Long overdue state laws must be enacted in Nigeria if the country is to reform its oil industry to make it more accessible to international actors and to win back investment. The Nigerian Senate is expected to finally pass a bill known as the Petroleum Industry Bill (PIB), originally tabled in 2008, to change how power plants are operated and financed, under pressure from Royal Dutch’s oil drilling unit Shell Plc.
Bayo Ojulari, Managing Director at Bowl Nigeria Exploration and Production Co. explained that “For every month and every week that we delay, the mutual fund moves elsewhere”, continues “We have a promise that it will appear in June. We’ve heard that before and we’re waiting to see it. “
Africa’s largest oil producing country with valued 37 billion barrels of oil, was criticized for not having passed the PIB for so long and for international companies being confronted with regulatory uncertainty. This is surprising for a country that relies on oil for about 80 percent of its revenues and produces about 2 million bpd of crude oil, with the potential to produce closer to 4 million bpd.
The reform would turn the NNPC, the regulator of the Nigerian oil and gas sector, into a limited liability company, deregulate much of the sector, cut taxes and make Nigerian oil generally more attractive to investors.
Criticism of the delay dates back to 2016 when the Nigeria Extractive Industries Transparency Initiative (NEITI) published a report titled The urgency of a new petroleum sector law, where the group estimates that Nigeria lost over $ 400 billion because it failed to pass the 2008 law.
Nigeria’s Senate President Ahmad Lawan specified last week, “Our expectation is that we will pass the PIB within the month of June”. But some wonder if this step is too little too late.
Similarly, hedge funds are becoming more bullish on US crude
With the International Energy Agency (IAE) and governments around the world pushing for a green revolution and the move away from fossil fuels, there is no longer the same urgency to invest in large oil-producing countries as it used to be. While the PIB could streamline investments in Nigerian oil, after years of uncertainty, investors are not so willing to place big bets on the African state.
The once attractive onshore oil business is no longer compatible with the goals of several international oil companies. Royal Dutch shell, for example, is in talks with the Nigerian government to order Shift from onshore production to focus on offshore activities as they have seen regular incidents of theft, sabotage and oil spill.
Other international giants, Chevron and ExxonMobil, have also scaled back their activities in Nigeria to get away from certain oil and gas projects to become more environmentally friendly.
Nigeria’s oil production hit a record low in May after an average production a little more than in the first quarter 1.4 million barrels a day what caused Oil revenues collapse by 98 percent In April. This low production is partly due to the cuts in OPEC + earlier in the year, but that’s not the only challenge.
Several of the largest oil fields in the country, including the Niger Delta such as Forcados, Bonny, Escravos, Brass River and Qua Iboe as well as the offshore fields Bonga, Usan and EA have produced less oil due to technical or maintenance problems. Leaks in the country’s oil pipelines, due to sabotage and generally aging infrastructure, have resulted in more oil spills.
If Nigeria hopes to capitalize on its sizeable oil reserves over the next decade, it must stop delaying industrial reform and adopting the PIB. However, in order to attract foreign investment in its crude oil, the government must also commit to increasing funds to improve aging infrastructure and improve safety measures for onshore production in order to win back oil companies that have been deterred from doing business in the country .
By Felicity Bradstock for Oil Genealogie
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