Home Oil & Gas Why foreign investors shun the Nigeria gas sector

Why foreign investors shun the Nigeria gas sector

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The Federal Government’s desire to attract about $48 billion of a projected $194 billion oil and gas investment in Africa may have suffered a huge setback with investors opting for other business-friendly destinations.

The development may have been orchestrated by its lack of clarity in gas pricing, licensing requirements and domestic gas delivery obligations among others contained in the recently signed Petroleum Industry Act (PIA).

The Nigerian National Petroleum Corporation (NNPC) had in 2019 projected that the country will attract about $48.04 billion or 24.8 per cent of an estimated $194 billion total oil and gas investment coming to Africa over the next seven years (2019-2026)

Its closest rival on the continent, Angola, will take 11.3 per cent of the total expected spend, while emerging jurisdiction, Mozambique, will have as much as 23.8 per cent of that.

The NNPC also stated that within this investment window, the country would have 20 out of the 93 projects funded across the continent’s oil and gas industry.

Prior to the signing of the PIA, gas investors had complained about the earlier listed challenges,a development that led to many gas fields undeveloped across the country.

Curiously, industry observers are however disappointed that the hitherto challenges which had caused a huge setback to the gas sector were not addressed in the PIA.

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Indeed, the Nigerian Gas Association (NGA) in its communiqué on the PIA said the Act needs to be more specific about time-bound triggers for transitioning from a regulated to a market-driven (willing-buyer-willing seller) pricing framework as this will ensure investments can be made with definitive and applicable fiscal terms.

NGA advised that some immediate short-term options could be explored while pricing reform is in progress, including transition to willing-buyer-willing-seller by 2023, adding that the NGA would like to see a pathway that could be adopted to deliver a pricing reform and long term liberalization of the domestic gas market.   

It added that the industry needs clarity on what the specific terms for the licensing of midstream or downstream gas or petroleum liquids post the 18-month transition period should be.

The group also raised concerns on the potential overlaps in the roles of Nigerian Upstream Petroleum Regulatory Commission(NUPRC) and the Nigerian Midstream Downstream Regulatory Authority(NMDRA), saying the PIA imposes an obligation on upstream operators under the regulatory purview of NUPRC as well as holders of other licenses or permits who are also engaged in activities in midstream of downstream gas operations prior to the effective date of the PIA to apply to NMDRA within 18 months from the effective date of the PIA for the appropriate licenses or permits, as applicable.

NGA equally said the PIA currently does not provide for industry/private sector representation on the Governing Council of the Midstream and Downstream Gas Infrastructure Fund. This, it said, is key for the credibility in the administration of the fund. It also maintained that the fiscals for stand-alone non-associated gas developments need to be included in the PIA.

The group further noted that as a committed stakeholder in the gas sector, it hopes and expects that these and many more issues that may emanate as the implementation of the PIA progresses will be clarified in the form of regulations and possibly amendments to the Act as required in the near future.

THE SUN

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