A high-level panel of Nigerian oil and gas stakeholders unpacked the new operating environment facing Africa’s oil giant at African Energy Week 2022 ongoing in Cape Town.

With the final enactment of Nigeria’s new Petroleum Industry Act (PIA), the country’s bright future looks closer than ever, driven by renewed investments in its oil sector and massive growth in its gas industry. At the conference, the Nigerian industry stakeholders came together to explore the opportunities and challenges facing the sector during “The Decade of Gas and PIA” Country Spotlight at African Energy Week 2022.

Giving insight into the PIA, the PIA is one of the most significant legislative reforms shaping Nigeria’s oil and gas investment climate, consolidating several Nigerian petroleum laws into a single, transparent document, aimed at boosting oil and gas output, reducing and streamlining royalties, and enhancing the sector’s attractiveness to international investors. It was signed into law in August 2021. Prior to its implementation, it was estimated that Nigeria’s failure to adopt new oil and gas legislation was incurring $15 billion in lost investments in the country per year.

Rolake Akinkugbe-Filani, Board Member of the African Energy Chamber, noted that in terms of the current state, there has been a retrenchment of capital from the Global North. “We need to look more inwards. What are we trying to fund? Gas infrastructure requires long-term investment, and depending on the path of the value chain, long-term supply, and off-take contracts. Historically, there has been a reliance on DFIs”.

Business-Friendly Regulatory Agency

Esueme Dan Kikile, Manager, Corporate Communications at NCDMB, stated that as a business-friendly regulatory agency, “We believe that the PIA brings regulatory stability, clarity, and inclusiveness, particularly bringing in all stakeholders, including host communities, to be part of the process of managing oil and gas resources”.

Among its provisions, the PIA reforms the state-owned Nigerian National Petroleum Corporation into a more modern, profit-driven, commercially-inclined national oil company (NOC), in line with the wave of NOC privatizations across the continent. Last August, the NNPC established new terms and conditions for six offshore licenses controlled by International Oil Companies, which are expected to bring substantial volumes of underutilized production to market between now and 2030.

Yemi Adetunji, Group Executive Director, Downstream, NNPC Ltd. also noted that previously, the NNPC was mainly focused on operations, but was also involved in some policy and regulation aspects. “The PIA has clearly defined roles within the industry”.

“There is a role for policy – the Ministry of Petroleum Resources – and for regulation, and the NNPC is now solely focused on operations. As a Limited Liability Company, we also have the responsibility and obligation to ensure we render our accounts. We are a more nimble, more responsible, and more responsive organization, declaring profits and dividends to our shareholders with transparency.”
Yemi Adetunji

Dr. Justice Derefaka, Technical Adviser on Gas Business and Policy Implementation to the Minister of State for Petroleum Resources, Nigeria, also echoed the same view asserting that the plus side of the PIA is that there is now an upstream, midstream, and downstream structure of the NNPC. “That is a game-changer. When investors come to Nigeria, they need a sovereign guarantee. This restructuring allows the NNPC to invest in businesses.”

Provisions for Gas Monetization

According to panelists, the PIA also makes provisions for gas monetization through a comprehensive framework for gas tariffs and delivery. Home to over 200 trillion cubic feet of proven, largely untapped gas reserves, Nigeria launched its “Decade of Gas” initiative in March 2021 in a bid to monetize its prolific natural gas reserves and fund its way through the global energy transition. Gas monetization has faced challenges owing to inadequate infrastructure and limited investment across upstream, midstream, and downstream sectors.

Dr. Derefaka noted that the idea behind the national gas policy is to move Nigeria from an oil-dependent country to a gas-based economy. This, he said, led to the government declaring the ‘Decade of Gas,“For quite some time, we have been dependent on crude oil. The truth is that we have little oil and a lot of gas. If upstream operators focus on gas, then we could become the fourth-largest gas producer globally.”

“There is a huge opportunity for downstream gas, particularly in terms of gas processing and infrastructure. To expand the distribution value chain, those investments are seen as broadly more impactful from a value creation perspective. In the climate in which we are working, it can be difficult to raise funding for upstream oil and gas without demonstrating long-term value.”
Dr. Justice Derefaka

To date, Nigeria has invested billions in its recent infrastructure drive, with megaprojects across the country seeing an influx of capital. This month, the NNPC signed four Memoranda of Understanding for the execution of the $25-billion Nigeria-Morocco Gas Pipeline, which could create new energy supplies for West Africa and Europe. Yet in addition to enhanced energy infrastructure, positioning Nigeria as a global gas supplier to African and international markets will be contingent on driving the energy transition narrative, panelists stated.

Panelists included: Rolake Akinkugbe-Filani, Board Member, African Energy Chamber; Yemi Adetunji, Group Executive Director, Downstream, NNPC Ltd.; Dr. Justice Derefaka, Technical Adviser on Gas Business and Policy Implementation to the Minister of State for Petroleum Resources, Nigeria; Dr. Nosa Omorodion, Director National Companies, West Africa, Schlumberger; and Esueme Dan Kikile, Manager, Corporate Communications, Nigerian Content Development & Monitoring Board (NCDMB). The panel was moderated by Etienne Gabel, Senior Director, Global Power, and Renewables at S&P Global.