The passing of the Petroleum Industry Act in 2020 in Nigeria is starting to have a positive effect on how the country’s oil and gas industry is viewed.
Decades in the making, the PIA is an amalgamation of 16 Nigerian petroleum laws which outline the framework for petroleum activities in the West African country. It ensures an enabling environment for investors, backed by a transparent and strengthened regulatory framework.
Speaking at a conference in Cape Town, Kola Karim, CEO of Shoreline Energy International said he has noticed a positive shift in community engagement with the Act and changes it has wrought in the industry. Kola also noted that oil and gas business in-country makes up almost 90% of Nigeria’s use of foreign exchange.
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“When you talk of ranking and importance regarding the government of Nigeria, it is the industry. Now with the PIA, the world knows it is open for business. What we have seen is the level of engagement being more robust and the value proposition is becoming clear in the markets,” said Karim.
Heine Melkevik, former Managing Director Equinor Nigeria and current Managing Director Business Development, Alta Trading UK Limited, said the predictability the Act brings to the sector means investors can model what kind of investment different projects need.
While Melkevik thinks investment into renewable energy is necessary, he pointed out the level of industrialisation the continent needs to undergo in order to create a manufacturing sector, needs the baseload stability that oil and gas-powered plants can provide, and he sees space for both kinds of projects. “It shouldn’t be either-or, transition to renewables or oil and gas. The reality is sub-Saharan Africa needs more investment in oil and gas.”
Clarity of regulation will make doing gas and oil business in Nigeria easier
The passage of the PIA creates frameworks to provide clarity for return on investments on projects; ease of business has been more clearly regulated; access to licencing has been restructured and simplified; and timelines for licencing are no longer at the discretion of authorities but independently regulated.
The conversion contract – a process for companies to change their contracts to be governed by the new laws – is also clearly spelled out. Existing contracts will be honoured under old regulations until their licencing expires and any new contracts will be written under PIA rules.
Olakunle Williams, CEO of QSL Gas and Power said there are obvious implications for investment opportunities for the country’s natural gas sector. “The PIA is a good piece of legislation. What we need to do is talk about developing the energy mix in Nigeria that allows natural gas to be developed and a way is found to transition to cleaner energy.
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“We are disproportionately affected by climate change, but we cannot abandon our natural resources. Even globally, this is a challenge. Nigeria and African countries need to develop our manufacturing sector. So how do we develop knowledge-based ecosystems and set up the right energy mix,” asked Williams.
He sees the opportunity for natural gas to be used to address Nigeria’s baseload needs and Akinwole Omoboriowo II, CEO of Genesis Energy, believes there is sufficient capital in-country to create the pipeline.
“My encouragement is that the law has been passed, there is sufficient capital in the country. There are a lot of hotspots and there are more opportunities than issues,” said Omoboriowo. ESI
Kola Karim and others were speaking at the African Energy Week