Oil companies say the delay in passing the PIB is slowing down the industry.
International Oil Companies, IOCs, on Wednesday said the continued delay in passing the Petroleum Industry Bill, PIB, into law is creating uncertainties. The uncertainties delay the take-off of fresh projects worth several billion of dollars that would grow industry capacity and reserves.
The Country Chair of Shell Companies in Nigeria, SCiN, Mutiu Sunmonu, said its upstream exploration and production arm, Shell Petroleum Development Company, SPDC, has put on hold investment decisions on two key offshore oil and gas projects that would have cost about $30billion till when the new petroleum law is approved.
The Managing Director of ExxonMobil Companies Nigeria, Mark, and his Total E&P Nigeria Limited counterpart, Guy Maurice, also expressed similar fears, saying the relevant authorities should speed up action towards getting the proposed law ready, to help the oil and gas industry continue to grow.
The chief executives were speaking on the challenges to growing Nigeria’s oil and gas industry capacity at the on-going Nigeria Oil & Gas, NOG 2013 Exhibition and Conference in Abuja.
The Group Executive Director, Exploration& Production, Nigerian National Petroleum Corporation, NNPC, Abiye Membere, had identified high cost of conducting oil and gas business, long contract cycle and lack of oil exploration and production by IOCs as the challenges to realising industry growth potentials.
To create the enabling environment, Mr. Membere said the NNPC Board has set nine months as the maximum timeline to complete tenders for complex projects, while a maximum of six months has been fixed for simpler ones, to eliminate rising cost associated with longer tender processes.
He said before the end of the second quarter of this year, all issues contributing to longer tender processes would be resolved, to drastically cut down on the cost and pricing of projects, adding that cost reduction initiatives captured in the proposed PIB would help drive industry production capacity and reserve.
Mr. Sunmonu, who expressed SPDC’s commitment to continue to provide the leadership in the industry, said the challenge is not in the potentials to grow capacity to produce 4 million barrels of oil per day and 40 billion barrels reserves, but mobilising the resources to bring it into reality.
He said the key challenge is in making the best out of the resources available by optimising production and making the operational environment more stable for the players.
For the country to recover its pre-militancy era production level of an average of 2.7 million to 3 million barrels per day, the industry requires to maintain the addition of about 300,000 barrels per day of fresh production through the investment of about $30 billion in two deep-water projects annually.
The Shell boss, who acknowledged the difficulty in achieving this goal, said the challenge becomes more complicated when the country is losing an average of 150,000 barrels of crude every day to crude theft alone, saying this demands urgent action by stakeholders to remove the uncertainty that is affecting fresh investments.
“If contractors are not sure of a stable investment environment, regular payments, value-adding partnerships and a different project funding approach, it would be difficult to attract fresh investments,” he said.
For the ExxonMobil boss, all what the industry is clamouring for is a PIB that would provide for globally competitive returns on investment to all stakeholders as well as a law that would create an investment climate that enables the government to cooperate with industry players without disrupting agreements on funding for oil and gas operations.
According to the Managing Director of Total, the IOCs are demanding a balanced, competitive PIB that would guarantee a stable operational environment, ensure security, fair fiscal regime; and that would help investors decide on investment on projects and remove funding constraints.