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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
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