23 February 2018, Sweetcrude, Abuja – The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, has noted that Nigeria’s oil and gas industry would require about $100 billion investment over the next couple of years, a lot more than the projected $40 billion it is expected to generate over the same period.
Kachikwu was speaking during a Roundtable Discussion on “Deepening collaboration in the African Oil & Gas Industry – Challenges and Opportunities for Investment”, at the maiden Nigeria International Petroleum Summit (NIPS), in Abuja.
According to him, “We need to look at investments. What we have done over the last two years has helped. Suddenly we are looking at investment portfolios over the next two to three years of close to $40 billion which includes the coming back to stream of a lot of the First Investment Decisions (FIDs) that have been postponed, but $40 billion is not enough to drive this industry.
“Our estimate is that you need about $100 billion worth of investment to drive this sector. Those investments will go into gas projects, they will go into pipelines that have be replaced, they will go into new plants, they will go into the flare policy of the government, they will go into the development of LPGs and CNGs.
“We need to begin to convert our petrol consumption cars to gas and electricity driven cars so we can avoid some of the embarrassments we have in terms of our supply needs.”
Kachikwu further highlighted the importance of passing oil and gas reforms including the Petroleum Industry Bill (Bill), stressing the urgency of the moment in order to give clarity to potential investors.
He said, “We must very quickly establish regulatory and legislative certainty. Whatever it is you do with the PIB, various arms of it should be done and dusted with so that investors can have clarity in terms of where they can underpin their investments.”
He added that, “Transparency is key. We continue to have the negative vibe in transparency despite all that has been done in the oil industry. What it says to us is that something must still be missing. Every average Nigerian says the oil industry is not transparent. Given the fact that the cardinal focus of this administration is anti corruption, we must ensure that whatever we do, we must give serious attentions to transparency.
“We need to look at our processes, we need to look at our contractual terms, we need to review our patronage culture, we need to diversify the opportunities. When we are transparent, investors get a lot confident and are able to come in droves.”
The minister of state further observed that, “There are issues of security. We have done a huge amount of work, but a whole lot more needs to be done.
“Cost is key. We have all agreed that there is a need to address the cost. The federation is worried about the fact that whilst countries like Saudi Arabia are targeting cost per barrel below $10 we are still oscillating in the mid $20s. I am happy that one or two IOCs have been able to achieve production cost of about $15, we still need to get everybody else to take that model.”
According to him, “One of the things that we are going to be seeing is how to incentivise those who have the least cost production and not to penalise but quite frankly pull the ears of those who want to continue to run a high cost profile. In an era in which OPEC quotas are going to be obviously in place over the next two years, I will not be surprised if we get to a point where those who give us the least cost oil will get the first preference in terms of the barrels that we will put in the market. Cost s very important and we have to look at it.
“It is so important there are so many major policies that we need to take and they can no longer wait, whether it is the private sector participation, costing or subsidy regime or private sector investments but they are also critical to the survival of this industry.”
He added that, “Over the next five years, first we will like to look at the production volumes. We are targeting about 3 million barrels over the next five years and the projects that we have on ground can get us there, so whatever we need to do, we need to ensure that the capital that is available to drive this is sot sucked out by other investments in the sector.
“Pipeline replacement is key, we must be able to distribute in a professional and unhindered manner all over the country. We need to find a way to release this to the private sector and tariff it and bringing efficiency.
“Downstream deregulation obviously, maybe not now, but futuristically, we need to begin to address this. The earlier we can find a model whereby people bring in their products and sell their products without hindrances is better for this country.”
Speaking on growing Nigerian oil companies into major corporations, the minister of state remarked that he would like to see more of them come on board.
“We have about 10 of the contribution in production today, we need to do more. I am targeting over that five year period they move to at least 25 per cent which means that we need see what incentives are essential for them to take some of the blocks that the International Oil Companies (IOCs) are dropping and begin to bring them back into contributions in very realistic manners.
“Africa and African market is very key for us, as we begin to get into the way regional markets becomes very protected – the Gulf coming together, America begin to pursue becoming self sufficient, the African market holds the potential for us, whether in refined petroleum products or transfer of technology and skillsets, whether it is in taking of advantages by local Nigerian companies, we need to begin to protect the African market and utilise it to its full potentials.
“The future is promising, lots of opportunities and lots of energies that will be getting off the ground. There is going to be challenges, fiscal issues that need to be addressed to empower everybody to invest. The oil sector provides a catalyst to diversify this economy,” Kachikwu stated.