Oil Companies to Invest $15bn in Gas, Seek Competitive Fiscal Regime

  • Osinbajo asks operators to prepare for Nigeria’s destiny free from oil Egina’s FPSO homeward bound

Ejiofor Alike

Oil and gas companies operating in Nigeria have committed to invest $15 billion in Nigerian gas development in the next couple of years and have urged the federal government to ensure that the reform bills presently before the National Assembly are predictable and competitive to sustain investments.

The operating companies under the aegis of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI) said in a documentary yesterday to mark its 55th Anniversary in Lagos that no matter the complex and difficult operating environment, Nigeria’s oil and gas industry has opportunities for improvement and growth.

This is coming as the Vice President of Nigeria, Prof. Yemi Osinbajo, tasked the oil and gas producers operating in Nigeria to prepare the country’s destiny as the world shifts attention away from crude oil to clean or renewable energy.

Chairman of Total Upstream Companies in Nigeria and Managing Director of Total E & P, Mr. Nicolaz Terraz, also disclosed that the Floating Production Storage Offloading (FPSO) vessel for the 200,000 barrels per day Egina deepwater field being developed by his company, has sailed away from the Goeje South Korea yard of Samsung Heavy Industries (SHI) and is on its three months journey to Nigeria.

Speaking thursday at the OPTS anniversary, the Chairman of Shell Companies in Nigeria and Managing Director of Shell Petroleum Development Company of Nigeria (SPDC), Mr. Osagie Okunbor, who is also Chairman of OPTS, stated that from being an organisation made up of three IOCs in August 1962 when it was formed, the OPTS had grown to a 27-member group, out of which 20 companies are indigenous Nigerian producers.

“The group was created in response to the budding oil and gas sector, which offered huge prospects for the emerging Nigerian nation. Nigeria had just discovered oil six years earlier in 1956. The history of OPTS then is the story of oil and gas exploration and production in Nigeria,” Okunbor said.

Okunbor explained that despite the challenging fiscal regime, security and environmental circumstances, OPTS has contributed significantly to the development of Nigeria as oil and gas revenue accounts for over 90 per cent of export earnings, 83 per cent of the federal revenue and about 35 per cent of the country’s Gross Domestic Product (GDP).

He said the oil and gas industries had also contributed billions of dollars to the Nigerian governments at all levels in taxes, levies, royalties, rents and licenses.

Okunbor noted that the 55th anniversary, which has “Nigeria, An Investor Friendly Destination,” as the theme, would give the Nigerian operators a chance to learn from the experiences of some of their key partners about how the changing landscape, globally and locally, is providing new opportunities.

“As complex and difficult as the Nigerian business environment may be described, there are opportunities for improvement and opportunities for growth. That is what we see in OPTS. Working with governments at all levels, we have the responsibility to get the right policies for our people and for the country,” Okunbor added.
In his keynote address, Osinbajo identified some of the challenges facing Nigeria’s oil and gas industry to include: security and environment, funding issues, high technical costs and obsolete legislations.
The Vice President, however, noted that the federal government is addressing these challenges.

According to him, President Muhammadu Buhari, had launched a roadmap to reform the oil and gas industry, stressing that the roadmap has set specific and tiOsinbajo also disclosed that the oil and gas industry would also benefit from federal government’s efforts to improve the Ease of Doing Business in the country.

He, however, reminded the Nigerian oil and gas producers that the world has come to terms with the fact that fossil fuels are increasingly going out of fashion.

“I am certain that this is an issue you have to galvanise and grapple with as oil producing companies. Around the world, countries are increasingly setting deadlines to wean their cars and machines of petrol and diesel in place of green or renewable energy. It is no longer a question of if but when. It is for this reason that the so-called oil-rich countries like ours have an obligation to prepare for a destiny that may be well beyond oil. It is in this context that this mantra of ‘we need oil to set ourselves free from oil’ makes maximum sense,” Osinbajo explained.

He tasked the oil and gas industry operators to invest in research and development (R & D) that focuses on renewable energy.

In the documentary by the OPTS, the organisation disclosed that through the efforts of its members, gas production in Nigeria has increased by over 90 per cent from 1.9 billion cubic feet per day to 3.5bcf/d.

The organisation added that investment outlay for gas and power in the coming years would exceed $15 billion, while over $80 billion would be invested in projects in oil and gas sector in the next few years.

But the Chief Executive Officer of Waltersmith, Mr. Abdulrazaq Isa, who moderated a special session titled “Competitive Fiscals,” argued that the country needs a competitive fiscal regime to attract investments, adding that the reform in the industry has protracted for too long, thus leading to dearth of investments for 10 years.

According to him, the country needs to conclude the reform to stay competitive, adding that Nigeria still needs oil to get out of oil.

Isa, who summarised the position of the panelists at the session, charged the government to make the environment attractive as capital only goes to where it is welcome.

While charging the federal government to incentivise the operators to make investments, Isa argued that “squeezing the golden goose for more eggs will lead to its dearth.”

Terraz, who shared the success story of Egina FPSO in the area of local content development, stated that the FPSO left the Samsung yard in Korea on October 31, 2017, and would arrive the SHI-MCI yard in Lagos in the next three months for integration before it sails away to the Egina field.

SHI was awarded the contract for the Engineering, Procurement, Construction, Integration, and Commissioning of the 2.3 million barrels capacity FPSO for the Egina oil field, located in Oil Mining Lease (OML) 130, offshore Nigeria.

Terraz noted that with Shell’s Bonga, ExxonMobil’s Erha, Chevron’s Agbami and Total’s Akpo, Usan and Egina fields, Nigeria has become a global leader in deepwater.

According to him, the deepwater has become the country’s growth engine since 2002 as it is not impacted by security challenges in the country.