The Petroleum Minister faces a task of drawing up competitive fiscal and regulatory terms for the oil and gas sector as well as organising transparent oil licensing bid rounds. He is expected to remove fuel subsidy, deregulate the downstream sector and liberalise gas prices, stakeholders say.
Buhari’s second term will have big impact on the Ministry of Petroleum Resources which controls Nigeria’s oil and gas sector – the heart of Africa biggest economy.
According to industry experts, the challenge before the Petroleum Minister is to improve the economic growth of a sector responsible for 90 percent of Nigeria’s foreign exchange earnings but whose GDP contribution has remained in the one
digit margin, with all-time highest contribution of 9.84 percent in Q3 2017.
Experts in the oil and gas sector say reforming fiscal and regulatory terms by passing into law a competitive petroleum industry bill is the most urgent task facing the government. Next is leveraging the oil and gas sector to provide linkages across the economy and creating efficiency in the oil and gas sector.
For Adeola Adenikinju, director Center for Petroleum and Energy Economics and Law and member of the Central Bank of Nigeria Monetary Policy Committee, the most important agenda is ensuring the Petroleum Industry Bill (PIB) is passed to provide transparency in the sector, including reform of the NNPC and provision of clarity for fiscal, regulatory terms so the oil sector can confirm to international standards.
“We have an upstream that’s not operating optimally; midstream that’s not functioning, and a downstream that is dying so we have to think of a way to ensure private sector can make investment in the sector,” Ademola Henry, team lead at Facility for Oil Sector Transformation (FOSTER II), said.
Henry Biose, a petroleum economist based in Port Harcourt, said a petroleum industry law is a critical framework that will drive investments followed by actions to liberalise the gas sector.
“Our current laws are out- dated and if the PIB is not passed, uncertainty in the sector will increases and investors will stay away due to the absence of law to protect their investments,” Biose said.
Another major dilemma for the present government is the issues concerning oil bid round which last took place in 2011.
Last year, Madagascar, Algeria, Ghana started oil licensing rounds to boost their reserves, increase revenue as well as their capacity to take advantage of soaring oil prices, but Africa’s biggest producer has been unable to finalise bid round plans since 2016. Over 186 marginal fields lie fallow because bid rounds have not been conducted leading to loss of billions of naira in revenue.
“Oil bid rounds should be more competitive and transparent, let Nigerians know who is bidding for each field,” Agboola told Businessday.
Deregulation of the downstream petroleum sector is another key issue that faces the minister.
Today, Nigeria is only capable of pumping some 2.5 million barrels of crude oil per day despite sitting on more than 40 billion barrels of proven reserves with its mid-stream and downstream infrastructure are arguably in worse shape than upstream production.
