INDUSTRY Solutions

Fifty-six years after independence and more than 58 years after Nigeria’s first commercial oil discovery, the sector is still bedeviled by low production level/reserves, militancy and weak regulatory framework. As the country marks its independence, stakeholders in the oil and gas sector have proffered a leeway to resuscitate the country’s dwindling sector. They called on the Federal Government to tackle the issue of militancy in the Niger Delta, reduce contractual circle, strategise means of funding Joint Venture (JV) cash call and others. Proffering solutions to the sectors’ challenges at an oil and gas forum in Lagos recently, Chairman, Oil Producers Trade Section (OPTS), Clay Neff, said it is essential to have efficient and effective regulatory bodies to ensure transparent and timely approval of activities such as permits, licence renewals, projects, and contracts. According to Neff, the government agencies that regulate the petroleum industry often have duplicative and overlapping functions leading to unnecessary bureaucracy. He said that procurement-contracting approvals take up to 36 months, while in many countries similar processes take an average of six months. Neff said there must be a solid tax and legal framework that leads to stable laws and policies in order to attract the required massive investments. He added that it is important for Nigeria to maintain its reputation for honoring contracts. “Businesses need to know with reasonable degree of certainty that contracts and agreements entered into in good faith will be honored, and where disputes arise that there will be access to an independent and fair mechanism for a timely resolution. Neff noted that Nigeria’s huge untapped gas resources could underpin Government’s vision to grow gas production for power generation and to support industrial uses. He stated: “Government policy should be directed at striking the right balance between seeing gas as a catalyst to drive economic development and as a commodity for revenue generation. Chairman, Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, wants government to as a matter of urgency, review the country’s fiscal terms to maintain attractiveness and investment. Okoroafor urged the government to either honour its JV cash calls obligations or convert them to sovereign loans. “Another possible scenario is to reduce government equity in these JVs to 10 per cent and focus more on royalties and taxes, which generate close to 80 per cent revenue for the government. Investors’ confidence in oil and gas activity in Nigeria is eroding within all these frameworks of uncertainty. Investments are moving to countries with better terms,” he added.