and a joint 4

6 management team comprising ORBs, Financiers and NNPC, to steer the operation of the refineries over a period of 5-6years to bleed incremental liquids for recouping of investments. 31. The second dimension was to ascertain what holders of existing licenses to establish refineries have done since they were issued their licenses. Of about licenses issued by DPR for the establishment of modular refineries, only two (2) have shown substantial progress. The high percentage of nonperformance led to engagements with licensees to ascertain the issues with a view to removing all bottlenecks. 32. On the concept for co-location of refineries, we have moved from our initial model, which involved co-locating brownfield refineries with the existing refineries to the co-location of brand new (greenfield) refineries. The overall concept remains the same pipelines, jetties, and where possible, storage tanks would be jointly invested in and shared. 33. To become net exporters of petroleum products, our existing refineries need to operate at nameplate capacity and all private and modular refineries need to contribute their quota. 34. To promote local content, we need to ensure Nigerian companies to participate in the process and the host communities must be taken into cognizance as they also have a role to play in achieving this goal. Conclusion 35. The challenges of any beautiful plan lie in its implementation and you can be assured that this administration would ensure the implementation in order to ensure that the Oil and Gas industry yields profit for the Nigerian people. 36. The NAEC are patriotic Nigerians searching for ways to ensure the best for Nigeria and so long as we have patriotic Nigerians sitting in the saddle, I am sure we will achieve all our goals. 37. Once again, I congratulate you for organizing this conference. It has been an absolute pleasure, ladies and gentlemen. Thank you for listening and God bless. 5