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Delayed PIB passage frustrates N17.2tn investment — IOCs

By on May 26, 2013

International Oil Companies operating in Nigeria have said the delay in the passage of the Petroleum Industry Bill has completely slowed down their N17.2tn ($109bn) proposed investment in the oil industry.

The bill, subjected to stakeholders’ debates for about 12 years, is still being discussed at the National Assembly.

Oil majors, who spoke under the aegis of the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, said the planned projects were no longer economical due to the fiscal terms of the bill.

Members of the OPTS are Royal Dutch Shell, Total, Chevron, ExxonMobil and Agip.

Speaking at a session organised by the Petroleum Technology Association of Nigeria during the recent Offshore Technology Conference in Houston, Texas, the OPTS Chairman, Mr. Mark Ward,  said, “$109bn in planned investments is not progressing as new projects are no longer economical.”

Ward, who also doubles as the Chairman/ Managing Director, ExxonMobil Nigeria, said the operators had planned to invest $33bn in the next five years but lamented that the fiscal terms of the PIB, if not reviewed, might jeopardise this.

Ward said the PIB lacked clarity in implementation and had no transition plan.

“There is enormous investors’ uncertainty with apparent divergent interest.  Nigeria’s Joint Venture oil fiscal terms are already among the highest in the world, not considering the high risks and cost due to security and bunkering,” he said

He noted that the PIB would create one of the harshest Production Sharing Contract regimes, adding that the challenges with the content of the PIB would lead to a decline in production of oil and gas resources.

He further said, “The PIB outcome is highly uncertain for the industry.  It applies to only existing projects and does not preserve contractual basis on which investment was made.”

Ward insisted that a good PIB should have fiscal terms that create value for the economy and attract investment.

He said the PIB, when passed, should streamline regulatory environment by separating regulation and commercial functions and solve funding issues.

“A stable, globally competitive climate that enables all key stakeholders to meet their objectives,” he added.

The OPTS, in similar vein, had earlier said in a document made available to our correspondent that it would affect $66bn worth of potential deepwater investment in the country.

They said deepwater oil production had the potential to generate $66bn of investment and contribute additional 900 kilo barrel of oil equivalent per day production to the country’s current production figure by 2020.

But the Group Managing Director, Nigerian National Petroleum Corporation, Mr. Andrew Yakubu, who spoke during the West African Development Luncheon at the OTC, said the PIB, when passed into law, would change the fortunes of the country’s oil and gas industry.

He said though Nigeria had given a lot of incentives during the take-off of the deepwater exploration to encourage investors, the country could no longer be over-generous with incentives.

The PIB, he said, was expected to create a win-win situation for Nigeria and IOCs operating in the country.

He said, “When we started the deepwater project, we had to give incentives to investors in order to encourage them. Now the deepwater project is mature, so we can’t continue to give such incentives.

“When a child is young, you give him milk but when he grows old, you give him solid food. We can’t continue to give milk to somebody forever.”

The NNPC boss, who said the PIB would not retard investment in Nigeria, insisted that the IOCs should not expect the country to continue to be ‘over-generous’ with incentives.

 

 

 

 

 

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