Non passage of PIB slow rig activities, new investments – Baker Hughes, FDC Research

Without the passage of the Petroleum Industry Bill (PIB) and instituting new fiscal incentives that will attract new investments, Nigeria’s rig count will remain flat in the second quarter, indicating declining investments, according to a new research by Baker Hughes and Financial Derivatives.

The International Association of Drilling Contractors (IADC) reported that Nigeria’s rig count reduced to 7 in 2014 largely influenced by diminishing global rig count and cash crunch experienced by the Nigerian National Petroleum Corporation, (NNPC) in the execution of joint venture projects.

Nigeria’s rig count reduced further to 3 as at March 2016 according to the research showing that the investments in oil fields have been shelved while on-going rig activities have slowed.

Baker Hughes and Financial Derivatives team of analysts noted that the average rig count for March 2016 for the United States was 478, down 54 from the 532 counted in February 2016, and down 632 from the 1,110 counted in March 2015.

The average Canadian rig count for March 2016 was 88, down 123 from the 211 counted in February 2016, and down 108 from the 196 counted in March 2015.

The worldwide rig count for March 2016 was 1,551, down 210 from the 1,761 counted in February 2016, and down 1,006 from the 2,557 counted in March 2015.

Nigeria’s National Assembly is expected to commence discussion on the PIB which has continued to generate controversy since it was sent to the legislature in 2012.

Bukola Saraki, Senate President said last week that both houses of the National Assembly will start considering the “Petroleum Industry Governance Bill” next week. The awaited bill will seek to address issues such as institutional reform, upstream, downstream and gas administration, fiscal matters and revenue management.

The bill is expected to clarify the roles of the government in the oil and gas industry reducing potential for conflict. It will also clarify the role of the minister, create a new and independent regulatory institution that will enforce regulation free from government intervention and lead to the unbundling of the NNPC.

The PIB ran into troubled waters largely over the purported removal of host communities development fund from the bill, a provision that required International Oil companies to contribute 10 percent of their profit to host communities has reawaken ethnic and geopolitical fissures in Nigeria’s body politics.

The report also highlights power output from the national grid that fell to 2500mw from in March 2016 from 4500mw in August 2015.

It attributed this shortfall of approximately 50 per cent to the bombing of the Forcados pipeline disrupting gas supplies.

It believes however that power generation may improve slightly due to the rainy season that will boost hydro power generation.

 

ISAAC ANYAOGU