The year 2019 appears to be the most turbulent for operators in the energy sector as some government policies expected to increase oil and gas production remained unattended to.
A major setback to the progress of the oil sector was recorded in August, when President Muhammadu Buhar, declined assent to the much- awaited Petroleum Industry Bill (PIB).
Stakeholders are, however, worried that about 90 per cent revenue accruing to the Federal Government from oil and gas proceeds may nosedive anytime soon.
This was even as they raised fresh concerns over unfavourable fiscal and regulatory issues holding the over 15 years bill from becoming law.
Citing the undermining of the powers of the Minister of Petroleum Resources and the functions of the ministry to decline assent for the PIB, the President equally stated the same reason in declining assent to the National Oil Spill Detection and Response Agency Act (Amendment) Bill passed by the National Assembly.
Buhari is the Minister of Petroleum Resources
For the Managing Directors of the Rural Electrification Agency (REA) and the Nigerian Bulk Electricity Trading (NBET), the year ended on a sad note as the Minister of Power sacked both heads of agencies over allegations bothering on alleged infractions.
But, while the sector was struggling in murky waters some modest achievements were still recorded. For instance the Federal Government was able to strike a deal with Siemens for the upgrade of the transmission, distribution and generations arms of the power sector. Though, the details of the deal still remain sketchy as the amount involved was yet to be disclosed to Nigerians. The deal aims to deliver about 11,000 megawatts of electricity by 2023.
Similarly, after a very long wait and several failed dates, the Nigerian Liquefied Natural Gas (NLNG) Limited, on December 27, signed its FID for the $10 Train 7 project.
Buhari declines PIB assent
The passage of Nigeria’s Petroleum Industry Bill (PIB) yet suffered further delay after President Buhari refused to sign it in its current form last August
According to a statement from the executive, the president, who is also the country’s oil minister, sent the Petroleum Industry Governance section of the PIB back to the National Assembly.
The setback may not be unconnected with multiple issues, including the section’s clause to reduce the power of the president and oil minister to oversee and award oil licences and contracts. The section of the bill has provisions for a regulatory body to take 10 per cent of oil revenues, rather than these revenues gong to federal, state and local governments.
Senator Ita Enang, an official of the presidency, had said that the increased remit of an oil fund could lead to conflicts in interpretation and a lack of clarity.
Both houses of the Nigerian parliament passed the bill in January 2019 but presidential assent is still required for the PIB to become law. The contentious governance section would create four new entities with powers to award exploration licences, run bid rounds and make recommendations on upstream licences, a sector of the Nigerian oil industry which attracts ongoing calls for more development and investment. This section was only passed by both houses after it was broken down into smaller sections.
NOSDRA Act amendment suffers setback
Like the PIB, President Buhari had in March, declined assent to the National Oil Spill Detection and Response Agency Act (Amendment) Bill passed by the National Assembly.
Buhari, in a letter, addressed to former Senate President, Bukola Saraki said his decision was pursuant to Section 58 (4) of the 1999 Constitution of the Federal Republic of Nigeria (as amended).
Specifically, the President said the bill undermines the powers of the Minister of Petroleum Resources and the functions of the ministry. The letter read, “I am declining assent to the bill because in a number of important sections, the bill undermines the powers of the Minister of Petroleum Resources and the functions and responsibilities of the Ministry of Petroleum Resources.”
Buhari also rejected the imposition of 0.5 per cent of Operation Funds on oil companies, explaining that this will create an additional tax burden on oil firms operating in the country.
He listed the contentious areas in the bill to include Section 3, 6 (1a), 7 (a) and (b), 8, 9 and 11.
“Section 8 of the bill imposes a new charge and the industry of 0.5 percent of Operation Funds of oil companies for the enforcement of the environmental legislation in the petroleum sector.
“This imposition is an additional burden on the industry, particularly given that it is unclear what operation funds mean for the purpose of applying the provisions of the bill,” It added.
FG signs agreement with Siemens
In July, President Buhari witnessed the signing of Electricity Road Map agreement between the Federal Government of Nigeria and Germany-based company, Siemens at the State House, Abuja.
The agreement is the outcome of a meeting Buhari held with German Chancellor, Angela Merkel on August 31, 2018.
The Letter of Agreement was signed on behalf of the Federal Government by the Director-General of the Bureau of Public Enterprises,, Mr Alex Okoh, and the Global Chief Executive Officer of Siemens, Joe Kaeser.
Speaking shortly after signing of the agreement, Buhari tasked Siemens and other stakeholders in the power sector to work hard to achieve 7,000 megawatts of reliable power supply by 2021, and 11,000 megawatts by 2023.
“We all know how critical electricity is to the development of any community or indeed any nation.
“And in Nigeria, we are blessed to have significant natural gas, hydro and solar resources for power generation. “We are still on the journey to achieving reliable, affordable and quality electricity supply necessary for economic growth, industrialisation and poverty alleviation,” he said.
According to him, our goal is simply to deliver electricity to Nigerian businesses and homes.
“My challenge to Siemens, our partner investors in the Distribution Companies, the Transmission Company of Nigeria and the Electricity Regulator is to work hard to achieve 7,000 megawatts of reliable power supply by 2021 and 11,000 megawatts by 2023 in phases 1 and 2 respectively.
Minister suspends NBET, REA MDs
It was a bleak Christmas for the Managing Directors of REA, Ms. Damilola Ogunbiyi as the Minister of Power, Sale Mamman, suspended her indefinitely.
Also, the Minister directed the Managing Director, Nigerian Bulk Electricity Trading (NBET) Plc, Dr Marylyn Amobi, to step down from office.
According to the Minister’s Special Adviser, (Media) Mr. Aaron Artimas, Ogunbiyi’s indefinite suspension was with immediate effect.
Following some apparent infractions in REA, Mamman directed Ogunbiyi to proceed on indefinite suspension with immediate effect.
Ms Ogunbiyi is to hand over to the next most senior officer in the Agency.
Consequently, the Minister has directed an immediate investigation into the activities of the Agency towards repositioning it for better service delivery.
Amended DeepOffshore law comes into effect
President Buhari on November 4, signed the amended Deep Offshore Bill into law.
Senior Special Assistant on Media and Publicity, Malam Garba Shehu said in a statement that the President assented to the bill in London.
Buhari said with the Act, Nigerians would get equitable income from natural resources.
The statement reads: “Today (Monday) is an important day for all Nigerians – but particularly the younger generation.
“I signed into law the amended Deep Offshore Act. Nigeria will now receive its fair, rightful and equitable share of income from our natural resources for the first time since 2003.
“In that year oil prices began a steep increase to double – and at times – triple over the following decade.
“All this time Nigeria has failed to secure its equitable share of the proceeds of oil production, for all attempts to amend the law on the distribution of income have failed. That is, until today (Monday).”
Buhari said rapid reductions in the cost of exploration, extraction and maintenance of oil fields had occurred over the past 25 years, just as sales prices have risen within the period.
The deepwater or deep offshore fields are currently produced under the production sharing contract (PSC) arrangement and are operated by international oil companies (IOCs). But members of Oil Producer Trade Section (OPTS), a private industry group under the umbrella of the Lagos Chamber of Commerce and Industry (LCCI), in a position paper, stated that the amended Deep Offshore Act will only increase the Federal Government’s revenue in the short term.
They said it will diminish economic viability of deepwater projects, which would stall deepwater investments in Nigeria and negatively impact production, government’s revenue, local jobs and the broader economy.
According to the group, the Act does not reflect business realities; therefore, increasing the royalty without addressing the full fiscal package is not consistent with the Federal Government’s objectives of sustainable long term growth.
“The amended Deep Offshore Act, with a price-based royalty on revenues above $35 per barrel, in addition to existing water depth based royalties, is a burden on the industry.
NLNG signs Train 7 FID
Nigeria LNG Limited (NLNG) on December 27, in Abuja took FID for its Train 7 Project, which will increase its production by 35% and its competitiveness in the global LNG market.
This decision allows the expansion to increase the capacity of NLNG’s six-train plant from the extant 22 Million Tonnes Per Annum (MTPA) to 30 MTPA, with the award of contracts for the engineering, procurement and construction activities to follow the closure of bank and Export Credit Agency (ECA) financing, and the finalization of some key supporting commercial agreements expected in early 2020. The actualisation of the Train 7 Project comes as NLNG celebrates 30 years of its incorporation and 20 years of safe and reliable operations since exporting its first LNG cargo in 1999.
According to Tony Attah, MD/CEO of NLNG, “Train 7 is the crux of a growth agenda which will ensure the Company’s position as the 5th major supplier of global LNG is maintained, increasing value to its Shareholders and other stakeholders, as well as further reducing the gas that would otherwise have been flared, in fulfilment of its vision of ‘being a global company, helping to build a better Nigeria’”.
He further remarked that “over 12, 000 jobs will be created during the peak of construction, trade and commercial activities within the NigerDelta region equally receiving a boost as a result. The Project will also support the development of local engineering and fabrication capacity in the country. Other opportunities for local content include procurement, logistics, equipment leasing, insurance, hotels, office supplies, aviation, haulage, and many more.”
The Company further remarked that the Project upon completion will support the Federal Government’s drive to diversify its revenue portfolio and generate more revenue from Nigeria’s proven gas reserves of about 200 Trillion Cubic Feet (Tcf).
The construction period after FID will last approximately five years with first LNG rundown expected in 2024.