While Nigeria is still undecided on how to go about the reform of the oil and gas sector, Egypt, its North African counterpart, has extended an olive branch to international oil companies by giving them incentives that they find difficult to resist.
The cornerstone of Egypt’s energy reforms aims to tempt foreign firms wary of setting foot in the Egyptian market.
According to Petroleum Economist, the crux of Egypt’s ambitious energy reform has been a better deal for upstream international oil companies (IOCs). Stung by the failure of exploration rounds in 2012 and 2013, Cairo has guaranteed a higher minimum price for offshore producers. The old minimum price of $2.73/mn Btu has been replaced by $3.95/mn Btu to give IOCs a stronger incentive to invest. The pricing hike and other liberalisations, have seen a surge in exploration, led by the four IOCs that already dominate Egyptian production.
Eni, flush from finding the 30tn ft³ Zohr field in 2015 last summer surveyed another field, Nour, 31 miles off Suez, although both the company and the Egyptian government are tight-lipped about these developments.
The IOCs continue announcing new finds, while Egypt used the conference and exhibition EGYPS to unveil a dozen exploration licences, its largest ever auction. Consultancy Wood Mackenzie calls it “Egypt’s astonishing gas renaissance”, estimating there is 61tn ft³ of gas reserves in existing fields with another 45tn ft³ waiting to be found. Egyptians are adjusting to the new reality of their country, once an energy backwater.
In Nigeria, things are not looking so bright. The failure to pass the Petroleum Industry Bill in the last 18 years has led to stagnation in the country’s oil and gas industry.
In the past 12 years there have not been any exploration activities and consequently there has not been any new discovery.
Even some of the discoveries that have been made have not been developed because of the delayed passage of the bill.
The Petroleum Industry Governance Bill which was passed by the National Assembly was not signed by President Muhammadu Buhari because of complaints from some state governments who claimed that their revenues would be reduced if the regulatory authority was allowed.
The oil and gas industry has been inactive for several years that the IOCs only service their existing assets.
The latest move by the Federal Government to get the IOCs refund $20 billion as tax owed could further compound the problems of the industry as this is likely to delay some of the projects slated for development this year.
Olusola Bello
