The Nigerian government has signed a deal with oil giants that aims to cut the duration of the awarding process for petroleum development projects to six months for existing production-sharing contracts (PSCs).
The pact, a memorandum of understanding that also serves as a service-level agreement (SLA), has “the goal of quickly ramping up Nigeria’s flagging crude oil production, ensuring compliance with the provisions of the Nigerian Content Act, and timely approvals of documents”, the Nigerian Content Development and Monitoring Board (NCDMB) said in a press release Monday, referring to a law regulating oil and gas development projects. Besides the board, the other signatories included Nigerian National Petroleum Co. Ltd. (NNPC), Nigerian Agip Oil Co. Ltd. and subsidiaries of Chevron Corp., Shell PLC, Exxon Mobil Corp. and TotalEnergies SE. The NNPC is the concessionaire of the PSCs held by the multinationals.
“The SLA was conceptualized by the NCDMB and is intended to optimize the contracting cycle in the oil and gas industry and spur the speedy development of new oil and gas projects, contributing to increased oil production and improved national economy”, the NCDMB said.
NCDMB Executive Secretary Simbi Kesiye Wabote noted the first such SLA for the oil and gas industry in Nigeria was signed May 2017 with Nigeria LNG Ltd. “[T]he industry found the outcome impressive leading to the Independent Petroleum Producers Group signing the SLA in 2018 and Oil Producers Trade Section thereafter”, Wabote said in Monday’s announcement.
“The Executive Secretary stated that the overall goal is to conclude the oil and gas industry’s tendering to contract award processes within six months, affirming his conviction that the target is realistic with all key parties now on board with the execution of the SLA”, read the announcement.
The Western African nation targets over $50 billion worth of oil development projects in the next five years, the NCDMB earlier said. The projects were laid out at the Nigerian Oil and Gas Opportunity Fair (NOGOF) in May.
“Some of the opportunities are from the indigenous players, some by NNPC Ltd and the international oil companies. If you put them together, in the next five years they would exceed $50 billion that would be invested in the Nigerian oil and gas industry”, Wabote told the gathering, as quoted in an NCDMB media release.
In one of the projects, Shell Nigeria Exploration and Production Co. (Snepco) is expanding its Bonga oil field development. The already-operational northwest section of the field can produce about 65,000 oil-equivalent barrels a day, according to Snepco in a news release February 13.
Of projects proposed at previous NOGOFs, most “have come to fruition” but “others are challenged by security concerns, final investment decisions challenges, bankability and regulatory requirements and approvals”, Wabote said in the fair.
The NCDMB official called for the elimination of “policy inconsistencies” and urged relevant agencies to pass supplementary laws to the Petroleum Industry Act “to give investors the necessary confidence to move ahead”, the May press statement said.
Adopted 2021 to replace the Petroleum Act, the new legislation provides for infrastructure funding support, investment promotion and a simplified hydrocarbon tax. The Midstream and Downstream Gas Infrastructure Fund contained in the law aims to grow the domestic market for natural gas produced from privately funded projects, as well as enables risk-sharing to encourage private investment. Meanwhile fossil fuel tax collection has been limited to “crude oil as well as field condensates and liquid natural gas liquids derived from associated gas and produced in the field upstream of the measurement points”, as stated in the text of the legislation.
Petroleum is a key contributor to Nigeria’s economy. Oil and natural gas comprised 5.34 percent of the country’s real gross domestic product for the second quarter, making this sector the fourth largest component of the economy behind crop production, trade, and telecommunication and information services, according to a report by Nigeria’s National Bureau of Statistics published August 25.