…Lack of PIGB, others pose challenge
Udeme AKPAN, Sebastine OBASI, Michael EBOH & Ediri EJOH
With initial commitment to exploration and production, previous administrations in Nigeria had projected to increase the nation’s oil reserves from less than 28 billion to 40 billion barrels by 2020 for some reasons. First, the increased reserves were expected to enable the nation increase its production capacity and earn re revenue. Second, it was also targeted at prolonging its involvement in oil business.
But this may not be as the Department of Petroleum Resources; DPR report obtained by Sweetcrude, indicated that Nigeria’s oil reserves that have not shown much improvement in the past few years, remained low at 37 billion barrels. The situation is fuelled by many factors; including the inability of the nation to put in place a functional Petroleum Industry Governance Bill (PIGB) has scuttled many investments in the industry.
In his recent presentation at the Petroleum Sector Reforms organised by the Nigeria Natural Resource Charter (NNRC) Chairman, Oil and Gas Economics & Management, University of Cape Coast, Ghana, Prof Omowumi Iledare, disclosed that the inability of the nation to put in place a functional Petroleum Industry Governance Bill, PIGB, has scuttled many investments in the industry. Consequently, he said that Nigeria’s resource base has dipped, as the nation only produced oil and gas without doing much to increase reserves, adding that many operators have not been able to make Final Investment Decisions, FIDs, thus forcing them to sack workforce while divesting assets, adding that restiveness has started to build up, while oil production declined.
He said: ‘’Nigeria slipped out of top-10 producers. The PIGB has set out the foundations that will ensure optimum management (perform and drive growth) of Nigeria’s petroleum resources. The Bill has satisfactorily defined the Governance and Institutional Frameworks necessary to put the country in line with contemporary global and industry trends. Expedient signing of the Bill and purposeful implementation will be key to the turnaround aspirations of the reforms.”
He said the PIGB was good for the nation, as it de-emphasized mere export of oil and gas, adding that president Muhammadu Buhari should assent it into law without further delay.
In its latest report released in Abuja, the NNRC stated further that bad governance was fuelling inefficiency, maladministration, red tape, secrecy and corruption in the petroleum industry. The NNRC, therefore, called for the immediate passage and assent to the Petroleum Industry Governance Bill (PIGB) and the other variants of the Petroleum Industry Bill, to address the lapses currently seen in the industry.
The report noted that bad governance had impacted negatively on the country’s revenue, brought about declining investments, promoted inefficiency and weakened critical institutions and structures in the industry.
According to the report, the delay in concluding the PIGB and other variants of the PIB had brought about declining revenues, declining production and reserves, deferment of core investments, prolonged Joint Venture funding difficulties, divestments by oil majors, loss of competitiveness and loss of jobs.
It added that the non-passage of the petroleum industry law had promoted widespread leakages, theft and sabotage, brought about an ailing downstream sector, ensured insufficient gas for power generation and made it impossible for revenue from the industry to be used to enhance other sectors.
It stated: “Corporate governance consists of the set of rules, processes, norms, customs, policies, laws and institutions affecting the way people direct, administer or control a corporation. It defines the relationships among (all) players involved in delivery of specific goals.
“Improving governance simply means strengthening institutions in particular in the areas of clarity of structures, roles, accountability, transparency, and overall efficiency and effectiveness.”
The report added that resource governance matters for the people who live close to extraction sites, as competent management of oil, gas and mining can reduce environmental impact.
“In countries with poor resource governance, companies are lax in efforts to protect communities and the environment. Dividends from resource wealth can offer a path out of poverty, but without strong institutions and policies, countries are more likely to fall victim to the ‘resource curse.’
“The results have become apparent as commodity booms have not contributed to growth and employment creation in non-extractive sectors,” it noted.
The NNRC report further highlighted the key objectives of the PIGB which included creating efficient and effective governing institutions with clear and separate roles for the petroleum industry and establishing a framework for the creation of commercially oriented and profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry.
Minister of State Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, disclosed that Nigeria that needs to invest $100 billion in the industry only attracted $40 billion in the past two years.
He said: “$40 billion is not enough to drive this industry. Our estimate is that we need about $100 billion in investments to propel this sector. Those investments will go into gas projects, into the pipelines that have to be replaced; they will go into new plants and into the flare policy of the federal government.
“A huge amount of investments needs to go into the downstream sector in terms of the refineries, so that we can avoid the embarrassments we see daily in terms of the supply mix. This is in addition to the development of LPG, LNG and CNG assembly plants, as prevailing realities show that we will need to begin to convert our cars from petrol consumption cars to gas and electricity driven cars fairly quickly.
“Given that the cardinal focus of President Muhammadu Buhari’s administration is anti-corruption, we must give serious attention to the issue of transparency. We need to look at our processes, contractual terms, review our patronage culture and diversify the opportunities available to ensure more people are admitted into the player mix. When we are transparent, investors get the confidence to come in droves.”
Investigation showed that the current drilling and other operations would not result in the making of very huge reserves in short and medium term, meaning that Nigeria needs more investments to meet set target in the oil and other sectors.
In an email to Sweetcrude, Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, had stated: “The Nigerian economy remained fragile with the high dependence on oil sector for revenue and foreign exchange earnings. Although oil revenues increased with recovering oil prices in 2018, the impact on the economy was subdued by the huge foreign exchange commitments to petroleum product importations and the inherent subsidy. The high debt service obligations were also major constraints to the growth of the economy.
“With the limited progress in the ongoing effort to diversify government revenue sources, the performance of the oil and gas sector would remain a critical factor that would shape the outlook for the economy in 2019.”