The oil and gas sector in Nigeria is losing up to $ 400 billion of funds as investors are deterred from the market by uncertainty and regulatory weaknesses.
Discussing the issue of the relatively few number of investors in the Nigerian oil and gas sector as compared to the potential rewards of the sector, speakers at the KPMG oil and gas breakfast seminar in Lagos pinpointed a number of unfavourable characteristics of the country’s regulatory sphere which may deter investors from becoming involved.
The seminar estimated that due to these deterring factors, the country is losing between $200 billion and $400 billion in investments, as such action needs to be taken to firm up regulations.
In particular, speakers noted that the unclear subsidy regime – the government having stopped and started with its subsidizing of oil imports numerous times over the past year – is playing havoc with the oil sector; prompting investors to beat a rapid retreat which in turn is hitting importers’ funds and the country’s supplies.
The seminar also noted that the extremely lax approach to law enforcement across the country is deterring investors, as investments become unsafe due to the lack of guarantee as to safe-guards, and reliable response in the face of crime.
The general consensus coming from within the sector is that there is a general air of uncertainty, caused in part by overlaps in roles within the industry, as such preventing investors from gaining confidence in the market.
In this light, speakers agreed that regulations need to be put in place in order to capitalise on the huge potential of the oil and gas sectors as global players turn to Africa for fresh supplies of natural resources. However, concerns were expressed as to the proposed Petroleum Industry Bill (PIB), which it is thought fails to provide a coherent structure, and will be insufficient to attract investors and grow the sector.
“PIB is an ambitious bill leading to additional complexity, uncertainty and time consuming implementation. Draft PIB raises serious concerns as enablers are insufficient,” said Vice-President for Finance, Bernard Bos of Shell Exploration & Production Africa.
He went on to say: “the proposed PIB Joint Venture (JV) terms are not competitive when compared with other oil producing countries. Proposed PIB PSC terms are not competitive when compared with the global deepwater regimes. Non-fiscal PIB outcomes are highly uncertain for industry,” quotes Businessday.