Oil
Nigeria loses over $40bn investments in 2 years
LAGOS – Nigeria is estimated to have lost more than $40 billion or N6.3 trillion investments in the last two years as a result of uncertainties in the oil and gas sector. Specifically, oil companies have held back over $40 billion worth of investment while waiting to see what happens, sequel to regulatory uncertainty. Sweeping reforms to taxes and royalties, transparency, local participation and the Nigerian National Petroleum Corporation, NNPC, have been promised since 2007.
According to estimates from the Senate Committee on the upstream oil industry, investments of at least $28 billion in the oil and gas sector have been lost or deferred since 2010. Similarly, uncertainties are holding back Shell Petroleum Development Company’s (SPDC) planned investment of about $30 billion in two offshore deep water projects in Nigeria.
At the just concluded Nigeria Oil and Gas (NOG-13) conference held in Abuja, Mutiu Sunmonu, Managing Director of SPDC, said it was regrettable that Nigeria was losing huge revenues and investments, due to oil theft and bunkering because of uncertainties. Though Sunmonu did not mention the projects where the fund would be deployed to, he stated that “SPDC would rather wait for stable and right conditions before committing finances.”
According to him, “Perhaps Nigeria’s oil and gas industry is slipping into the era when it took Mexico about 50 years to recover from such challenges in its oil industry. I recall the Mexican story where it took the country 50 years to recover from the loss in its oil production and my worry is that we are slipping towards that.”
Divestments
While Shell may have held back further investments in the sector, Conocophillips, a Houston Texas-based oil group, sold its assets after 46 years of operation in Nigeria to Oando Group. Some of these assets included its 17 percent stake in Brass Liquefied Natural Gas, LNG facility and its joint venture stakes in OMLs 60, 61, 62, 63, 131, as well as Kwale-Okpai independent power plant.
The company was estimated to have realized more than $1.7 billion from the sale of its assets in Nigeria. The sale of its Nigerian business unit was part of ConocoPhillips’ plan to increase value for shareholders through portfolio optimization, focused capital investments that deliver growth in production and cash margins, improved returns on capital, and sector-leading shareholder distributions.
Earlier, British Gas (BG) Exploration and Production, citing Nigeria’s turbulent oil and gas sector, pulled out of Nigeria, despite investing more than $500 million in its exploration activities on the offshore blocks OPLs 332, 286, 284 and Olokola Liquefied Natural Gas (OK LNG).
While announcing the divestment from OK LNG, Frank Chapman, Chief Executive Officer, said, “We are switching properties to development of projects elsewhere, most probably the expansion of our new assets in Australia. At the appropriate time, there would be further opportunities in Nigeria. For today, it is a low priority.”
International Oil Companies, IOCs are finding it easier to bye-pass Nigeria in their investment decisions, due to what they termed unfriendly oil sector operating environment. Consequently, Nigeria is estimated to have lost about $2.7 billion or N426 billion from decline in crude oil production in the last quarter of 2012 – October to December.
According to the Central Bank of Nigeria, CBN, Fourth Quarter Economic Report, Nigeria’s oil revenue in the fourth quarter of 2012 dipped by N112.6 billion, as gross oil receipts in the Federation Account stood at N1.824 trillion. That showed a 5.8 percent reduction from N1.936 trillion recorded in the third quarter of 2012.
The CBN report also stated that Nigeria’s crude oil production, including condensates and natural gas liquids stood at 2.00 million barrels per day (mbpd) or 184.00 million barrels during the fourth quarter of 2012, compared to the 2.26 mbpd or 207.92 million barrels recorded in the third quarter, thus representing a decrease of 0.26 mbpd or 11.5 per cent in production level.
The report said the average price of Nigeria’s reference crude, the Bonny Light stood at $112.73 (N17,811.34) per barrel, with crude oil export at 1.55 mbpd or 142.60 million barrels in the fourth quarter, compared with 1.81 mbpd or 166.52 million barrels in the preceding quarter, representing a decline of 14.4 per cent.
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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