Attracting energy investments in Nigeria

With over 36 billion barrels of oil and 200 trillion cubic feet of natural gas, Nigeria has become one of the largest energy sectors in Africa, attracting significant investment and driving project developments along the entire energy value chain. However, as global capital spending declines due to the COVID-19 pandemic and international financial trends shifting from fossil fuels to renewable resources, African hydrocarbon players like Nigeria are competing for investment.

During the Nigerian Country Spotlight Session at African Energy Week (AEW) 2021, key Nigerian stakeholders discussed how the country has positioned itself as an attractive investment destination in 2021 and beyond.

The panelists included Dr. Adedapo Odulaja, Governor of OPEC for Nigeria, and SA-IER, Ministry of Petroleum Resources of Nigeria; Akinwole Omoboriowo II, CEO, Genesis Energy; Kola Karim, Managing Director and CEO, Shoreline Energy International; Olakunle Williams, CEO, QSL-GP; Heine Melkevik, former Managing Director Equinor Nigeria and current Managing Director Business Development, Alta Trading UK Limited; and Lawal Musa, energy analyst at Nigerian National Petroleum Corporation.

Nigeria has made a strong case for investment through a full sectoral restructuring and by leveraging advanced legislation and national energy policies to accelerate investment after COVID-19. In particular, through the passage of the Petroleum Industry Bill (PIB) on July 1, 2021, Nigeria has taken significant steps to increase oil and gas production while making the sector more attractive for international investment. The PIB comprises 16 Nigerian petroleum laws outlining the framework for petroleum activities and ensures a favorable environment for investors supported by a transparent and strengthened regulatory framework. At a time when the global energy sector is particularly competitive for foreign capital, the passage of the PIB serves to elevate Nigeria as the energy leader on the global stage.

“The reality is that Nigeria and Africa need more investment in the oil and gas space. The transition is good because you will be investing in more renewable energy, but to industrialize we need to invest in oil and gas. It’s a gradual and iterative process. What is going to happen now is you keep testing Nigeria’s determination and attitude. You have to take some risk as this is a long term game. The opportunities in Nigeria, from upstream to midstream to downstream, are too great to ignore, ”Melkevik said.

Meanwhile, with the passage of the Petroleum Industry Act (PIA), Nigeria has enacted a complete overhaul of the administrative, regulatory and tax system in the energy sector and restructured key petroleum institutions to streamline processes and expand the country’s oil and gas industry. As the country faces declining oil production from mature fields coupled with the lower investment climate caused by the COVID-19 pandemic, the PIA aims to increase the attractiveness of the sector for foreign investment and to ensure a market-driven regulatory environment, that accelerate the development of the country’s industry.

“Oil and gas make up 90% of the Nigerian exchange rate. If you speak of rank and importance in relation to the Nigerian government, it is industry. With the PIA, the world now knows it is open for business. What we’ve seen is that exposure is more robust and the value proposition is clear in the markets, ”said Karim.

“It’s not that PIA is going to be a game changer, it’s already a game changer and the game is already changing. Everyone will see this in the coming weeks. Many investors and people who want to invest in the industry are already taking a critical view and are more interested in it, ”says Odulaja.

“The PIA has proven to be a clear regulatory framework. For all interested candidates applying for a license, the PIA provides clear requirements and a timeframe in which you must have an answer. Immediately after the adoption of the PIA, implementation was initiated. There was a clause within the PIA to enroll NNPC within 6 months, and it did so in 1 month. This is a journey. It’s a transitional journey and the government is focused, ”said Musa.

With a regulatory environment that values ​​stability and transparency, the country will inevitably see an influx of foreign capital and international corporate ownership. PIB and PIA are not only driving the growth of domestic industry, they are also setting an incredibly high standard for other resource-rich nations that want to expand their energy sector and attract investment.

In addition to modernized regulatory frameworks, Nigeria has turned to national energy plans to accelerate development across the country. In particular, through the Decade of Gas initiative – a national strategy aimed at putting gas at the top of the country’s energy agenda – Nigeria is making significant strides in stimulating investment and driving development. The Decade of Gas initiative was launched in conjunction with the country’s National Gas Expansion Program, which has kicked off large-scale project developments across the country. Projects such as the $ 2.8 billion, 614 km Ajaokuta-Kaduna-Kano (AKK) pipeline, which connects the country’s eastern, western and northern regions, as well as the construction of the Nigeria LNG Train 7 worth 10 Billions of dollars were all propelled by the country’s gas policies.

“We have made great strides. Statistics show that we are doing less than 10% flares, so we are doing very well. Before the PIA, we already had guidelines to reduce flaring. Of course, we can’t completely reduce flares, but there is a clear direction and policy under the PIA, ”said Williams.

“Investing in any country is a serious undertaking. The law is now in place, but it is still a work in progress. My encouragement is that the law has passed, there is enough capital in the country. There are many hotspots and there are more opportunities than problems. The government created this wonderful environment for Nigerians to thrive in the energy sector. We continue to stress that gas is good, gas will enable industrialization in Africa. We have to think of our great-grandchildren and make plans for them, ”said Omoboriowo II.

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