The Petroleum Industry Act(PIA) is expected to lead to influx of massive investments in the oil and gas sector of the nation’s economy in the new year.
Nigeria’s oil and gas is hopefully swinging into significant level of growth backed by industry wide fiscal regime that government put in place in 2020.
The PIA is an attractive signpost to investors who had expressed some doubts about the future of the industry without assurances of return on Investment and uncertainty created by security challenges.
According to the minister of State for Petroleum Resources, Timipre Sylva, Nigeria lost an estimated $235 billion worth of investment in the oil and gas industry following delay in passing the legislative document.
The minister further disclosed that the country lost about $15 billion annually during the long debate on the law.
However, the Petroleum Industry Bill(PIB), became an Act, on August 16, 2021 after President Muhammadu Buhari gave assent to the bill.
Riding on the progress of the law, the federal government expects the country to produce 1.88 million barrels per day of crude oil in 2022 and will use a benchmark oil price of $57 per barrel for its budget planning.
Sylva is hopeful that the Act will assist Nigeria in increasing its oil production to four million barrels per day, bpd, and will also boost oil reserves from 37 billion barrels to 40 billion barrels, while also drawing on the country’s estimated 600 trillion cubic feet of natural gas reserves to provide clean and efficient energy.
In 2022, it is expected that the new law will enhance the Nigerian petroleum industry’s reputation, provide the pathway to new investments, and consolidate the country’s ability to play a significant role in meeting the world’s growing demand for energy.
These resources will be crucial in supplying world markets with a broad portfolio of energy options, as well as supporting the global endeavor to alleviate energy poverty as envisioned in the United Nations’ Sustainable Development Goal 7.
Despite the challenges that have plagued the oil and gas sector, the country is well on its way to recovery.
The PIB 2021 and the recently concluded marginal field bid rounds has sparked the hope for the enhancement of economic growth and an increase in Nigeria’s GDP as well as creation of employment opportunities.
Government expects new marginal fields to begin producing in 2022, as signature bonuses flow in and work is near getting under way.
The marginal field round actually began in June 2020 and it is expected that first oil from most of the marginal fields will start around January 2022.
Furthermore, the ease in production cuts by the Organization of Petroleum Exporting Countries(OPEC)+ and the potential increase in Nigeria’s production quota meant well for the Nigerian government’s revenue.
Though, Nigeria still needs to focus on diversifying away from fossil fuels in the light of the global drive for clean energy, this is expected to be a gradual and steady process.
The aggressive focus on ending gas flare, through the National Gas Flare Commercialization Program and the various gas utilization initiatives, will go a long way in reducing Green House Gas emissions while also contributing to meeting our Nationally Determined Contribution target to the United Nations Framework Convention on Climate Change by 2030.
Also, as oil majors like Shell, Eni, ExxonMobil, Chevron take Final Investment Decision FIDs on $100b projects, stakeholders are seeking leeway and an extension of local content to manufacturing, construction, others.
With the Federal Government able to retain about $8 billion of the $20.4 billion spent on some projects by oil firms between 2016 and 2021 through local content development, it has outlined plans to increase the value that can be retained through the in-country capacity to 70 per cent from 2022.
The N19.5 trillion is spent on importing raw materials for the manufacturing sector as foreign companies dominate railway and other construction projects as well as the power sector, raising agitations in the National Assembly to expand extant local content law in the oil and gas industry to every sector of the Nigerian economy.
Also, the Chairman of the Nigerian Upstream Regulatory Commission, Gbenga Komolafe is equally expecting sustainable development of the nation’s huge hydrocarbon resources by enabling upstream businesses and creating additional revenue streams for government and the investors which government through the Act would be given priority in the new year.
According to him, it was critical for the global oil and gas industry to remain efficient and innovative in responding to the emergence of renewables, to sustain the relevance of hydrocarbon resources in the global energy mix.
Accelerating Power Sector Impact
Similarly, the Federal Government, in partnership with Siemens AG power project, plans to grow Nigeria’s power delivery to 25,000 megawatts in the first quarter of 2022.
Under the Presidential Power Initiative, the German firm is supporting Nigeria to raise electricity capacity to 25,000MW.
But the project has dragged since an agreement between the firm and the Federal Government was reached on August 31, 2018.
Nigeria and Germany had agreed to cooperate with the aim of resolving the challenges in the nation’s power sector and expanding capacity for future power needs.
Nigeria’s power generation currently hovers around 4,500MW and the country’s targets to grow this to 25,000MW through the Siemens deal.
The Presidential Power Initiative which began in 2021 is in three phases and is estimated to be completed in 2025.
The phases cover the upgrading and expanding of the transmission networks and distribution companies networks, improvement of access to affordable, efficient and reliable electricity, and providing support of industrial and economic growth in the country.
This first phase which began in 2021 will go on for a period of 10 months with the end goal of pushing to 7,000MW. So far, there has been no hitch as the team is currently on the pre-engineering phase.
The second phase will raise the availability to 11,000MW and the third phase will raise the availability to 25,000MW.
Also, the electricity sector will witness the second phase (Phase One) of the National Mass Metering Programme commencing in the first quarter of 2022.
About 980,000 electricity customers provided were with meters across the country under Phase Zero, which was designated by the Federal Government on October 30, 2020.
Under the Phase One four million would be deployed so as to reduce the metering gap in the country.
For phase one, which is four million meters, a Project Implementation Unit has been established to ensure the objective is realised.
That unit is going to carry out the competitive acquisition by the local meter manufacturers to supply the meters.