Nigeria’s inability to carry out reforms
in the oil sector could cause the country to cede investment
opportunities to other oil producing African countries.
in the oil sector could cause the country to cede investment
opportunities to other oil producing African countries.
The situation has also caused a dim in
prospects for new investments in the oil sector as well as losing the
market to countries carrying out reforms to make the sector more
competitive.
prospects for new investments in the oil sector as well as losing the
market to countries carrying out reforms to make the sector more
competitive.
Nigeria’s improved oil sales has not
translated into better value for the people because of weak fiscal
terms, poorly regulated sector and lack of a competitive oil law.
translated into better value for the people because of weak fiscal
terms, poorly regulated sector and lack of a competitive oil law.
“The world around us is
changing and the danger is that those of us in this part of the world
who play ostrich, could be in a dangerous situation as time will pass
quickly and others would
move on,” Mr. Victor Eromosele, CEO of M.E Consulting warned.
changing and the danger is that those of us in this part of the world
who play ostrich, could be in a dangerous situation as time will pass
quickly and others would
move on,” Mr. Victor Eromosele, CEO of M.E Consulting warned.
As oil industry is evolving, Nigeria’s
laws have failed to keep pace, hence a petroleum industry bill has not
become law 17 years after it was initiated.
laws have failed to keep pace, hence a petroleum industry bill has not
become law 17 years after it was initiated.
The Nigerian National Petroleum Corporation (NNPC) is accused of being opaque, inefficient and unreceptive to reforms.
But Nigeria’s African peers are not
wavering. Last week, Angola announced it will set up a new regulator for
the country’s oil industry as part of efforts to restructure
state-owned Sonangol and revive falling oil and gas output.
wavering. Last week, Angola announced it will set up a new regulator for
the country’s oil industry as part of efforts to restructure
state-owned Sonangol and revive falling oil and gas output.
The South western African nation has seen oil production dip to 1.4million barrels per day (bpd) from 1.9million bpd.
The regulatory role will be transferred
from Sonangol to the National Agency of Petroleum and Gas in the first
half of next year in a reorganization scheduled for completion in 2020,
while Sonangol, which partners with Total SA
and BP Plc to pump oil, will focus on the exploration, production,
refining and distribution of oil and gas.
from Sonangol to the National Agency of Petroleum and Gas in the first
half of next year in a reorganization scheduled for completion in 2020,
while Sonangol, which partners with Total SA
and BP Plc to pump oil, will focus on the exploration, production,
refining and distribution of oil and gas.
Africa’s third biggest oil producer,
Algeria is amending its national energy law to encourage upstream
investments. The country is softening tough fiscal terms and increasing
efficiency and speed of business processes to improve
investor confidence.
Algeria is amending its national energy law to encourage upstream
investments. The country is softening tough fiscal terms and increasing
efficiency and speed of business processes to improve
investor confidence.
The country’s objective is to align
reforms with the current energy market, striking a balance in technical
and financial risks between Sonatrach, its national oil company and
international investors. It also seeks to incentivise
outside participation while simultaneously preserving oil rents.
reforms with the current energy market, striking a balance in technical
and financial risks between Sonatrach, its national oil company and
international investors. It also seeks to incentivise
outside participation while simultaneously preserving oil rents.
Experts say the country would amend its
fiscal regime, allowing foreign partners to manage capital projects as
opposed to the current law requiring Sonatrach to possess a 51 percent
majority stake in all hydrocarbon projects.
fiscal regime, allowing foreign partners to manage capital projects as
opposed to the current law requiring Sonatrach to possess a 51 percent
majority stake in all hydrocarbon projects.
“The existing tax law, drafted during a
high oil-price cycle, should be revised to account for lower oil prices.
Algeria charges a 20% royalty on production, and this could be altered
to 12.5% and 16.25% subject to special conditions
in the new law.
high oil-price cycle, should be revised to account for lower oil prices.
Algeria charges a 20% royalty on production, and this could be altered
to 12.5% and 16.25% subject to special conditions
in the new law.
Windfall taxes of 15-50%, pending the
amount of production also apply, and may be targeted in the new law to
encourage outside investment in exploration and development projects,”
Rym Loucif, energy lawyer at Algiers office of
French law firm Gide Loyrette Nouel, told an online gas journal.
amount of production also apply, and may be targeted in the new law to
encourage outside investment in exploration and development projects,”
Rym Loucif, energy lawyer at Algiers office of
French law firm Gide Loyrette Nouel, told an online gas journal.
Other African oil producers including
Ghana, Equatorial Guinea, Egypt and Mozambique are driving reforms in
their oil sectors and positioning to attract new investments through
competitive fiscal and regulatory frameworks.
Ghana, Equatorial Guinea, Egypt and Mozambique are driving reforms in
their oil sectors and positioning to attract new investments through
competitive fiscal and regulatory frameworks.
In its report for 2018, the African Law
and Business Summit 2018 says that change has been rapid and widespread
in Africa’s oil and gas landscape.
and Business Summit 2018 says that change has been rapid and widespread
in Africa’s oil and gas landscape.
“Until recently, for example, Kenya and
many other African countries were solely oil importers and had no gas
reserves of substance. However, a host of new finds, gradually entering
into production, across Ghana, Kenya, Mozambique,
Senegal and Mauritania, Tanzania and Uganda, have significantly boosted
sub-Saharan Africa’s traditional upstream players.
many other African countries were solely oil importers and had no gas
reserves of substance. However, a host of new finds, gradually entering
into production, across Ghana, Kenya, Mozambique,
Senegal and Mauritania, Tanzania and Uganda, have significantly boosted
sub-Saharan Africa’s traditional upstream players.
“Senegal, for instance, has seen
investment from oil exploration companies, Cairn Energy and Kosmos
Energy, respectively, discovering some of the largest offshore gas
deposits between Senegal and neighbouring Mauritania’s territorial
waters,” the report said.
investment from oil exploration companies, Cairn Energy and Kosmos
Energy, respectively, discovering some of the largest offshore gas
deposits between Senegal and neighbouring Mauritania’s territorial
waters,” the report said.
Egypt and Algeria are also ramping gas production.
“Notably, almost 60% of Algeria’s oil
exports were to Europe in 2016. As well as being the main supplier of
natural gas to Spain last year, Algeria is one of the four or five
largest providers of oil and gas to countries like
France, Italy, Portugal, and even Germany. Similarly, in 2016, 86% of
Libya’s oil exports were to Europe,” said Dele Kuti, global head of oil
and gas for South Africa’s Standard Bank Group.
exports were to Europe in 2016. As well as being the main supplier of
natural gas to Spain last year, Algeria is one of the four or five
largest providers of oil and gas to countries like
France, Italy, Portugal, and even Germany. Similarly, in 2016, 86% of
Libya’s oil exports were to Europe,” said Dele Kuti, global head of oil
and gas for South Africa’s Standard Bank Group.
According to Bank-Anthony Okoroafor,
chairman of Petroleum Technology Association of Nigeria (PETAN, Africa
has huge resource base comprising 128 billion barrels or 7.5 percent of
world proven oil reserve, 503.3 Tcf (86.8 billion
BoE) or 7.6 percent of world’s proven gas reserves and 26 billion
barrels (Libya 5th globally) of shale oil. Algeria (3rd globally) holds
707 Tcf or 121.9 billion BoE shale gas potential.
chairman of Petroleum Technology Association of Nigeria (PETAN, Africa
has huge resource base comprising 128 billion barrels or 7.5 percent of
world proven oil reserve, 503.3 Tcf (86.8 billion
BoE) or 7.6 percent of world’s proven gas reserves and 26 billion
barrels (Libya 5th globally) of shale oil. Algeria (3rd globally) holds
707 Tcf or 121.9 billion BoE shale gas potential.
Analysts say foreign investors are spoilt for choice and investment dollars will go to countries that are serious.
