Passage of PIGB no guaranty for final investment decisions on projects

The  passage of  the Petroleum  Industry Governance Bill  (PIGB) by the Senate  does  not  guaranty  that  final  investment decisions on some strategic oil and gas projects which have been on the drawing board would be taken soon, industry operators say.

Consequently, the fate of   seven oil liquid projects capable of contributing  875,000 barrels of crude oil per day (bpd) to Nigeria’s output is hanging  in the balance.

Industry sources say the passage of  the PIGB by the  Senate will not fast track the decision on the final investment  on the seven oil  liquid  projects with  850,000 bpd capacity because the fiscal regime governing the operations of industry is not included in the PIGB document as it stands.

The projects are originally expected to come on stream between 2018 and 2020 but work on them has been stalled for some time because of the non-passage of the Petroleum Industry Bill.

BusinessDay  investigations reveal that the Final Investment Decision has only been taken on three  out  of  the ten planned oil liquid  projects  slated to come up for  production  between 2018 and 2020.

The implications of this is that investors in these projects would continue to shift dates for the FID, while the time for the execution of the projects continues to suffer  postponement.

Nigeria’s plan to achieve four million barrels per day in crude oil production by 2020 would also remain unattainable.

Out of the  ten projects slated  to come onstream between 2018 and 2020 only three of  have had  FID  taken on them. Of these three, two of the projects are for  condensate, which is not in the same grade with crude oil.  These are Sonam Field Development operated by Chevron and which is expected to produce 30,000 barrels daily  and Gbaran-Ubie Phase 2 operated by Shell, which is also expected to have a daily  production of 20,000 barrels per  day.

The third is the 200,000 barrels per day Egina project, slated to come on stream by 2018. Already, a 200,000 barrels per day capacity Floating Production Storage Offloading (FPSO) vessel for Total’s $16 billion Egina deepwater field is being built in South Korea.

The FPSO is being built by Samsung Heavy Industries at a cost of $3.3 billion, while the entire Egina field development project, including the FPSO will cost $16 billion.

The seven other  projects  calling for attention which are yet to have  their FID taken are:   Shell’s Bonga Southwest and Aparo, offshore deepwater, Bonga North with estimated daily crude oil production of  100,000 barrels per day, Zabazaba-Etan,120,000 bpd, Bosi,140,000bpd.

Others are Satellite field developments phase2, 80,000bpd, Uge  field 110,000 both belonging  to ExxonMobil and Nsiko field, 100bpd operated by  Chevron.

Our sources say the bill has nothing to do with the fiscal regime governing the financial operations of the industry, which is what most investors want to see before they   decide whether or not to invest.

The bill, they say, was essentially to restructure the Nigerian National Petroleum Corporation (NNPC) and make it  more efficient.

According to Diran Fawibe, chairman and chief executive officer of International Energy Resources (IES) the bill affects the governance aspect of the Petroleum Industry Bill (PIB) and until the fiscal aspect of the bill is   considered and everybody is satisfied, the uncertainty prevalent in the industry would continue.

“What is critical to the international oil companies (IOCs) is the fiscal regime because it is what will affect the economics of their projects. The issue of the communities cannot also not be wished away”.

Commenting on the bill, Biodun Adesanya, president Nigerian Association of Petroleum Explorationist (NAPE) said the PIGB must run it full course before it can become operational.

Adesanya said: “ The PIGB  cannot  facilitate  the immediate  signing  of FIDs  on  the projects because there are other aspects of the  PIB,  such as the  fiscal terms and community  issues, which must be  considered  in the  bill. These are what would give investors confidence to want to put down their money”.

“It must go through the House of Representative, it must also be harmonised by the National Assembly, before it is taken to the executive to verify and sign into law.  It is not an immediate thing”, he said

According to Eddy Wikina, former external relations manager, Shell Nigeria Exploration and Production (SNEPCO) FID indicates that the investors are ready to put down their money to fund the projects. He however said that as long the Nigerian environment is not conducive for business, it not likely that the FID on those projects would be carried out.

Security concerns have led some oil services firms to pull out of the country and oil workers’ unions to threaten to go on strike. The instability in the Niger Delta has also resulted in significant amounts of  production shut-ins  at onshore and shallow offshore fields, forcing companies to frequently declare force majeure on oil shipments.

Olusola Bello