Handlers of the oil and gas sector of the Buhari administration do not appear to be working on the same page for the overall interest of the citizenry. Most times, they do not speak out based on the facts on the ground or offer tangible reasons for some delayed actions.
For instance, Chief Executive Officer of Nigerian Midstream and Downstream Petroleum Regulatory Authority (NPRA), Farouk Ahmed, is attributing the rising cost of cooking gas to poor investment into the gas sector over the years.
Just a little over five weeks ago, Permanent Secretary Ministry of Petroleum Resources, Dr Nasir Sani-Gwarzo, pointed out that Abuja was on track towards investment in the oil and gas sector.
But, Ahmed said during his inauguration as CEO of NPRA, where Gbenga Komolafe was also inaugurated as the CEO of Upstream Regulatory Commission that the skyrocketing cost of cooking gas was due to poor investment into the gas sector.
Addressing journalists after the inauguration, Komolafe said the Commission will seek to not just be a regulator for the upstream, but also a business enabler for the sector.
However, The Guardian reported on September 10, 2021 that the country was on track as regards policies and strategies that will turn the country into Africa’s investment hub in the oil and gas industry.
Sani-Gwarzo, who disclosed this stated that cooperation with other countries was being developed to drive growth in Nigeria’s oil and gas industry. He spoke at Nigeria Oil and Gas Outlook 2021.
According to the newspaper report, the permanent secretary said, “achieving Energy Security; the Engine for Secured Economic Growth”, stressing that the Petroleum Industry Act (PIA) and other policies in the oil and gas industry will drive investment across the oil and gas value chain.
PIA, to him, provides an opportunity for purposeful investment into the development of Nigeria’s oil and gas resources by providing clear and simple fiscal terms that would guarantee reasonable investors’ margins.
“One central theme that runs through the Nigeria oil and gas sector today is the importance of implementation of the PIA on public finances, oil and gas production, the fiscal regime for international oil companies, transparency in the petroleum sector and indeed the entire sections of the proposed law. We couldn’t agree more. Effective implementation is at the heart of this Act and remains the route through which value will be unlocked into the Nigerian economy”.
“The PIA aims to incentivize optimality and cost-efficiency and cost-effectiveness in oil production. Different levers such as the cost-price ratio, the replacement of the investment tax allowances, and investment tax credits (which encourage gold plating) with production allowances that reward incremental production has been instituted.
“These measures are in addition to industry-wide initiatives already rolled out by the government, which focus on cost reduction and enablers in this regard”, he said and accordingly expressed confidence that with the Act in place, Nigeria is on track in its quest to align with the transit to cleaner energy globally.
Apart from producing liquid hydrocarbons, Sani-Gwarzo noted that the country is using its abundant gas resources as a bridge fuel between the fossil of today and the renewable energy of tomorrow.
And yet, Bank of Industry, in collaboration with the Bank of China, created a $500 billion funding arrangement to finance the importation of gas flare equipment into the country.
To access the funding, intending borrowers are required to provide an advance of 25 percent of their funding needs and import the gas flare equipment from China. For companies/players that intend to import their flare capture equipment from the United States, the US Exim Bank has also approved $69.8million for this purpose.
This development clearly aligns with the Buhari administration’s commitment to revitalising the domestic gas sector, as the country moves towards zero emission. Furthermore, the initiative will ease the access to funding, which, prior to now, has been a major bottleneck to potential investors/players in that sector.
It is instructive to note that prior to the above initiative, the Central Bank of Nigeria (CBN) had in the third quarter of 2020 launched an intervention fund of N250billion for the Nigerian gas sector, to help stimulate investment in the gas value chain.
The aim of the fund was to encourage the adoption of compressed natural gas (CNG) as the fuel of choice for power generation and transportation, and liquified petroleum gas for domestic cooking, amongst others.
However, industry players have indicated that accessing the CBN intervention fund was difficult, as commercial banks were treating access to the fund like conventional bank loans, thereby stalling its disbursement.
Operators have therefore opined that it is important that the CBN and other development banks prioritise the development of the Nigerian gas industry by providing concessionary interest rates and guarantees for dollar-denominated loans, in order to improve lender’s confidence in the gas projects.
In the meantime, Komolafe said the agency would work to ensure that Nigeria meets its OPEC oil production quota and benefits maximally from the current rise in price of oil.
The NPRA boss disclosed that the NPRA would urgently work with stakeholders to tackle the challenge of rising price of cooking gas.
Farouk Ahmed attributed the hike in price to poor investment into the gas sector over the years, saying with the abundance of gas, Nigeria should not struggle with gas supply.
In a remark, Minister of State Petroleum Resources, Timipre Sylva, challenged the CEOs on the growth of the oil and gas industry, following a drop in direct investment into the sector, pointing out that the Buhari administration expected exponential growth in the industry with the coming of PIA.
While Sylva explained that with the inauguration of the heads of the new regulators, other regulators that existed before the PIA no longer exist, he tasked the CEOs on the need for smooth take off of the agencies, adding that “from the effective date of the PIA, those agencies were in place.
“But unfortunately there were no leadership so they could not take off. But now there is nothing to wait for”, he said, stressing that he is expecting a lot of growth and development of the industry, saying the industry had been stagnated for a long time because the process of passing the PIA had been very arduous, having taken over 20 years.
He tasked the CEOs on the need for smooth take off of the agencies, adding that “from the effective date of the PIA, those agencies were in place, adding, “but unfortunately there were no leadership so they could not take off. But now there is nothing to wait for.”
