Oil
Nigerian Oil Sector A Prime Investment Destination – Baru
Modupe ASUDO
ABUJA-THE Nigeria oil and gas industry is still a major investment destination in Africa grossing over 24.8 per cent of foreign direct investments coming to the African continent.
This was disclosed in a press release by the Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation (NNPC), Mr. Ndu Ughamadu, which quoted the Group Managing Director of NNPC, Dr. Maikanti Baru, as saying that out of about $194billion capital investment flow into Africa for the period 2018 to 2025, $48.04bn came to the Nigerian oil and gas sector for various development projects.
Dr. Baru who made the assertion in a keynote address while declaring open the 2019 edition of the Nigeria Oil and Gas Strategic Conference and International Exhibition at the International Conference Centre in Abuja informed that the oil and gas industry was an essential building block in the nation’s economic growth.
Speaking on the theme of this year’s NOG Conference “Promoting Investment and Collaboration in Nigeria’s Oil and Gas Industry”, the NNPC helmsman stated that from the Upstream to the Midstream and Downstream sub-sectors, the Nigerian oil and gas industry was replete with massive investment opportunities.
“Nigeria holds about 2.2 per cent of global oil reserves. Our crude oil reserves have grown steadily from about 22 billion barrels in 1999 to 37.5billion barrels in 2018. Nigeria is home to the second largest crude oil reserves in Africa after Libya. Our crude oil production currently hovers around 2.2 -2.3 million barrels of oil per day (bopd). This was bolstered by the coming on stream of the Egina Field in December 2018 and which has currently ramped up to 200,000bopd,” Baru stated.
On the gas side, he said Nigeria has the 9th largest gas reserves in the world with an estimated proven and probable gas reserves of 201Trillion cubic feet (Tcf) and an upside potential of about of 600Tcf.
“In terms of gas production and utilization, Nigeria averages about 8.4bscfd. While only 18% of the production is consumed in the domestic market (Power, Industries and WAGP), 43% is exported as LNG, 32% is re-injected for enhanced oil recovery and other operational uses like fuel gas while 7% of total gas production is currently being flared”, he said.
The GMD stressed that the reserve figures by themselves did not mean anything unless investment in their development and production was driven in a sustainable and collaborative manner.
NNPC’s Maikanti-Baru
According to him, to encourage the existing players in the industry, particularly the traditional Joint Venture partners, NNPC undertook to settle all outstanding cash call arrears amounting to $5billion in 2016.
“Till date, we have defrayed over $2billion. All these efforts are geared towards sustaining investment and renewing investor confidence”, he stated.
Dr. Baru noted that in the last three years, the NNPC had been very active in the capital market assessing financing for different projects in order to sustain industry momentum, adding that the strategy was also used as a lever to promote collaboration.
“Over the past years, through systematic process, we have incrementally opened new areas to indigenous players. For some, it has provided the opportunity to collaborate with international or established industry players,” Baru informed.
He stated that between 2015 and 2017, the state oil corporation was involved in various project financing of over $3billion in new investment.
He listed some of the projects to include: the $1.2billion multi-year drilling financing package from 2015 to 2018 for 23 onshore and 13 offshore wells on OMLs 49, 90 and 95 under the NNPC/Chevron JV christened Project Cheetah; NNPC/SPDC JV ($1Billion) code named Project Santolina; NNPC/CNL JV ($780Million) code named Project Falcon; and NNPC/First E&P JV and Schlumberger ($700Million).
Baru stated that this year, the Corporation had significantly progressed new third party financings for the NNPC/SPDC JV and NNPC/MPNU JV with both transactions substantially over-subscribed.
“NNPC/SPDC Santolina III Project has an estimated cost of about $500million and NNPC/MPN Satellite Field Development II Project has an estimated cost of $1.3billion (NNPC to raise circa $700 Million in third party financing). Furthermore, we have initiated third party financing for the NNPC/NAOC Okpai II Independent Power Plant (IPP) project with estimated cost of circa $658.42million and the NNPC/TEPNG Ikike development project with estimated cost of circa $473.4million to be funded through prepayment for gas by NLNG,” Baru enthused.
He revealed that the NNPC has successfully initialed the Memorandum of Understanding (Framework Agreement) between NNPC and NLNG for the provision of circa $2.5 Billion funding for NNPC’s portion of Cash Call payable on Upstream Gas Supply Projects for Shell Petroleum Development Company (SPDC), Total Exploration and Production Nigeria (TEPNG) and Nigeria Agip Oil Company (NAOC) Joint Ventures.
“We have, also, initiated negotiations for the Financing and Technical Services Agreements (FTSAs) for identified NPDC Assets – OMLs 13, 65 and 111. As you may be aware, NPDC currently contributes about 8% of current national daily production. Further developments from these assets and NPDC JV assets is expected to move NPDC to over 300bopd equity,” the NNPC helmsman quipped.
He maintained that the NNPC has progressed negotiations with Engineering, Procurement and Construction Contractors and potential Chinese lenders on the third party financing for the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Project of $2.89 Billion.
On the Frontier Basins, Baru submitted that exploratory activities progressed from seismic data acquisition, processing and interpretation to the drilling of the Kolmani River -2 well in the Benue Trough with the findings in the Kolmani River -1 by SNEPCO being confirmed and a lot more interesting information being revealed by the well as it approaches total depth of 14,250ft.
He emphasized that promoting investment requires stability in regulatory framework, clarity in terms of fiscal direction and reforms, access to capital and more importantly effective and efficient deployment of both capital and human resources.
Baru assured that Nigeria offers and would continue to offer portfolio of promising, high-value projects with healthy returns.
He observed that at the NNPC, the Corporation has since recognized the challenge as well as the opportunities oil demand growth has presented particularly as a crude oil exporter experiencing a surge in local demand for petroleum products requiring a paradigm shift in business model in order to attract capital and sustain flow of investment.
Earlier in her welcome address, the Vice President of CWC Africa, organizers of the Conference, Wemimo Oyelana, said the conference aims to stimulate discussion around strategies that promote collaboration and draw investment into the country’s hydrocarbon industry.
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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