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Making Nigeria oil and gas sector preferred investment destination needs Fiscal framework and adequate security – Johnson Chukwu

Making Nigeria oil and gas sector preferred investment destination needs Fiscal framework and adequate security - Johnson Chukwu

…JV’s need to operate as a separate corporate entities
An Economic experts has revealed that right fiscal and legal framework, basic infrastructures, security and full deregulation of the downstream oil sector will guarantee Nigeria oil and gas sector to be the preferred investment destination .
Mr. Johnson Chukwu made this know while speaking with newsmen in Lagos, and opined that the desire of the petroleum ministry to see the oil and gas sector attract good Foreign direct investment before the end of the year may never be achieved if government continues with the delays in passing all the parts of the petroleum industry and governance bill.
Even though the Minister of Petroleum, Dr Ibe Kachikwu had recently developed a new policy document couched ‘The 7 Big Wins,’ that will compressively address the issues of policy and regulation, business environment and investment drive, gas revolution, refineries and local production capacity, Niger Delta and security, transparency and efficiency, as well as stakeholder management and international co-ordination.

Stakeholders had applauded the initiative of the Minister but maintained that government must show great political will to effect the policy and other necessary fiscal framework that are catalyst to make the oil and gas sector a preferred investment destination.
Chukwu who is also a public analyst and Founder of Cowry Asset Management Limited argued that for Nigeria oil and gas sector to be a preferred investment destination there must be enabling law.
According to him ,”Today we have had a long period of low investment in the oil and gas because of the absence of fiscal legal framework. So when government comes up with a fiscal legal frame work, it will catalyze the whole system. Good a thing the senate has passed the PIGB. When the whole bill is passed , it will create a level of certainty for investors.
He reiterated that good a thing Nigeria has sweet crude, which is easy to refine. ‘’Also we are a gas country , we have much gas than crude. So if we have the right fiscal and legal framework it will help investor to come into the country to invest’.
On the PIGB, Chukwu, stated that it is unfortunate that is has been on for the past 16 years. He insist that Investors cannot come to invest in an environment where they cannot ascertain what is available for them, what they are dealing with , will government meet up with her cash calls or not.

He called on government to ensure speedy passage of all parts of the PIGB. Stressing that the issues of JV call should be concretize. ‘It is a key element in the PIB. And the government should exist the issue of all Joint venture cash calls. JV’s should operate as a separate corporate entities which they can borrow on its own name. Chukwu noted
He asserts that if such is done, it will reduce the issues associated with valuation and cost valuation of transactions in the oil and gas sector, which people feel that the cost pass on by the JV partners may not be the optimal cost.
Chukwu noted that the other aspect government should look into is basic infrastructure as we don’t have effective gas pipe line that delivers to the different part of the country. Even though we have adopted a market reflective price for our gas but we don’t have enough gas for domestic use.

The third issue , according to Chukwu that will make Nigeria a preferred investment destination is the issue of security in the Niger delta. Poor security and vandalism are the major reasons Oil majors sold their onshore and shallow water assets and moving to the deep offshore. So we need to improve on insecurity because it covers the entire value chain of the oil and gas sector. Chukwu stated.

If we address this elements , it will certainly attract both local and foreign investor to the Nigeria oil and gas sector. He noted
On refineries he stated that most of the refineries we have are technological outdated ‘’ so we may not achieve the most optimal value , like some of the parts of the refineries are out off tune with the modern technology.
He said that basically what government must do is total deregulation of the downstream sector. With full deregulation, good refineries with modern technology will spring up, and Nigeria will have a lot of petrochemical complexes that will not only host refineries but other petrochemical industries. So to optimize the refinery is beyond the TAM that government is doing.

The issues, if addressed from the fiscal frame work and full deregulation and Nigeria will be rest assured of good private sector participation of refineries that will take care of local consumption and invariably for export.
It could be recalled that to guarantee the security of the oil and gas assets, Kachikwu said President Muhammadu Buhari would launch a $10 billion infrastructure development fund for the oil-rich but restive region.
Speaking on the expected impact of the new roadmap, Kachikwu said investments in Nigeria’s oil and gas sector, which took a downturn in the recent past would soon pick up following the conclusion of a review of the country’s Joint Venture Cash Call (JV) framework.
According to him, on the back of the review, a lot of oil and gas investors are pushing to come back and invest heavily in the country’s oil and gas sector.

He said that there would be an explosion of investment in the sector soon.
Kachikwu also said there were plans by the government to review the mechanism of securing oil and gas installations in the country to conform with standard practices as obtained in other oil and gas producing climes.
Also recall that as part of efforts towards reforming the oil and gas industry, the Ministry of Petroleum Resources (MPR) released the Draft National Petroleum Fiscal Policy. The release of the Policy follows the renaming of the Petroleum Industry Bill (PIB) to “Petroleum Industry Reform Bill (PIRB)” and breaking this up into two separate bills to address one of the major challenges bedevilling legislative passage of the PIB.

The purpose of the policy is to provide a fiscal framework that will guide the planning and development of petroleum activities in an efficient manner and ultimately lead to the socioeconomic development of Nigeria. Government is also interested in increasing revenue generated from this sector of the economy by making oil and gas sector preferred investment destination.

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