Petroleum producers in Nigeria have called on the Federal Government to offset the $1.3 billion owed to gas producers to stimulate new opportunities in the industry and boost the nation’s Gross Domestic Product (GDP) and power generation.
Speaking during the oil and gas industry policy roundtable in Abuja on Monday, Nathaniel Oyatogun, head of the subcommittee on gas at the Oil Producers Trade Section (OPTS), said that despite the various interventions by the Central Bank of Nigeria (CBN), some companies who produced gas from as far back as 2012 were yet to be paid.
According to him, “We need to pay off the debt we owe gas producers; currently, we owe gas producers about $1.3 billion. If that money is paid to them, they can drill more wells, complete small projects, build new gas processing plants and we will have power generation capacity.
The roundtable hosted members of the various hydrocarbon-related committees of the Nigeria National Assembly and the petroleum-producing companies in Nigeria, under the aegis Independent Petroleum Producers Group and the International Oil Companies (IOCs).
Oyatogun who noted that the gas pricing in Nigeria was too low to attract investment, said that it was a challenge to the Nation’s ability to meet the citizen’s electricity demands.
According to him, players in the oil and gas sector were open to working with the National Assembly to ensure a competitive fiscal framework that would attract investment and unlock development in the sector.
He explained that three levers including; recovery from royalties, recovery from production cost and recovery from tax could be harnessed to resolve the ‘legacy debts’ without the federal government’s direct cash disbursement.
“Under the decade of gas, we are looking at a cost-reflective approach. Right now the gas price is so low that gas producers are not able to recover their costs, and if you are not able to recover your costs how can you sustainably be in business? So we need to look at that, we need to have a good transparent and market-led environment that will create an atmosphere of a willing buyer, a willing seller that will bring competition.
“We all know that once competition is not cost-efficient or cost-effective, you will be thrown out of the market by the forces of supply and demand. We will also need to balance the needs of vulnerable users and it’s not going to be by the way we do subsidies but it’s going to be a direct approach to make sure that those who are very vulnerable will be taken care of and that will help us to be able to derive the benefits that we have in the gas sector,” he added.
In his remarks, Abdulrazaq Isa, chairman of the Independent Petroleum Producers Group (IPPG) said the industry was looking forward to working closely with the newly elected legislators to further develop the oil and gas sector, with a focus on amending critical areas stifling the growth of the industry.
He noted that despite the enactment of the Petroleum Industry Act (PIA), investor uncertainty, a core element of the ongoing reforms, persists and this is further exacerbated by the global energy transition drive and the insecurity in the Niger Delta with the resultant effect being a significant drop in the nation’s production output.
“It has been two years since the enactment of the Petroleum Industry Act (PIA) and this landmark legislation continues to transform the Nigerian oil and gas industry and has laid a solid foundation for its growth and development. However, investor uncertainty, a core element of the ongoing reforms, persists and this is further exacerbated by the global energy transition drive and the insecurity in the Niger Delta with the resultant effect being a significant drop in the nation’s production output.
“Consequently, Nigeria suffers untold collapse in revenue accruable from its vast hydrocarbon resources. It has therefore become imperative for us as an industry to ensure the immediate ramping up of oil and gas production to shore up the nation’s revenue base and generate the much-needed foreign exchange for the attainment of macroeconomic stability.
“Making this happen in the short to medium term will require focusing on the following key priorities; amendment of critical aspects of the PIA primarily aimed at establishing a strong regulatory and governance framework to guide the effective implementation of the Act and ensure the intended benefits of the industry-wide reforms are realised.
“To enhance the competitiveness of the industry to attract the level of funding required to fully optimise our vast hydrocarbon resources for today and future generations; enhancement of the security across the Niger Delta to safeguard and build a conducive operating environment to stem crude theft and sustainably address the unprecedented production decline witnessed in recent years, and establishment of a value-creating midstream and downstream sector to catalyse and rapidly industrialise the Nigerian economy thus significantly growing GDP and boosting job creation.”