The Petroleum Club (PC) is a foremost professional association; its membership encompasses stakeholders in the petroleum industry and other sphere of human endeavors. The PC held its Guarantors’ Dinner recently in Lagos. The Guarantors’ Dinner offered the professional association opportunity to dissect some issues in its member’s areas of interest.
Speaking to members, the organizing committee chairman and Managing Director of Seplat, Austin Avuru noted that in the next ten years, oil and gas will become enablers of Nigeria’s economy through revenue earnings. While oil and gas is seen as enablers is because the portion of the oil industry whose currency is domestic can only be engaged by local operators. Five years of indigenous participation has contributed much to domestic gas production. The key enablers for the industry has to do with strong regulation. According to Avuru, “if the country does not institute strong regulation in the oil industry, it will collapse. This is the nature of indigenous companies and the nation at large. Indigenous operators do not have the in-depth of discipline to entrench the governance necessary to move the industry forward. Local operators are often compelled by relevant institution of government before paying royalties. Therefore, “when operators do not pay royalties and taxes it will collapse the industry.”
The Seplat boss gave example of what happened at the power sector. Due to change of administration from one government to another led to fifteen months absence of the National Electricity Regulatory Commission (NERC) in 2015. The board could not be constituted as required by law and it lingered. Distribution Companies are supposed to remit 85% of their collections to the Nigerian Bulk Electricity Trading Company (NBET) which is the bulk buyer in the power chain. This slowed down the Generating Companies (GenCos) that should remit money to gas producers. It started with the Yola DisCo that was not able to remit the required percentage due to the crises in the north east. It reduced its contribution to NBET with 50% while 25% was remitted to NBET. The situation culminated to other DisCos remitting 25% to NBET even though there were no crises in the areas of their power distribution. At the end of two years, from 2015 to 2017 due to low tariff, it led to $3 billion debt in the power sector.
Avuru appraised gas infrastructures across the country with 300 million scf which goes through the pipeline from Escarvos to Lagos. But the Nigeria Gas Company which is a subsidiary of the Nigerian National Petroleum Corporation (NNPC) man not be able to hold forth in terms of huge conventional gas infrastructure due to some technical issues. Since the indigenous companies are playing their part in the oil industry, it will engender growth such as fertilizers for agriculture, cement for export and be able to supplier petroleum products to other parts of Africa. Avuru advocated for enhanced distribution networks for agricultural products being conveyed from the north to the southern part of Nigeria. According to the Seplat helmsman, Nigeria will be “deceiving itself if does not by 2027, have efficient world class rail system from north to south and west and to the east.”
On security issues, in fifteen months of the Niger Delta unrest, the economy sink into recession and national production decreased from 2.2 million barrels per day (bpd) to 1 million bpd. Avuru stated clearly that what has improved the economy and takes it out of recession is because the country has gone back to 2 million bpd. He warned that if the country does not address the Niger Delta crisis, “we will get to a point that the financial momentum that is required to get out of this problem, if we toy with six months of production, and next year our revenue is only able to fund 30% of our budget because of the crisis and we think that the crisis is not serious enough, it means we are joking.”
Avuru was of the view that PIB is not necessarily the solutions to Nigeria’s oil industry problems. What the country needs is fiscal bill that will address fiscal regime in the industry. The governance bill that will take some of the powers that have been grossly abused in the past will be a welcome idea. “These two pieces of legislation will put the industry back on track to a point where the future of the country is predictable.” This will give ample opportunity to investors to have clear idea of what the fiscal regime and governance structure is before investing into the sector. He commended the National Assembly for passing the PIB governance bill. On like previous efforts where the executive was expected to drive the passage of the bill. Avuru asserted that “every minister enjoyed the power that resided in the office of the minister and dwelled in that power to make sure that the PIB is not passed.” Eventually, the bill was passed through the effort of a committee set up by the National Assembly and led by former Director of the Department of Petroleum Resources, Osteen Olorunsola. The passage of the bill will address substantially the Niger Delta problem and hopefully, government will become sensible about its infrastructure. He added that only strong regulation can build governance discipline that is needed in the indigenous community.