Despite the Climate, Nigerian Oil Industry Delivered on a Few Things in 2020

By Adeniyi Adeoloye

 

 

 

 

 

 

The petroleum industry is in a bust cycle at the moment. The valley, this time, is deeper than any low the industry has been for decades.

But in the face of the hydrocarbon demand destruction brought on by the pandemic and the ensuing deferments of project FIDs, massive scale back of operations, and significant cash losses, the Nigerian Oil Industry delivered on some key issues.

NLNG Awarded EPC for Her Train 7

Nigeria Liquefied Natural Gas (NLNG) Ltd, in May 2020, in the thick of a global lockdown,  awarded the Engineering, Procurement and Construction EPC contract for its Train 7 project to three companies. Saipem, Chiyoda, and Daewoo.

Africa’s biggest LNG producer expects over $12Billion to be invested in the project with anticipated 12,000 jobs during the peak of construction.

The Train 7 when completed will see Nigeria’s LNG output increase from the current 22Million Metric Tons Per Annum (MMTPA) to 30MMTPA, a whopping 35% increase. The project also set ambitious local content targets (total in-country engineering hours set at 55%, while the procurement for execution of the project is also pegged at 55%) which will spur economic activity as well as enhancing technical capacity of indigenous companies and people.

Waltersmith Petroma Commissions a 5,000Barrels of Oi Per Day Refinery

Waltersmith Petroman, a Nigerian independent, on November 24, 2020, commissioned her 5000 barrel per day refinery, the first phase in a planned 50,000BPD refinery project. The ground-breaking of the second phase (a 25,000BPD Condensate Refinery Project) was also carried out on the same day.

The first phase is expected to bring 271Million litres of refined petroleum products (Heavy Fuel Oil, Dual Purpose Kerosene, and Automotive Gas Oil) to the national and regional market. The delivery of the project is sure a step in the right direction, as it will help bridge some demand gap, conserve scarce foreign exchange deployed in importation of refined products, and provide jobs for the teeming youth population.

The Return of the Petroleum Industry Bill

The Petroleum Industry Bill is back on the floor of the National Assembly, Nigeria’s bicameral house of legislature.

It was forwarded to the Assembly by President Muhammadu Buhari, in September 2020, for consideration and passage. The Bill has had a long life of going to the Assembly and ending up not becoming law. The first time it was introduced at the National Assembly was in 2008. It has returned, in several variations, thrice after that.

The purpose, however, is the same: to reform the country’s hydrocarbon industry. The bill seeks to provide a legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and Development of Host Communities.

The Senate, the Upper Chambers of the House, introduced the Bill for First Reading, at its plenary session of Wednesday, 30 September 2020.

The National Assembly leadership, which includes The Senate [resident Ahmed Lawan and the Speaker of the House of Representatives Femi Gbajabiamila, has repeated assurances that the Bill will become law this time. The PIB proposes reforms which many industry stakeholders believe will bring clarity to the fiscal regime and spur investment. Amongst many other items, the bill seeks to spinoff stake in the State hydrocarbon company NNPC to a commercially driven and profit focused enterprise to be called NNPC Limited; to be incorporated within 6 months of the passage of the bill. In addition, the new bill also provide for two regulators – one for “Upstream operations and the other for Midstream and Downstream”. These entities will succeed Department of Petroleum Resources – DPR, the current industry regulator. Furthermore, the new bill makes provision for “Host Community Trust Fund” which is set out to develop key infrastructural and human capital development in areas of operations. Although the passage of the bill has been postponed to mid 2021, there is a sense that the jinx about the PIB will be broken with this administration and this edition of the Bill will actually become an act of parliament.

DPR’S Call for Marginal Field Bid Round

Department of Petroleum Resources (DPR), Nigeria industry regulator called for a bid round for a total of 57 fields in land, swamp, and shallow offshore terrains in the outgoing year 2020. This round came to many observers as a surprise given the peculiarity of the time (low oil price regime as caused by the twin knock of a pandemic and Russia – Saudi’s crave for market dominance) the bid was announced. Nigeria’s last licencing round took place in 2007. The first and last Marginal Field bid round was conducted in 2003.

The data room and other processes were done virtually given the reality of the pandemic. The completion of this bid campaign should help increase Nigeria’s oil production, create jobs and put money into government coffer in earned signature bonus, taxes and royalties.

 

This piece is contributed by Adeniyi Adeoloye, a Petroleum Geoscientist who lives and works in Dublin, Ireland. He holds a Master of Science Degree in Petroleum Geoscience from the University College, Dublin Belfield, Ireland. He is passionate about the transformation of the study of geosciences and market intelligence in the Africa Oil and Gas landscape. He will contribute from time to time to Africa Oil+Gas Report.

 

 



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