I am honoured and pleased to be in your midst today to celebrate the 55th anniversary of the Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce and Industry (LCCI).
As the oldest advocacy group for the Oil and Gas industry, the OPTS has a rich heritage of promoting the best interests of the Upstream Oil and Gas sector of the Nigerian economy.
Aside from being the industry’s largest private sector investors and participants, we all owe you a debt of gratitude for these positive contributions through the years.
The theme: Nigeria: An Investor Friendly Destination, aptly describes Nigeria’s current journey of transiting to the next chapter, of maximizing our resources for the development of our nation, and the OPTS platform is an important sounding board for government and several regional non- state actors interested in the oil and gas industry.
Permit me to mention some highlights of the performance of the Industry in the past two years and in the past year. 2016 tested the resolve and resilience of oil producing countries especially OPEC members.
Unlike in 2008 where the oil price decline was driven by demand deterioration, the decline in the oil price from 2014 to 2016 was due to excess supply. So more than ever, we needed closer collaboration within OPEC and externally with the non-OPEC members. Oil market sentiments have improved since the OPEC and non-OPEC declaration, and as prices rose, volatility decreased and net futures and options long positions increased.
In 2016, the Nigeria upstream sector of the oil and gas industry was challenged by the menace of upstream assets vandalism. From a peak production of over 2.30 Million barrels per day recorded at the beginning of 2016, we witnessed a decline to an almost all-time-low of just under 1.0 Million barrels per day due to incessant vandalism. Many indigenous producers suffered perhaps more than other players in the industry.
But thankfully, largely due to sustained engagements with the Niger Delta and the new Niger Delta vision, our production has ramped up to about 2.1 million barrels per day, from our 2016 crude oil production average of about 1.8 million barrels and that figure includes condenses.
Petroleum products supply and distribution to the nation is fairly stabilized since the giant leap of May 2016 market liberalization.
However, with the prevailing change in the macroeconomic conditions, this is being achieved at higher cost, especially to NNPC as the supplier of the last resort.
We continue to channel more energy towards resolving our downstream issues, once and for all and we have also made tremendous progress in fulfilling the repayment terms of the new sustainable funding framework for Joint Venture cash call operations. This will not only sustain our JV operations but is also a key enabler for incremental production from our JV operations and a pathway towards incorporating our JVs.
In the area of Local Content, in the year 2016, the country witnessed a steady increase in participation of Nigerians in oil and gas contracts by about 180%, and we expect that the numbers will increase in 2017 and beyond.
When all these highlights of the industry are taken together, we can see both progress and challenges.
Our challenges include that of security & environment, institutional capacity, funding of investments, high industry technical costs, obsolete legislation & fiscal regimes, downstream sector issues and infrastructure constraints.
There are often various factors that contribute to create these challenges. These factors obviously underpin our own approach and considerations we have made in reforming and repositioning our oil and gas industry.
Reforming the Industry, you are well aware, His Excellency, President Muhammadu Buhari launched in October 2016, the roadmap for the repositioning of the Nigeria Oil and Gas Industry. The roadmap has very specific time-focused targets and like the many other steps taken in the sector since the inception of the present administration, we remain focused on making necessary, even if dramatic policy shifts in this sector to grow, deepen and open up the business and opportunities in Nigeria’s oil and gas sector.
All studies conducted on the Nigerian petroleum sector since 1999, agree that the issue that the role of Government in the oil and gas sector needs to be better clarified whilst the policy, regulatory and commercial institutions need to be given a refocused mandate to ensure better sector governance, transparency of regulations and operations, accountability of the institutions, and removal of opaqueness around the industry.
For these reasons, we have begun to address these issues with an overhaul of sector policies. We have developed and obtained the approval of the Federal Executive Council for a new National Oil and Gas Policy, and a new fiscal policy has been developed and its approval by FEC is underway.
We have taken a root and branch effort to reform, which is the basis of these policies and in order to ensure the sustainability of the policies, Nigeria is in the process of legislating these critical policy positions within the next few months.
The strategic objective of the new oil policy is to:
Create a market driven oil and gas industry,
Maximize production and processing of hydrocarbons,
Move away from oil as a source of income, to oil as a fuel for economic growth,
Minimize the environmental footprint of oil exploration and production,
Manage the balance between depleting oil resources vs renewable energy,
In the gas space, our policy interventions aspire to move the economy from oil to gas,
Diversify the gas supply options within Nigeria, to ensure security of supply,
Extend gas penetration in the domestic market in order to facilitate the growth of the electric power, agricultural, and industrial sectors gain a presence for Nigerian gas in international markets,
Operate a gas industry with a clear division of roles between private and public sectors,
Public sector policy making; implementation and regulation,
Private sector investment and operations,
End and commercialize gas flaring and address environmental issues,
Provide an enabling environment for increased private sector participation in the gas sector.
To clarify the rules guiding investment in the gas sector, the new fiscal policy sets out to address Nigeria’s energy trilemma of addressing energy availability, enhancing energy accessibility and promoting energy availability
It will enhance fiscal neutrality, create a fiscal basis that will encourage investments and market developments, while emplacing competitiveness and cost efficiency for the benefit of both government and the industry operators.
Hitherto, the Nigerian downstream infrastructure had been solely financed by government because of the social and economic impact, high investment requirements and long gestation period.
Due to competing needs for government resources from other public sector services, most oil and gas infrastructure development projects should be financed and managed through private sector participation.
It is in the light of this, that comprehensive reforms are ongoing to fast track the development of private sector led downstream infrastructure, for effective competition and efficient service delivery.
We will continue to address Niger Delta issues and build a peaceful and prosperous Niger Delta, with emphasis on job creation for our teaming unemployed youths, investment in infrastructure, energy and promotion of sustainable livelihood.
Other key areas in our focus include; hydrocarbon tracking, cost reduction and restructuring our parastatals. All in all, if our government’s orientation and doctrinal positions are anything to go by, the future portends even greater private sector leadership and participation in the oil and gas sector.
The oil industry stands to benefit greatly from our on-going Ease of Doing Business reforms. On Tuesday, the World Bank released its latest report, in which Nigeria achieved the unprecedented step of climbing 24 places in the rankings, and earning a place on the list of ten most improved economies in the world.
This is fantastic news, but by no means an excuse for us to slow down. Instead we’re taking it as the very reason why we need to ramp up our reforms, for the benefit of Nigeria. There is still work to be done in reducing bureaucratic bottlenecks in the award of contracts and generally in obtaining approvals – in your case from National Petroleum Investment Management Services (NAPIMS). It is for this reason – the creation of a business environment that catalyzes business activity and investment –that this year alone we have issued an Executive Order focusing on improving the business environment, and launched two National Action Plans designed to be short-term interventions aimed at implementing specific business environment reforms. The second National Action Plan is on-going, and we expect that it will yield results across every sector of the economy, including the OPTS.
In closing, let me reflect briefly on the issue of the slow but steady emergence of a post-oil world order. All around us there is evidence along these lines, of a world that is coming to terms with the fact that fossil fuels are going out of fashion. I’m certain that this is an issue you’ve had to agonise over and grapple with as oil producing companies.
Around the world, countries are increasingly setting deadlines to wean their cars and machines off petrol and diesel, in favour or clean, renewable energy. It is no longer a question of if but when. And it is for this reason that so-called ‘oil-rich’ countries have an obligation to prepare for a destiny beyond oil. It is in this context, that the mantra of ‘we need oil to set ourselves free from oil’ makes maximum sense.
As you yourselves adjust to the reality of the dwindling significance of fossil fuels, we solicit your cooperation and support for our own clean energy economy efforts as well. We would like to see you invest more in research and development initiatives focused on renewable energy; in generally envisioning and laying the foundation for a post-oil world.
The thinking about the swiftly emerging future, more than any concerns about a disappearing present, is what should most readily occupy our minds and thoughts on, as oil producers. It is certainly what should occupy the hearts and minds of all countries around the world, especially the so-called ‘oil rich’ ones like ours.
On this note, let me again express my appreciation to the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), for extending this invitation to me to celebrate your 55th anniversary with you. No doubt, the five-and-half decades ahead are guaranteed to witness more business model disruption and technological innovation than the five-and-half behind you.
I wish you a successful navigation of the exciting times and seasons ahead.
Happy 55th anniversary and thank you.
Senior Special Assistant to the President on Media & Publicity
Office of the Vice President
2nd November, 2017