Nigeria dithers on PIB while peers move to woo oil investments

The passage into law of what is an equivalent of Nigeria’s long-delayed Petroleum Industry Bill (PIB) in Mozambique last Thursday has again brought to the fore the seriousness with which oil and gas producing countries are positioning themselves to attract investors, creating pressure on Nigeria to reform its oil industry.

This is as increasing discoveries of oil and gas resources in many parts of the world, including Africa, are intensifying global competition for investment as oil majors maintain a disciplined and selective approach to capital investment.

In Africa, especially in East Africa, large recent discoveries are presenting new opportunities for investors, thereby increasing competition in the continent.

Mozambique’s lawmakers approved petroleum laws that open the way for new oil and gas bids as well as special tax breaks for offshore fields operated by Anadarko Petroleum Corporation and Italian oil major, Eni, to aid their development.

Just last week, Mexico saw the passage into law of an energy reform bill that promises to lure investments into the country’s oil and gas industry, after approval by lawmakers and immediate signing by President Enrique Pena Nieto.

“No serious country will leave a sensitive sector like the oil and gas industry lying down for more than a decade without passing the PIB. And if you don’t pass the PIB, no serious investor will want to expand his or her business frontiers into the Nigerian oil and gas industry,” Bala Zakka, an energy expert, told BusinessDay.

Globally, competition for investment is increasing and countries perceived as stable are more successful in attracting investment, said Elizabeth Proust, managing director and chief executive officer, Total E&P Nigeria, at a recent conference in Lagos.

“The global oil and gas industry will invest over $10 trillion in capital expenditure in 2015-2025, and there will be winners and losers,” said Proust. 

Zakka further said lack of investment in the Nigerian oil and gas industry was a self-inflicted problem.

“It is an internal problem. The reason is that the legislators we have do not still understand that we are a mono-product economy, and because we are a mono-product economy, we need to make sure that the oxygen of revenue into the country is kept alive. The PIB has been lying there for more than a decade,” he said.

Wumi Iledare, president, International Association for Energy Economics, stressed the need for government to create an enabling environment such that investors would be more than delighted to invest in Nigeria.

“The resources to develop are there, especially natural gas. The only thing Nigeria does not have is governance structure that supports investment,” said Iledare.

Mozambique’s offshore fields may hold enough gas to meet global demand for more than two years, according to Empresa Nacional de Hidrocarbonetos, the state-owned oil company.

In March this year, Anadarko Petroleum, the primary operator of Mozambique’s Rovuma Offshore Area 1, which is estimated to hold more than 65 trillion cubic feet of natural gas, said it had sold two-thirds of the capacity of its planned Mozambique LNG project to Asian customers.

The southeast African nation is finalising the process for new oil and gas bids and will conclude this by the end of the year, said Esperanca Bias, mineral resources minister.

“We were waiting for the petroleum law to be approved. Now we have the tool we were seeking for new bids, because those must be regulated by the new bill,” Bias said. 

“The bill was passed and despite waiting for some corrections after final approval, we feel comfortable because it will help to attract more investments and develop gas projects, protecting the investors and their investments. The value of the investments in Area 1 and 4 is big and we need to give comfort to investors for gas-project development,” she said.

In Nigeria, a marginal fields licensing round, which was flagged off last November to auction 31 fields to local companies, has been stalled, even as investors are eager to see the bid round come online.

Crucial to Nigeria’s aspiration to boost power supply to business and homes is natural gas, and the country boasts over 180 trillion cubic feet (Tcf) of discovered reserves and up to 600 Tcf of undiscovered gas reserves, but requires massive investment to unlock the value in the resource.

Nigeria, Africa’s top oil producer, has seen its crude oil reserves decline from 37 billion barrels to 35 billion barrels, according to the Department of Petroleum Resources (DPR).

“Looking forward, to position itself favourably relative to competition for investment, Nigeria needs to create a more stable regulatory, competitive fiscals, and conducive business environment,” said Proust, noting that Nigeria’s domestic gas market has significant potential that requires investment across the value chain to realise growth and achieve economies of scale.

FEMI ASU