28 February 2014, Abuja – The passage of fiscal and non-fiscal enablers in the the Petroleum Industry Bill (PIB) could add value to the economics of offshore investments, the Managing Director/Chief Executive Officer, Seplat Petroleum Development Company, Mr Austin Avuru, has said.
He spoke during his presentation at the IP Week in London.
Avuru, who spoke on “Petroleum Industry Bill: Increasing Investment Opportunities in the Offshore Nigeria,” said the non-passage of the bill was inimical to the industry’s progress.
The PIB is supposed to help the oil industry in terms of restructuring the institutional and fiscal framework to promote transparency, efficiency, exploitation activities and maximise economic rent accruing to the government as it hopes to achieve 40 billion barrels of crude reserves and oil production of four million barrels per day by 2020.
Avuru said foreign direct investment (FDI) to Nigeria dropped from $6 billion in 2009 to $2.3 billion in 2010 even though the “oil sector accounted for over 60 per cent of FDI inflow to Nigeria”.
He also noted that signing the PIB has become imperative because of the emergence of other oil rich countries in Africa, a situation that has affected FDI inflow to Nigeria.
Quoting the United Nations Conference on Trade and Development (UNCTAD), he said: “Between 1970 and 1990, Nigeria accounted for 30 per cent of FDI inflow in Africa, but only 16 per cent in 2007 due to emergence of other oil rich countries.”
Aside from affecting FDI inflow, Avuru said the non-passage of the oil bill has had other adverse effects some of which include push back of “start-up dates for selected oil and natural gas projects, for instance, Bonga North and Sonam field development), to be undertaken by the international oil companies (IOCs), tremendous decline in exploration activities in the last seven years and the fact that only three exploratory wells were drilled in 2011 compared to over 20 wells drilled in 2005.”
He, however, admitted that there had been some progress on the PIB, which has passed the Second Reading in the National Assembly.
He noted that there were contentious issues stalling the passage some of which he identified as “power of the minister, the application of Petroleum Host Community Fund (PHCF), the funding of New Frontier Exploration Services and the onerous fiscal terms.”
Avuru expressed optimism that the passage of the bill would help “decrease investors’ risk through a stable regulatory environment, redesign fiscal terms to maximise government take, provide significant opportunities in shallow offshore and deep water terrains while opening a window of opportunity to invest in a stable and commercially prospective oil and gas environment.”
– The Nation