NIGERIA Invest in 2012-13 - Newsdesk Media

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oil, gas and minerals
The deal would have given CNOOC reserves of
six billion boe – around one-sixth of Nigeria’s total
reserves. The government said an initial offer was
“unacceptable”, but added: “Your interest in all the listed
blocks will be considered if your revised offer is favourable.”
The Petroleum Industry Bill and onshore
As mentioned above, the major disincentive to invest in
Nigeria’s oil industry in recent times has been the long-delayed
PIB, which includes a new tax framework for oil projects. The
plans have been a particular deterrent to deepwater oil projects
where the rates of return will drop sharply.
It has had less effect in interest on onshore oil
as the terms will be little changed and actually improved
Nigeria’s four refineries have been
running at an average of around
40 per cent of capacity over the
past decade, compared to a global
expectation of around 90 per cent
for smaller onshore oil projects. The government take
for 100 million bbl fields is currently high and will remain
very similar, but the take for a 20 million bbl onshore field will
drop from around 95 per cent to 77 per cent.
“Under current JV [joint venture] terms, the extremely
high government share is among the highest in the world
and is a significant disincentive to new investment.
Under the PIB terms, the government share is progressive
and generally lower from smaller fields and should
enhance the economic viability of these fields,” said
analysts Wood Mackenzie.
However, after four years of debate, the PIB is still
stalled as vested interests try to protect themselves
from its changes. This has resulted in major investors
being unwilling to commit money to Nigeria until
a final solution is in place.
“While most politicians publicly call for widespread
industry reform, few have done more than pay lip service to the
invest in nigeria 2012-13
idea. Long accustomed to windfall profits and the discretionary
allocation of assets, Nigeria’s politicians have continually
placed personal interests ahead of reform, resulting in
deliberate delays and obstruction,” analyst Ergo cautions.
Exactly how the PIB will play out is almost impossible
to forecast, while the future for Nigeria’s onshore oil fields
looks much more assured. What is less assured is the future
of the oil refineries. Nigeria may be one of the largest crude
producers and exporters in the world, but it has to import
the majority of its refined products.
Boosting refineries’ output
Nigeria’s four refineries have been running at an average of
around 40 per cent of capacity over the past decade,
compared to a global expectation of around
90 per cent. According to data from NNPC,
the worst-performing year was 2007, when
they ran at a meagre 12 per cent.
Theoretically, plans are under way for an
additional 750,000 b/d to be added to the
existing refining capacity of 455,000 b/d.
China State Construction Engineering
Corporation has said it will build three
new refineries. A Memorandum of
Understanding has been signed in
a deal said to be worth $23 billion.
However, there have been many similar
promises in the past that have failed
to turn into reality.
While joint ventures are important in developing Nigeria’s
own abilities, they are also significant in a country in which
personal connections can be crucial. As alluded to earlier, the
days when many of the most sought-after contracts were
awarded more because of friendship and political necessity are
hopefully retreating, but the Nigerian system is most easily
manoeuvred with local knowledge and support.
There is likely to be a swathe of new acreage up for sale
once the PIB has been passed. Major oil companies, including
Exxon and Chevron, are rumoured to be waiting to offer
some of their own onshore interests, and the government is
promising a new licensing round.
Petrofac is only one of a series of oil and gas service
companies now forging links with indigenous firms to meet
local content requirements that were often given little
consideration in the past, but are now becoming a necessity.
It remains unclear exactly how stringently the
NOGICDA will be implemented, as little heed has been