day.
This was the verdict of stakeholders in the Nigerian oil and gas industry yesterday, after assessing its growth prospects in the face of declining investment in production infrastructure and bureaucratic bottlenecks against the proposed deregulation of the upstream sector.
The warning is coming as the 13-year-old Petroleum Industry Bill (PIB) encountered the most vociferous opposition at the National Assembly and the Northern Governors’ Forum, over the inclusion of the 10 per cent Community Fund in the document.
In a no-holds barred, Chatham House forum on the controversial PIB, the stakeholders including private sector operators in the oil and gas industry, management and financial consultants warned that government’s business may eventually grind to a halt if the deteriorating level of public and private sector investment in the upstream sector continues over the next few years, particularly against the backdrop of demand and price volatility in the international market.
It was revealed that the parlous state of affairs in the upstream sector was responsible for the loss of the $100 billion between 2008 to date as she failed to attain her annual crude oil production quota even when resources and investment to achieve same are available, stressing that the amount would continue to increase until full deregulation and less involvement of government in operational activities was achieved.
The major headache this time however, was that the ongoing reform in the power sector may be another effort in futility, since guarantees and commitment for regular gas supply to the Generating and Distribution Companies are yet to be extracted from suppliers under the current dispensation due to uncertainties of the nation’s fiscal environment.
More worrisome from this perspective was the revelation that despite the massive decay of pipeline infrastructures across the country, government’s investment in exploration and seismic activities has continued to decline in the face of drastic divestment by international oil companies due to the country’s poor fiscal environment.
The stakeholders also disclosed that one of the major reasons for the growing divestment by the IOCs remained the unfavourable average contract cycle in the industry which currently stands at about 36 months in Nigeria as against only three months in Saudi Arabia, 6months in Angola and five months in Kazakhstan and Argentina, respectively.
Just as the forum observed that though government’s investments in the sector can guarantee about 3.6million barrels per day, it could only set a target 2.4miillion per day while as of end of March 2013 only 1.98 million barrels per day was attained.
This development according to the stakeholders merely gives signal that government business may suffer some set back in the short run while its long-term threat could be phenomenal if nothing was done to correct the situation.
The discussants also attributed the widespread abandonment of key economic projects and high level of unemployment across the country on the Federal Government’s inability to meet production targets, warning that trend could contributes significantly to jobs losses and other vices that could impair the peace of the country.
Only last Wednesday, Governor of the Central Bank of Nigeria, CBN, Mallam Sanusi Lamido revealed that the Federal Government has so far spent about N158billion on the Niger Delta Amnesty programme in the country.
The governor who also lamented at the high level of unemployment in the country said that the current insecurity in parts of the country could likely be the outcome of high level of unemployment among the youths.
However in order to address the problem, the discussants recommended the immediate passage of the Petroleum Industry Bill which will trigger an elaborate institutional reform process in the industry.
