As Buhari Unveils ‘7 Big Wins’ in Oil and Gas Sector

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The recent oil and gas industry road map unveiled by President Muhammadu Buhari has the potential to address the challenges retarding growth of the sector. Ejiofor Alike, however, reports that this laudable initiative of the Minister of State for Petroleum, Dr. Ibe Kachikwu may fade into oblivion like other previous reform initiatives, if the implementation is not driven by business motives

A major challenge in the attainment of set targets in the previous initiatives by the federal government to grow the oil and gas sector was lack of political will in the implementation of the initiatives.

While the formulations of previous reform programmes were business-motivated, the implementation had suffered encumbrances emanating from political considerations.
For instance, the Local Content Policy was carefully developed by the administration of former President Olusegun Obasanjo with a target to domicile 40 per cent of oil and gas expenditure in-country by 2007 and 70 per cent by 2010.

However, the government could not muster the political will to enforce the industry’s buy-in into the programme until April 22, 2010 when former President Goodluck Jonathan signed into law, the Nigerian Oil and Gas Industry Content Development (NOGICD) Act, better known as Nigerian Content Act.

With weak implementation strategy, the country managed to achieve less than 10 per cent as at 2010 when the country was supposed to attain 70 per cent local content set target.
Also the reform initiated by Obasanjo in 2000 to overhaul Nigeria’s oil and gas sector, which led to the enactment of the Petroleum Industry Bill (PIB), has not been successfully implemented as the reform bill was not passed 16 years after it was initiated and eight years after the first version was submitted to the late President Umaru Musa Yar’Adua.

One of the objectives of the reform was to grow Nigeria’s crude oil reserves and daily production to 40 billion barrels and four million barrels per day, respectively.
However, with the failure of the federal government to implement the reform, investments in the sector nosedived with both reserves and daily production currently hovering around 36 billion barrels and 2.1 million barrels, far below the 2010 targets.

Since 2008 when the reform bill was first submitted to the National Assembly, oil and gas companies have withheld huge investments, citing lack of clarity of terms as a result of the non-passage of the bill.

Nigerian gas master plan

Another comprehensive policy to boost Nigeria’s gas sector was the Gas Infrastructure Blueprint approved by the Federal Executive Council (FEC) during its then bi-weekly meeting on February 13, 2008.
The blueprint was a very bold attempt by the late Yar’Adua’s administration to develop Nigeria’s domestic gas market through the expansion of gas supply infrastructure with projected inflow of at least $30 billion investment.

Before FEC approved the blueprint, the late President Yar’Adua had approved three guidelines to ensure the realisation of this vision.
These guidelines include: the Gas Pricing Policy; the Domestic Gas Supply Obligation (DSO) regulation, and the Nigerian Gas Infrastructure Blueprint.

The three inter-related approvals constituted the ambitious Nigerian Gas Master Plan targeted at pursuing three-pronged strategies – stimulating the multiplier effects of gas in the domestic economy; positioning Nigeria competitively in high value export markets, and guaranteeing the long term energy security of Nigeria.

To achieve his vision in the gas sector, the late President had created the Ministry of Energy (Gas) distinct from the Ministry of Energy (Petroleum) and appointed different ministers to oversee the gas and petroleum ministries.

The Domestic Supply Obligation under the Gas Master Plan mandates oil companies to set aside a pre-determined amount of gas reserves and production for the domestic market.
It also stipulates that the Minister of Energy (Gas) should determine the requisite amount of gas periodically for a period lasting about five to seven years.
Under the gas master plan, all the operators were required to comply with their obligations or face penalty of $3.5/mcf of gas under supplied, restricted export or both as the Minister of Energy (Gas) may decide.

FEC had also approved the short term gas supply proposed by the Gas Master Plan to double domestic gas availability to 1400mmcf/d by end 2008; triple it to 2050mmcf/d by end 2009.
With this plan, power generating capacity was projected to hit 4,500 megawatts (excluding hydro) by end 2008 and 6, 200MW (excluding hydro) by end of 2009.

However, the late Yar’Adua’s successor did not show equal commitment as the Ministry of Energy (Gas) was scrapped and powers concentrated on a Minister of Petroleum at the detriment of the Nigeria’s gas development.

With the slow implementation of the Nigerian gas master plan, power generation is still around 4,000MW against the 6,200MW targeted for 2009, as many power plants are still idle due to lack of gas to fire turbines, while the projected $30 billion investment is not forthcoming.

Kachikwu’s 7 big wins

For the oil and gas sector to grow, Kachikwu had recently developed a new policy document couched in ‘The 7 Big Wins,’ that will compressively address the issues of policy and regulation, business environment and investment drive, gas revolution, refineries and local production capacity, Niger Delta and security, transparency and efficiency, as well as stakeholder management and international co-ordination.

To guarantee the security of the oil and gas assets, Kachikwu said President Muhammadu Buhari would launch a $10 billion infrastructure development fund for the oil-rich but restive region.
“We are launching $10 billion infrastructural rebirth investment programmes in the Niger Delta region. This is not money that is going to come strictly from the federal government. It is going to come from investors, individuals who are ready to do private sector infrastructure, obviously states and federal governments as the case may be and international organisations who have shown interest to help,” he had said.

Speaking on the expected impact of the new roadmap, Kachikwu said investments in Nigeria’s oil and gas sector, which took a downturn in the recent past would soon pick up following the conclusion of a review of the country’s Joint Venture Cash Call (JV) framework.
According to him, on the back of the review, a lot of oil and gas investors are pushing to come back and invest heavily in the country’s oil and gas sector.

He said that there would be an explosion of investment in the sector soon.
Kachikwu also said there were plans by the government to review the mechanism of securing oil and gas installations in the country to conform with standard practices as obtained in other oil and gas producing climes.

He said each time he projected a rise in the country’s oil production to 2.2 million barrels per day (mbpd) and 3mbpd, they were based on the fact that the JV structure had been reviewed and funding issues sorted out.

“On the issue of JV cash call, we have done a yeoman’s job. We are nearing completion of those negotiations, it would go to the FEC and it does not require a law. Those things are basically MoUs,” he said.

While launching the roadmap, President Buhari had said notwithstanding his administration’s much talked about diversification as the main tool for putting the economy on the path of sustainable growth, Nigeria would have to depend on oil and gas revenue to get out of the current economic recession.

According to him, despite the fall in oil price, oil and gas resources remained the most immediate and practical keys out of the country’s present economic crisis.

“As important as it is to ensure that agriculture, solid minerals and other critical sectors of the economy are supported to grow and contribute more to the nation’s economy, we still need a virile and efficient oil and gas industry to take care of our foreign exchange requirements,” Buhari said.

According to him, an efficient oil and gas sector remains a national imperative and a core thrust of his economic policy, adding that the petroleum industry remained critical to the Nigerian economy of today and the future, despite current challenges.
The president also admitted that oil and gas still remained a critical enabler for the successful implementation of his budget as well as the source of funds for laying a strong foundation for a new and more diversified economy.

The president said the task before the Ministry of Petroleum Resources was to maximise the potentials and opportunities across the whole range of the oil and gas industry to stimulate the economy in spite of the current challenges.

According to him, there is also a dire need to instill a new culture of transparency and efficiency in the industry, streamline operations along best practices by championing and implementing strategic reforms at every layer of the industry.

Buhari said that if Nigeria was able to plug the leakages, and tighten loose systems that characterised the industry in the days of high oil prices, the country could do more with the little that it is getting at the moment than in the time of plenty.
The president noted that recent developments in the Niger Delta had temporarily limited the nation’s oil and gas production and supplies.

Kachikwu’s vision behind the ‘7 big wins’ is indeed laudable and given the speed and passion with which he had pursued and successfully addressed some of the issues in the policy document, particularly the issues of transparency and efficiency in the NNPC, as well as robust engagement with the Niger Delta, it is expected that the country will derive the targeted benefits from the new roadmap.
Since assumption of office, Kachikwu has successfully implemented series of reforms that did not require legislative interventions.

Kachikwu’s previous initiatives had stabilised the supply of petrol in the country, enthroned a regime of transparency at the Nigerian National Petroleum Corporation (NNPC), reorganised the state-run oil company and opened up the corporation to public scrutiny.

For the first time, NNPC started a monthly publication of its accounts.
With the political direction provided by President Buhari, the petroleum minister has also given Nigeria voice in the global energy politics.
It is therefore expected that political interferences will not truncate the implementation of the ‘7 big wins.’