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Reforming & Repositioning the Oil & Gas Industry in Nigeria Keynote Address By: Dr Emmanuel Ibe Kachikwu

Honourable Minister of State – Petroleum Federal Republic of Nigeria

Protocol

1. I am honoured to be in your midst today at this Nigeria Oil & Gas Conference

and exhibition to make some remarks on “Reforming & Repositioning the

Oil & Gas Industry in Nigeria”.

2. The theme of this year’s conference; Journey towards transformation and

the title of my speech “Reforming & Repositioning the Oil & Gas Industry

in Nigeria” aptly describes Nigeria’s current situation of transiting to the next

chapter on the journey to maximizing our resources for the development of our

Nation.

3. Today, the Nigerian Oil and Gas Conference & Exhibition is an important event

in the Nigeria oil and gas industry calendar. As such, I am delighted to

participate with you today in discussing the current state of our industry and

discuss the roadmap for moving the industry forward

Highlights of the Industry and the Journey So far

4. Globally, 2016 tested the resolve and resilience of the oil producing countries

especially OPEC members.

5. Between 2015 and 2016, there has been about a 25% drop in global spending

on exploration and production running into hundreds of billions of dollars which

is directly attributable to the low oil prices

6. Unlike in 2008 where the oil price decline was driven by demand

deterioration, the decline in the oil price from 2014 to 2016 was due to

excess supply.

 

7. More than ever, the need for closer collaboration became necessary internally

within OPEC members and externally with non OPEC members. This strong

collaboration yielded the production adjustment of 1.8 mb/d by OPEC and

number of Non-OPEC countries; this great achievement for the first time

is expected to balance the market by 3Q17.

8. Oil market sentiments have improved since the OPEC and Non-OPEC

declaration as prices rose, volatility decreased and net futures and

options long positions increased.

9. In 2016, the Nigeria upstream sector of the oil and gas industry was challenged

by the menace of upstream assets vandalism. Our crude oil export pipeline

system namely, Trans-Forcados to the west, the Obangbiri – TemiDaba – Brass

in central Niger Delta, the Nembe creek trunk line and the Trans-Niger pipeline

which evacuates crude produced onshore to export terminals were subject to

severe vandalism. Similarly, the Bonny – Port Harcourt crude oil pipeline and

the Escravos – Warri – Kaduna crude oil supply pipelines were not spared.

10. In spite of this, we witnessed a peak production of 2.35 Million barrels

per day recorded at the beginning of 2016 which declined to an almost all-

time-low of 1.3 Million barrels per day per day due to incessant vandalism. Our

2016 Crude oil production averaged 1.85 mln barrels of oil per day.

11. Despite these, Nigeria however, still remains a leading producer in Africa with

potential to boost production to the neighborhood of 3 mln barrels of oil

per day by 2020; once the required investments flow in and the planned

deep-water projects are fully realized to achieve an incremental reserve of

at least 1 billion barrels and half a million barrels in incremental

 

production capacity per day. For example, the opening up of Dahomey

Basin with the coming on-stream of the Aje field is certainly a major milestone

for the industry.

12. On the gas front, we witnessed an increase in the 2P National Gas Reserves

from 188 Tcf in 2015 to 192 Tcf in 2016

13. Petroleum products supply and distribution to the nation is fairly stabilized

since the giant leap of May 2016 Market liberalization. However, with the

prevailing change in the macroeconomic conditions, this is being achieved at

higher cost, especially to NNPC as the supplier of the last resort. We continue

to channel more energy towards resolving our downstream issues, once and for

all.

14. 2016 also saw us Negotiating and signing a novel Agreement on a new

sustainable funding framework for Joint Venture cashcall operations. This will

not only sustain our JV operations but is also a key enabler for incremental

production from our JV operations and a pathway towards incorporating our

JVs.

15. In the area of Nigeria Content, we also witnessed a steady increase in

participation of Nigerians in oil and gas contracts by 180% from Fifteen (15)

Nigerian Content Compliance Certificates (NCCCs) worth $396,103,336.38

issued in 2015 to forty two (42) Content Compliance Certificates (NCCCs)

valued at $1,645,233,425.59

16. When all these highlights of the industry are taken together, we can

see both progress and challenges.

 

17. Our challenges include that of security & environment, institutional capacity,

funding of investments, high industry technical costs, obsolete legislation &

fiscal regimes, downstream sector issues and infrastructure constraints.

18. There are often various factors that contribute to these expected outcomes. I

therefore would like to engender both interest and debates to the strategies

that underpin our roadmap for reforming and repositioning our oil and gas

industry.

Reforming the Industry

19. We developed and launched a practical and well-reasoned Petroleum Industry

Roadmap tagged the 7 Big Wins for the new Nigerian Petroleum Industry.

20. The 7 Big Wins is not like any other roadmap, as we have never been in short

supply of roadmaps. This roadmap is different because it reflects the vision of

the country’s Leadership and the explicit support and commitment of the

industry and all stakeholders, to its implementation.

21. The roadmap is different as it has very specific time-focused targets and like

the many bold steps we have taken in this sector since the inception of the

present Administration, we are by this roadmap focusing and committing to

take unprecedented steps and making dramatic policy shifts in this sector to

grow, deepen and open up the business and opportunities in Nigeria’s Oil and

Gas Sector.

22. The focus of the roadmap covers the following 7 key areas:

• Emplacing new policies, legislations and regulations

• Enabling the Business environment and attracting Investments

• Unleashing a Gas Revolution to spur multiplier effects including wealth

creation, environmental protection and job creation

• Improving our domestic capacity for local petroleum products production

and attaining self-sufficiency by 2018.

• Sustaining engagements with Oil producing communities and attaining zero

militancy in the Niger Delta region by the end of 2017

• Enshrining Transparency and Efficiency in the industry and automate

business processes to account for every drop of oil produced in the country.

• Adopting a sustainable and well-structured Stakeholder Management

framework that will address the peculiar needs and circumstances of the Oil

and Gas Industry.

23. All studies conducted on the Nigeria petroleum sector since 1999 are settled

on the issue that the role of Government in the oil and gas sector needs to be

better clarified whilst the policy, regulatory and commercial institutions need to

be given a refocused mandate to ensure better sector governance,

transparency of regulations and operations, accountability of the institutions,

and removal of opaqueness around the industry.

24. For these reasons, we have commenced to address these issues with an

overhaul of sector policies. Dialogues have already been held with stakeholders

in the industry and civil society on critical sector issues and the outcome of this

process is a new National Oil Policy, a new National Gas Policy and a new Fiscal

Policy.

25. To clarify, we have taken a root and branch effort to reform, which is the basis

of these policies and in order to ensure the sustainability of the policies, Nigeria

is in the process of legislating these critical policy positions within the next few

months.

26. The strategic objective of the new oil policy is to:

• Create a market driven oil and gas industry:

 

• Maximise production and processing of hydrocarbons;

• Move away from oil as a source of income to oil as a fuel for economic

growth;

• Cost efficient storage, transportation and distribution for petroleum

products;

• Minimise the environmental footprint of oil exploration and production;

• Managing the balance between depleting oil resources vs renewable

energy.

27. In the gas space, our policy interventions aspires to :

• Move the economy from oil to gas;

• Diversify the gas supply options within Nigeria, to ensure security of supply;

• Extend gas penetration in the domestic market in order to facilitate the

growth of the electric power, agricultural, and industrial sectors;

• Gain a presence for Nigerian gas in international markets;

• Operate a gas industry with a clear division of roles between private and

public sectors

o Public sector policy making; implementation and regulation;

o Private sector; investment and operations;

• End and commercialise gas flaring and address environmental issues;

• Provide an enabling environment for increased private sector participation in

• the gas sector;

• Clarify the rules guiding investment in the gas sector.

28. The new fiscal policy sets out to address Nigeria’s energy trilemma of

addressing energy availability, enhancing energy accessibility and

promoting energy availability

29. It will enhance fiscal neutrality, create a fiscal basis that will encourage

investments and market developments while emplacing competitiveness

 

and cost efficiency for the benefit of both government and the industry

operators.

30. Hitherto, the Nigerian downstream infrastructure has been solely financed by

government because of the social and economic impact, high investment

requirements and long gestation period.

31. Over 5000km of petroleum product and gas pipelines, storage depots,

refinery, power generation, transmission and distribution infrastructures were

all built through direct government funding.

32. Due to competing needs for government resources from other public sector

services such as education, health and transportation infrastructure etc. most

oil and gas infrastructure development projects should be financed and

managed through private sector participation.

33. It is in the light of this that comprehensive reforms are ongoing to fast track

the development of private sector led downstream infrastructure and

fully deregulate the market for effective competition and efficient service

delivery

34. We are determined to address the Niger Delta issues and build a peaceful and

prosperous Niger Delta, with emphasis on job creation for our teaming

unemployed youths, investment in infrastructure, energy and promotion of

sustainable livelihood.

35. We have being working closely with all relevant stakeholders including

communities, state governors, government agencies, oil and gas companies to

deploy a holistic developmental framework that will ensure lasting peace and

 

sustained development in the region. This is our commitment, and this

bond we are determined to achieve.

36. It is indeed a bumpy but rewarding ride and we are excited about it.

37. We will continue to deploy innovative thinking, new ideas and robust

partnerships to re-tool, re-kit, redesign and re-engineer our systems and

processes to ensure that we get more from the little that we are getting

at the moment than we did even in the time of plenty.

38. This is the choice that we have made and the challenge we must meet. We

appreciate the fact that reforms are often not easy because they often cause

inconvenience, but for the Nigeria Oil and Gas industry, we are encouraged

that we have the determination to see through the structural changes that are

needed to create the conditions for prosperity in the near future.

39. The lessons of the past ought to enable us respond decisively – It is

indeed a new dawn for Nigeria’s Oil and Gas Industry

Anthony-Claret Onwutalobi
Anthony-Claret Onwutalobi
Anthony-Claret is a software Engineer, entrepreneur and the founder of Codewit INC and CEO of Portia Web Solutions. Mr. Claret publishes and manages the content on Codewit Word News website and associated websites. He's a writer, IT Expert, great administrator, technology enthusiast, social media lover and all around digital guy.
https://www.codewit.com

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