PIB Delay Threatens $8.4bn Annual Oil Investment

• PIB Delay Threatens $8.4bn Annual Oil Investment

The delay in the passage of the Petroleum Industry Bill is threatening an average capital expenditure of $8.4bn per year expected to be spent on 249 oil and gas fields in Nigeria between 2018 and 2020.

Capex into Nigeria’s oil and gas projects would add up to $25.3bn over the three-year period in upstream capex by 2020, GlobalData, a leading data and analytics company, said in a new report.

It said ultra-deepwater projects would be responsible for over 28 per cent of $25.3bn of upstream capex in Nigeria, or $7.2bn by 2020.

The shallow water projects are expected to account for 26 per cent of upstream capex with $6.7bn by 2020, while deepwater and onshore projects will necessitate $6bn and $5.5bn, respectively in capex over the period.

GlobalData expects that the Nigerian National Petroleum Corporation will lead Nigeria in capex, investing $5.3bn in the country’s upstream projects by 2020. Royal Dutch Shell Plc and Italian oil major, Eni, will follow, with $4.7bn and $2.8bn, respectively.

It said Zabazaba-Etan Project, a planned shallow water conventional oil field, would lead capital investment with $4.8bn to be spent between 2018 and 2020. Owowo West, a conventional oil field in the Niger Delta Basin, would follow next with a capex of $1.8bn.

Several planned deepwater projects in the country have been repeatedly pushed back because of regulatory uncertainty caused by the delay in passing the PIB.

The Energy Information Administration, the statistical arm of the US Energy Department, said as a result of the uncertainty, international oil companies in Nigeria had sanctioned (reached a final investment decision) on only one of eight planned deepwater oil projects.

“Both sanctioned and unsanctioned deepwater oil projects have the potential to bring online almost 1.1 million barrels per day of new production over the next five or more years. However, only 200,000 bpd has reached the critical development milestone,” it said.

The PIB, which was initially proposed in 2008, is expected to change the organisational structure and fiscal terms governing the oil and natural gas industry, if it becomes law.

“Regulatory uncertainty has resulted in fewer investments in new oil and natural gas projects, and no licensing round has occurred since 2007. The amount of money that Nigeria loses every year from not passing the PIB is estimated to be as high as $15bn,” the EIA said.

In February, the Group Managing Director, NNPC, Dr. Maikanti Baru, said the passage of the PIB would unlock $10bn worth of oil and gas investment in the country.

The first part of the bill, Petroleum Industry Governance Bill, has been passed by the Senate and the House of Representatives, awaiting the President’s assent.

“When the other sections of the bill are finally passed, it will unlock over $10bn of investment held up due to uncertainty,” Baru said.