10 July 2013, Lagos – As the National Assembly prepares to sit with the various stakeholders to harmonise their positions on the Petroleum Industry Bill, PIB, the feud between the federal government and the International Oil Companies, IOCs, over the fiscal terms proposed in the bill has deepened, especially with regards to gas development.
Speaking Tuesday on behalf of the Oil Producers’ Trade Section, OPTS, of the Lagos Chamber of Commerce and Industry, LCCI, at the 14th annual general meeting of the Nigerian Gas Association, NGA, and Business Forum held in Lagos, the Managing Director of Mobil Producing Nigeria, Mr. Mark Ward, insisted that the PIB would erode the gains recorded by the recent government efforts to develop gas in Nigeria.
Ward, who is the Chairman of OPTS, said with the planned $32billion industry spending in gas development by 2020, Nigeria has a great potential to achieve its projected targets in the gas sector, but pointed out that the PIB would make future investment in gas non-reliable as the reform bill provides the harshest terms for gas in the world.
He said with her over-dependence in oil revenue, the country was vulnerable to oil price shock, stressing that accelerated and diversified economic growth through encouragement of development of the gas sector was critical for the country.
“It is not about profit. At the end of the day, it is about viable economic returns that any investor can make, whether it is a big investor or a small investor,” he said.
He stated that both the IOCs and the small Nigerian indigenous producers were equally affected by the PIB, noting also that the desire of the reform bill to separate the oil business from gas business would also be inimical to future investment in the gas sector.
According to him, the PIB should link the price of crude oil to the price of gas in determining fiscal terms.
But the Group Executive Director in charge of Gas and Power at the Nigerian National Petroleum Corporation, NNPC, Dr. David Ige, said the greatest challenge facing gas development in the country was the domination of the gas business by four or five IOCs, saying this dominance accounted for the current tension over the PIB.
He said about 90 per cent of the country’s gas reserves was concentrated in the hands of these IOCs.
According to him, such oligopolistic arrangement where oil majors, who were primarily centred around oil or export gas sit on the country’s gas reserves has created tension because the IOCs want the PIB to approach gas at the same level as oil.
He said the two products were different commodities, stressing that the PIB seeks to make gas equally competitive.
Ige defended the separation of the gas business from the oil business in the PIB, saying that globally, consuming nations are moving away from linking gas price to oil price.
“The task today is to delink the price of crude oil from the price of gas because there is a lot of distortion in the price of oil. So, when you use the price of oil to determine the price of gas, you will introduce a lot of inefficiencies,” he said.
Ige said the country’s projection for gas was the most aggressive projection anywhere in the world, adding that if the country achieves this projection by 2017/2018, the combined production of gas in Nigeria would translate to an equivalent of 1.5million barrels of oil equivalent per day.
He said if the country achieves four to five billion cubic feet per day domestic utilisation of gas by 2018, Nigeria would be at par with South Korea in terms of domestic gas consumption.
Responding to the IOCs’ claims that the PIB provides the harshest fiscal terms for gas in the world, the Deputy Director in charge of Gas Development at the Department of Petroleum Resources , DPR, Mr. Okpara Orjiakor, who represented the DPR Director, Mr. George Osahon, accused the IOCs of deliberately undermining the PIB to make excessive profits and urged them not to go to the National Assembly to oppose the passage of the bill.
“It is not that what we (federal government) is asking for is too much; it is because the people (IOCs) want to take too much. There is no way we will not make money from our gas. We are not the only gas nation. Other nations are producing gas and if you go to the internet, you will see their fiscal terms. It is not that gas is cheap. Nigerians are paying more to get gas. We are begging for gas, while we have abundant gas resources because the people that want a lot of profit are keeping our gas,” he said.
Orjiakor stated that there was no way the oil companies would be allowed to make the same profit from gas as they have been making from oil, adding however that the federal government would not say that companies should not make profit.
“You end up flaring gas and you are the same people talking about depletion of the Ozone layer and the health hazards arising from that. They are the same people that cannot do the same thing in their home countries,” he added.
– This Day.