{"id":57742,"date":"2022-09-22T00:25:35","date_gmt":"2022-09-22T00:25:35","guid":{"rendered":"https:\/\/www.africannewspaper.net\/2022\/09\/22\/has-nigerias-petroleum-industry-act-reshaped-the-industry-african-business\/"},"modified":"2022-09-22T00:25:53","modified_gmt":"2022-09-22T00:25:53","slug":"has-nigerias-petroleum-industry-act-reshaped-the-industry-african-business","status":"publish","type":"post","link":"https:\/\/www.africannewspaper.net\/2022\/09\/22\/has-nigerias-petroleum-industry-act-reshaped-the-industry-african-business\/","title":{"rendered":"Has Nigeria&#8217;s Petroleum Industry Act reshaped the industry? &#8211; African Business"},"content":{"rendered":"\n<div data-poool=\"90\" data-poool-mode=\"hide\">\n<p>Nigeria is now more that one year away from the Petroleum Industry Act (PIA), hitting the statutes. This landmark piece of legislation saw glacial progress through Nigeria\u2019s parliament over two decades, but the lengthy gestation should not hide its significance to the oil and gas sector\u2019s future. \u00a0<\/p>\n<p>Nigeria is keen to ensure that its oil and gas sector is on a steady footing with elections in 2023.\u00a0The PIA has played a crucial role in forging both stronger sector growth\u00a0by establishing a new framework for Nigeria\u2019s oil and gas sector, including two new regulators, the National Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.<\/p>\n<p>It also paves the ground for the professionalisation of the loss-making state-owned Nigerian National Petroleum Company (NNPC), turning it into the NNPC Ltd, a quasi-commercial entity which nonetheless remains owned by the government \u2013 a process that was completed in mid-July. NNPC Ltd\u2019s focus is now to boost productivity.<\/p>\n<p>In the words of President Muhammadu Buhari, the state energy company will be \u201ccommercial, independent and viable\u201d, operating without relying on government funding and free from institutional regulations.<\/p>\n<p>There is still much to do. Even though the PIA has been in place for a year, it is still in transition. Committees are trying to determine what it means in practice. A Nigerian analyst who is experienced was contacted by <em>African Business<\/em>It was questioned how much the NNPC would change after it became a limited company. However, there is some evidence that things could be changing post-PIA.<\/p>\n<aside id=\"icp-link-block_63286326af996\" class=\"icp_internal_link mt-4 mb-4 \"><\/aside>\n<h2>Oil majors sign new contracts<\/h2>\n<p>In August, the NNPC negotiated new terms for six offshore licenses owned by international oil companies (IOCs). This move could result in substantial volumes of untapped production coming to the market over the next decade.<\/p>\n<p>It is important to note that it suggests a positive mood among Nigerian-focused oil majors. IOCs have historically been reluctant to sign new production sharing agreements (PSCs), which cover deep-water assets. But in early August, new PSCs were signed for Chevron\u2019s Oil Mining licenses (OMLs 127 and 132), Eni\u2019s OML 125, TotalEnergies\u2019 OMLs 130 and 138 and ExxonMobil\u2019s OML 133. These five deep water blocks could produce 10bn barrels per year over a period of 20 years.<\/p>\n<p>Their signings are a testament of the success of negotiations between NNPC, the majors in removing wrinkles in contracts that had previously affected corporate revenues.<\/p>\n<p>If their public statements are anything to go on, the majors appear satisfied enough with the outcome. ExxonMobil said it validated its\u00a0\u201cearlier commitment to maintain a significant deep-water presence in Nigeria, via Esso Exploration and Production Nigeria (Deepwater)\u201d.<\/p>\n<p>It was the PIA, which was crucial in changing the mood music among majors. As NNPC CEO Mallam Mele Kyari noted in a statement, the renegotiated PSCs were in line with the provisions of the PIA, with a \u201cgreat deal of clarity between NNPC Ltd and its partners in the deep-water space\u201d. These new PSCs will generate future revenues of more than $500bn, according to estimates.<\/p>\n<p>However, this is not to imply that the PIA has changed the agenda. All the PSCs \u00a0\u2013 apart from Total\u2019s OML 130 which covers the Akpo and Egina fields \u2013 will run for another 20 years under pre-PIA laws.<\/p>\n<p>Exxon stated that renewals confirmed its earlier commitments to continue a significant deep water presence in Nigeria. In a clear sign of the improved atmosphere between host and IOCs Shell, ExxonMobil and Chevron all plan to withdraw lawsuits against Nigeria.<\/p>\n<aside id=\"icp-link-block_63286336af997\" class=\"icp_internal_link mt-4 mb-4 \"><\/aside>\n<h2>ExxonMobil assets thrown into dispute<\/h2>\n<p>That is not to say the majors\u2019 future Nigeria operations will be plain sailing. Exxon\u2019s plans to sell a set of shallow water assets with production of about 95,000 barrels of oil equivalent per day to Nigerian independent Seplat Energy hit an obstacle on 6 July,\u00a0when the proposed\u00a0$1.6bn sale was halted after a judge in Abuja granted NNPC an \u201corder of interim injunction\u201d barring ExxonMobil from completing any divestment in a unit that ultimately operates four licences in Nigeria.<\/p>\n<p>With NNPC wanting to block the sale, seeing potential opportunity for itself in owning the assets, there is now a serious prospect of a lengthy dispute that will stymie majors\u2019 hopes of selling off some of their shallow water and onshore assets \u2013 with Shell and Total likely to have to wait out the Exxon divestment process.<\/p>\n<p>In August, President Buhari had given his support to the asset transfer. But the decision was later reversed. Clarity may need to wait until next year&#8217;s election for a new president.<\/p>\n<p>However, the Nigerian analyst said that\u00a0<em>African Business\u00a0<\/em>the authorities ultimately appear minded to allow the sale to Seplat go through: \u201cThe big risk was NNPC trying to pre-empt the deal. It could have easily created a situation in which NNPC would have been able to obtain those assets if the government wanted it to. That it didn\u2019t do so is significant.\u201d<\/p>\n<aside id=\"icp-link-block_63286347af998\" class=\"icp_internal_link mt-4 mb-4 \"><\/aside>\n<h2>Crude production in decline<\/h2>\n<p>The backdrop is one that will see Nigeria\u2019s crude production on a trajectory of consistent declines in output. In May, crude oil production fell by 23.8% year-on-year, to 1.02m barrels per hour.<\/p>\n<p>Fitch Solutions\u2019 oil and gas team project that Nigeria\u2019s oil output will fall by 9.1% in 2022, caused by previous underinvestment in the country\u2019s oil sector, as well as theft. While new production from Ikike will temporarily offset the declines, it will not reverse the overall drop.<\/p>\n<p>As Fitch\u2019s emerging markets economist John Ashbourne noted in a webinar in early September, net prices are rising more than volumes are falling, reflecting the fact that\u00a0a lot of the fields have been in decline for some time.<\/p>\n<p>\u201cProduction volumes we don\u2019t expect to rise by very much over coming years, despite a blip coming in 2026-27, when some offshore production will come online. Volumes have remained relatively stable and consistently below their levels in the past. If you look at the period between 2010 and 2015, when volumes were close to 2.5m barrels per day, we don\u2019t think they can get anywhere near back to that,\u201d said Ashbourne.<\/p>\n<p>That means that even as\u00a0oil prices remain elevated, the value of oil produced in Nigeria will never return to the levels seen just 10 years ago.\u00a0Another problem is that the policymaking process may remain in limbo until the 2023 presidential election. It could take longer as the new administration gets in place.<\/p>\n<aside id=\"icp-link-block_6328638eaf99a\" class=\"icp_internal_link mt-4 mb-4 \"><\/aside>\n<h2>Gas production to grow<\/h2>\n<p>But there is also progress to report in Nigeria\u2019s downstream, which could yet give a boost to exports. The opening of the Dangote oil refinery in Lagos will boost the\u00a0capacity of Nigeria\u2019s refining sector by 147%, taking it up to over 1.1m barrels per day, says Fitch. And it also widens Nigeria\u2019s export slate to include more refined products. Nigeria currently exports crude fuels but could export products into neighboring countries.<\/p>\n<p>Long-term, Nigerians are more optimistic about natural gas than crude oil.\u00a0Nigeria\u2019s annual gas production is set to from about 50bn to 70bn cubic metres in coming years, reflecting the impact of improved offshore production and better gas capture. Fitch says that Nigeria could soon produce almost as much gas as Algeria in the 2030s.<\/p>\n<p>Majors are clearly much more exercised by the country\u2019s natural gas prospects than its troublesome crude oil fields in the Delta. Gas is likely to be a source for future export growth for the largest and most experienced IOCs. It may still be worth staying the course in Nigeria, even if they are downscaling elsewhere.<\/p>\n<aside id=\"icp-link-block_632863d3af99c\" class=\"icp_internal_link mt-4 mb-4 \"><\/aside>\n<\/div>\n<p>Source: <a href=\"https:\/\/african.business\/2022\/09\/energy-resources\/has-nigerias-petroleum-industry-act-reshaped-the-industry\/\">african.business<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nigeria is now more that one year away from the Petroleum Industry Act (PIA), hitting the statutes. This landmark piece of legislation saw glacial progress through Nigeria\u2019s parliament over two decades, but the lengthy gestation should not hide its significance to the oil and gas sector\u2019s future. \u00a0 Nigeria is keen to ensure that its [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":57744,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Has Nigeria&#039;s Petroleum Industry Act reshaped the industry? - African Business - African News Paper<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africannewspaper.net\/2022\/09\/22\/has-nigerias-petroleum-industry-act-reshaped-the-industry-african-business\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Has Nigeria&#039;s Petroleum Industry Act reshaped the industry? - African Business - African News Paper\" \/>\n<meta property=\"og:description\" content=\"Nigeria is now more that one year away from the Petroleum Industry Act (PIA), hitting the statutes. 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