By Hector Igbikiowubo & Yemie Adeoye
THE Shell Nigeria Exploration and Production Company (SNEPCO), a subsidiary of the Anglo-Dutch oil giant, Shell, yesterday disclosed that the offshore oil industry in the country has lost momentum owing to uncertainties governing investment terms.
It was also gathered that crude oil production from Nigeria â€™s deepwater portfolio now accounts for 28 per cent of the countryâ€™s daily output.
These were revealed in a presentation titled: Nigeria â€™s deepwater journey and the challenges ahead, made by Mr. Chike Onyejekwu, the Managing Director of SNEPCO, at the ongoing annual conference and exhibition of the National Association of Petroleum Explorationists (NAPE) in Abuja yesterday.
He said the Oil Producers Trade Section (OPTS), including Shell, recognise the need to review Nigeria â€™s oil sector framework and fully support the underlying objectives of the Petroleum Industry Bill.
â€œIt is right and proper that resource holders should seek to maximise value from their own resources. To do so, the bill must find a fair balance to allow the government to extract value during good times and ensure continued investment during tougher times.”
Members of the OPTS believe that the current bill hasnâ€™t yet found the right balance. The PIB proposes multiple, increased royalties and fiscal terms that will make new investments in deepwater uneconomic,â€ he noted.
The Shell boss said the bill also excludes a number of legitimate costs from being recovered, adding that uncertainties around these issues are already stalling development of major discovered resources and discouraging companies from undertaking the aggressive exploration programmes which were launched under the 1993 PSCs.
He said Shell and other members of the OPTS are ready and keen to undertake more projects in Nigeria, adding however that a regime that balances the risks investors take with the rewards they can expects is required.
â€œAnd we need a regime that recognises investment decisions taken under old terms. Transition arrangements are essential to reassure operators that have considerable exposure,â€ Onyejekwu further pointed out.
He said according to statistics from the OPTS, multi-billion dollar offshore projects have added 600,000 barrels of production per day to the countryâ€™s total output, providing a valuable cushion to offset onshore production declines resulting from the security challenges in the Niger Delta.
Onyejekwu also disclosed that the companyâ€™s operated Bonga deepwater project has paid net cash put at $6 billion (about N912 billion) to the Nigerian National Petroleum Corporation (NNPC) and the Federal Government in the last four years.
He noted that even though the development of the Bonga deepwater project entailed no investment for the NNPC at all, the country has benefited immensely from the investment.
â€œIn addition to the specialist Nigerian deepwater engineers we have trained for Bonga, the project provided work for other companies. For example, Nigerdockâ€™s Snake Island facility in Lagos was developed as a support base for Bongaâ€™s operations and a modern ABB onshore base was established at Onne in Rivers State for subsea equipment testing and maintenance. All these benefits flow as a direct result of the 1993 PSCs that have underpinned offshore development.â€
He described the 1993 PSC terms as groundbreaking, noting that these terms established the right balance of risk and reward that convinced global players to commit to investment.
â€œThe 1993 PSCs offered low royalties rates â€“ zero per cent for water deeper than 1000 metres. They also provided an Investment Tax Credit â€“ or ITC: investments could be offset against tax at rate of 50 per cent. As a result, international oil companies came to the Gulf of Guinea and deployed their global experience and advanced technology,â€ he enthused.