President Bola Ahmed Tinubu’s game changing reforms in the oil and gas sector: An excerpt from the speech delivered Friday 8 March at a press conference in Abuja by special adviser on energy Olu Arowolo Verheijen
Background
• Our ambitions to accelerate our economic growth and diversify the
economy for the benefit of all Nigerians require timely, credible, clear
and consistent policy.
• We are faced with a revenue crisis which is impacting all Nigerians.
To urgently address this, President Bola Tinubu is actively seeking
ways to grow revenue and forex to stabilize our economy and
currency. The Oil and Gas sector is critical to our ability to do so.
However, our current oil and gas production and investment levels
falls significantly short of our potential.
• Since 2016, Nigeria has only accounted for only four percent (4%) of
Africa’s total oil and gas investments, despite possessing thirty-eight
percent (38%) of the continent’s hydrocarbon reserves. A society is
not rich because of its resources but because of what it does with
those resources
• His Excellency, President Bola Ahmed Tinubu is determined to
reverse this trend and take decisive steps to ensure to a conducive
business climate and reposition Nigeria as a preferred investment
destination for oil and gas sector.
• To achieve these objectives, Mr President has:
– Issued a Presidential Directive to streamline and clarify the
scope of the two Regulators in the petroleum sector to provide
certainty and create a conducive business environment.
– Directed the NSA and Special Adviser on Energy to coordinate
enhanced security measures in the Niger Delta. Owing to this
Directive, the TNP pipeline which had been repeatedly
vandalized is now enjoying improved uptime; availability has
practically doubled since these directives were implemented.
This has translated to increased liquids of over 200,000
barrels/day being transported over the last 6 months. It has
increased the availability of NLNG Trains 1-6 from 57% in 2023
to 70% in Q1 2024.
– The President has also introduced fiscal incentives to deepen
Compressed Natural Gas (CNG) and Liquified Petroleum Gas
(LPG) penetration. These incentives were designed to:
o ease the impact of fuel subsidies on transportation cost
and enable the displacement of PMS/Diesel and;
o contribute to stabilizing the price of cooking gas in the
market and support the transition to clean cooking.
Following extensive engagements, analysis and benchmarking, with
industry operators and regulators, the President has taken further action
to address foundational issues identified in the course of these
engagements. Mr President has initiated amendment of primary
legislation to introduce fiscal incentives, reduce project execution
timelines and promote cost efficiency. However, recognising the urgency
to accelerate investments to stabilise the economy, His Excellency
executed these Policy Directives to clearly signal the policy direction of
this administration to both the market and regulators.
The Policy Directives are:
1. Fiscal Incentives for Non-Associated Gas (NAG), Midstream and
Deepwater Oil & Gas Developments:
This Directive aims to facilitate the monetization of Nigeria’s extensive
oil and gas resources. For Gas, 76% of our gas reserves, remain
undeveloped. This explains why, despite possessing one of the largest
gas reserves globally, we lack sufficient gas to meet our domestic
needs for industry, for power and for cooking. The fiscal incentives
introduced will attract the much-needed investments to enhance
energy security, catalyze economic activity, attract essential foreign
exchange, and promote job creation.
2. Streamlining of Contracting Processes, Procedures and Timelines: The
President has issued directives to reduce contracting timelines and
project delivery. Benchmarking and analysis revealed that the
contracting cycle takes up to 36 months. This Directive should have the
effect of compressing this cycle to less than 6 month in line with global
averages. This will expedite the delivery of oil and gas products to the
market and enhance overall value for the country.
3. Local Content Practice Reform: This Directive seeks to ensure that
local content requirements are implemented in a manner that does not
impede investments or the cost competitiveness of oil and gas projects.
This Directive aims to reduce the cost premium of operating in Nigeria,
presently averaging at 40%. We anticipate significant benefits from this
reform, including the development of local companies’ capacity, thereby
generating additional business opportunities, job creation and boosting
economic growth.
Implementing Partners
• A diverse array of stakeholders were consulted and provided input
into. Some of these stakeholders will be responsible for
implementation.
1. Fiscal Incentives: The Minister of Finance/Co-ordinating
Minister of the Economy will develop and propose amendments
to introduce fiscal incentives for deep-water developments into
legislation. The Federal Inland Revenue Service (FIRS) and the
Nigerian Upstream Petroleum Regulatory Commission
(NUPRC) will issue guidelines on the implementation of the
fiscal incentives.
2. Streamlining of Contracting Processes, Procedures and
Timelines: The MOFI, MOPI, Nigerian Content Monitoring and
Development Board, NNPCL will be responsible for
implementation and enforcement.
3. Local Content Practice Reform: The NCDMB is responsible for
implementing the Directive and issuing supporting guidelines.
Details on the role of each stakeholder are contained in the Policy
Directives, which have been Gazetted and will be distributed shortly.
Co-ordination
• The Special Adviser to the President on Energy to play a
coordinating role in ensuring implementation within the timelines
stipulated in the Directives.
• I will follow up on implementing these directives and in return we
expect the Operators to commit to their promises to make these
investments.
Conclusion
• Our need to fuel economic growth at rates that significantly exceed
our population growth rate has never been more urgent. The
President strongly believes that private sector-led growth enabled by
clear and inclusive government policies is the most enduring path to
prosperity for all Nigerians. We will sustain engagement and
collaboration with key investors to ensure we attract capital and
capabilities to this sector to catalyze job creation, productivity,
income growth across multiple sectors. This administration is laser
focused on enabling transformational economic opportunities to lift
millions of hardworking Nigerians our of poverty. (Flowerbudnews)
