Giant Strides in the Petroleum Sector

Four years of Muhammadu Buhari's Administration (2015 - 2019)

Striving to initiate policies for the Oil and Gas sector and supervising the implementation of approved policies in the sector, the Ministry of Petroleum Resources (MPR) along with the Agencies and Parastatals under its supervision, the Ministry has set revolutionary policies to grow the sector and contribute more to the nation’s economy.

Dr. Emmanuel Ibe Kachikwu
Dr. Emmanuel Ibe Kachikwu,
Immediate Past Honourable Minister of State for Petroleum Resources and his team articulated the 7 Big Wins policy for the Oil and Gas sector

While giving accounts of the achievements of the Ministry recently, the immediate past Honourable Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu supported by the Ministry’s Permanent Secretary, Dr. Folasade Yemi-Esan and Heads of Agencies under the Ministry disclosed that the key performance indicator for the achievements of the Ministry in the Oil and Gas Sector can be seen through the 7 BIG WINS which are the industry’s roadmap.

President Muhammadu Buhari (GCFR),
President, Federal Republic of Nigeria and Honourable
Minister of Petroleum

The 7 BIG WINS encapsulates seven thematic areas of focus, each with several initiatives, plans and strategies for realizing an array of well-articulated goals in the document. The seven thematic areas are Policy and Regulation; Business Environment and Investment Drive; Gas Revolution; Investment Drive; Gas Revolution; Refineries and Local Production Capacity; Niger Delta and Security; Transparency and Efficiency as well as Stakeholders Management and International Coordination.

The 7 BIG WINS as the Short and Medium Term Priorities to Grow Nigeria’s Oil and Gas Industry 2015¬2019 was launched by President Muhammadu Buhari on 27th of October, 2016.
Since the unveiling by Mr. President, the 7 Big Wins have resonated in the consciousness of industry regulators Investment Drive; Gas Revolution; Refineries and Local Production Capacity; Niger Delta and Security; Transparency and Efficiency as well as Stakeholders Management and International Coordination.

Dr. Folasade Yemi-Esan
Permanent Secretary, MPR, deployed Ministry’s resources to support the 7 Big Wins to a huge success.

The 7 BIG WINS as the Short and Medium Term Priorities to Grow Nigeria’s Oil and Gas Industry 2015¬2019 was launched by President Muhammadu Buhari on 27th of October, 2016.

Since the unveiling by Mr. President, the 7 Big Wins have resonated in the consciousness of industry regulators
i.e. the Ministry, its Parastatals and Agencies, who see the strategy as being cardinal for the development of the Oil and Gas sector so as to make unprecedented impact on the economy of the country. More so, in the past four years, the Government decided to pay priority attention to a number of critical areas in order to prevent future recurrence of past downturns in the sector and to restore Nigeria’s competitive role among other global players. Wins and has recorded key achievements with the new reforms in a number of critical areas under each of the Big Wins:

Big Win 1: Policy and Regulation:

Unleashing new policies, legislations and regulations.

* The Nigeria Oil and Gas Policies have been approved and gazetted. On the other hand, the approval of Nigeria Fiscal Policy is ongoing. The three (3) policies when launched will become a framework for implementing the petroleum industry laws and programs.

* The Petroleum Industry Governance Bill (PIGB) has been passed by the National Assembly (NASS) while the Petroleum Industry Fiscal Reform Bill, Petroleum Host Community Bill and Petroleum Industry Administration Bill are currently undergoing legislative procedures. The bills when passed will provide a legal, regulatory, administrative and fiscal framework for the petroleum industry.

Big Win 2:

Business Environment and Investment Drive: enabling the Business environment and attracting investment.

* Schedule for conduct of Oil Blocks and Marginal Field Allocations have been drafted and awaiting presidential directives.

* The National Council on Hydrocarbons was established in 2016 with the objective of strengthening international linkages and processes for stakeholder consultations. The 3rd edition of the Council took place in Calabar (Cross River state) from the 26th- 30th November, 2018.

* Establishment and hosting of the Nigeria International Petroleum Summit (NIPS): an Africa Petroleum Technology and Business Conference (APTBC). The 1st edition was held in 2018 in Abuja. The event is an annual conference that provides a platform to bring together the various stakeholders in the oil and gas industry both locally and internationally to network and exchange ideas, to have engagement and negotiation on economic and political issues relating to the Oil & Gas sector and as well as provision of exhibitions opportunities. Commentators have dwelt extensively on the Big Win 2; they said it has been facilitating “A More Profitable Sectorfor Investors.”

Chroniclers of events in the Ministry also recorded that “In 2016, Dr. Kachikwu (Honourable Minister of State for Petroleum Resources) undertook investment road shows to China and India where multi-billion dollar MOUs were signed on diverse and much needed infrastructure developments across the oil and gas value chain. Progress is being made to monetise the MOUs signed.” “Similarly, in 2017, he (the Minister of State) visited the headquarters of all International Oil Companies to increase investment commitment in the sector, with the ENI/Agip visit yielding a commitment to invest in a 150,000bpd Greenfield refinery.”

Kachikwu was also recorded to have “also played key roles in facilitating a Gas Sale Agreement (GSA) between TEPNG and INDORAMA for urea plant Phase 2 and TEPNG and Greenville for mini LNG, all in the country. He actively facilitated and participated in the concept/project development of the followings: Nigerian Sovereign Investment Authority (NSIA) proposed Ammonia Plant, ENI planned Refinery, Nigerian Gas Flare Commercialization Programme (NGFCP) and Okpai Phase 2, just to mention a few projects/concepts with vast potential for growing and developing the Nigerian economy.”

A further revelation was that a new Joint Venture (JV) Cash Call System has come into place under the present Administration. “Underfunding which led to huge cash call arrears and poor investment was the bane of the oil industry when this Administration came on board. In order to relieve the huge burden of funding the cash call obligations of Nigeria’s Joint Venture operations, a sustainable alternative funding option for cash call obligations of the Nigerian National Petroleum Corporation (NNPC) under the Joint Venture Agreement (JVA) on Petroleum Production is being implemented.”

“The sustainable funding of the JVs is expected to lead to an increase in national production from the current 2.2mbpd to 2.5mbpd by 2019, as well as reduction in Unit Technical Costs from $27.96/ barrel of oil equivalent (boe) to $18/boe. The net payment to the Federation Account is expected to double from about $7 billion to over $14 billion by 2020 and the immediate effect of the new cash call policy will increase net FGN Revenue per annum by $2 billion.”

Big Win 3: Gas Revolution:

Aimed at unleashing a gas revolution to spur multiplier effects including; wealth creation, environmental protection and job creation.

* The Nigeria Gas Flare Commercialization Programme (NGFC) was unveiled in December, 2016. The programme is a key component of the Nigerian Gas Policy which will provide an avenue for gas flares to be economically utilized. The objective is to reduce the environmental and social impact caused by the flaring of natural gas; protect the environment; prevent waste of natural resources; and create social and economic benefits from gas flare capture.
The Permanent Secretary of the Ministry, Dr. Folasade Yemi Esan disclosed that the design of the key Programme transaction as well as the commercial framework and documentation has been completed. She said, “When fully implemented, it will unleash a gas revolution that will tremendously improve power generation, full scale Industrialization and LPG penetration at the domestic levels.”

* The LPG Penetration Programme at Domestic Level (LPG Expansion Initiation) was launched by the then Acting President Yemi Osinbajo on 29th November, 2016. LPG Penetration Framework in the area of energy diversity will be to reduce the national dependence for energy consumption on PMS, DPK and AGO by achieving a 40% fuel switch to LPG in 10 years by facilitating behavioral change advocacy drive among the citizenry. The project is also to ensure that the country meets the Paris agreement INDC of reducing 20% of annual Green House Gas (GHG) emissions by 2030.

The project is to promote its wider use in Domestic Households, Power generation, Auto – gas and Industrial applications towards the attainment of Five Million (5,000,000) MT utilization in 5 years. The project will be to improve the standard of living in rural communities and enabling the creation of an estimated 500,000 job opportunities for unemployed women and youths nationwide.

* Development of Wholesale utilized. The objective is to reduce the environmental and social impact caused by the flaring of natural gas; Gas Pricing and Infrastructure Tariff Model is ongoing to create conducive environment for gas investment.

* Harmonization of Fiscal Arrangement to encourage increased private sector participation in LPG value chains is ongoing. This aspect is being driven by the Gas Department of the Ministry.

Big Win 4:

Refinery and Local Production Capacity: To improve our domestic capacity for local petroleum refining and attaining self ¬sufficiency by 2019.

* Revamping of the four (4) Government owned refineries (Port Harcourt 1&2, Warri and Kaduna refinery) is ongoing, the financiers have been identified, negotiations with the approved financiers on the financing model is about to be concluded.

* The Ministry has secured approval of Incentives (Tax Waiver) for importation of modular refinery Components/Equipment’s to encourage investment in the modular refinery.

* Ten (10) Modular Refineries project are at advanced stages of development, with two among them (OPAC Refinery at Kwale, Delta State and Niger Delta Petroleum Resources Refinery at Ogbelle, Rivers State) are expected to begin operation before end of 2019;

* On the establishment of Green Field and Collocated Refineries to boost petroleum products self-sufficiency in the country:
□ AGIP is working towards establishing a (150,000bpd) capacity refinery.
□ The Dangote (650,000bpd) Refinery is expected to come on stream by 2019/early2020.
□ NNPC is negotiating with the investor (JIL-Amber Consortium) on the collocation of (100,000bpsd) refinery in the PHRC yard.
□ The Government to Government MOU has been signed between Nigeria and Niger, and the Steering and Technical Committee inaugurated for the Construction of pipeline from Niger to Nigeria and establishment of (100,000bpsd) refinery at bordertown in Nigeria.
□ All the above stated projects are targeted towards increasing Local Refining Capacity and creating job opportunities.

Big Win 5:

Niger Delta and Security: The Ministry is sustaining the engagement with oil producing communities to attain zero militancy in the Niger Delta region.

– Niger Delta Development Compact has been developed and presently awaiting approval of FEC. The compact is targeted at ensuring the realization of developmental projects in the region, through the compact accountability and transparency.

– The Modular Refinery Initiatives would help in providing jobs and increase cash liquidity within the environment. The NGFCP program when fully operational, would allow companies to utilize the wasted gases towards more production thereby, providing jobs opportunities for the region.

– Security Framework for Stabilizing the Niger Delta Region developed to provide community- based participation in protection of oil and gas assets. The framework is targeted at fostering Community relations, while ensuring the protection of oil and gas infrastructure.

– The Standardization of Industry-Wide CSR Engagement with Host Communities is being developed. Consultations with the Communities in this regard have been completed while a review of current practices of CSR with host communities is on-going.

In a comment he made earlier on the Big Win 5, Idang Alibi, the then Director of Press and Public Relations of the Ministry revealed that perhaps this is the area where the achievement of the Buhari Administration in the Oil and Gas Sector can be felt most. He said that the first all-inclusive meeting with Niger Delta leaders and representatives was hosted by President Muhammadu Buhari.

Idang said that the political level engagements by Vice President Yemi Osinbajo with host communities in all the Oil producing States was to reaffirm the Federal Government’s commitment to critical issues concerning the region’s peace and development; the development of the Strategic Implementation Work Plan (SIWP) with support from Niger Delta Development Commission (NDDC) and in collaboration with the Ministries of Niger Delta Affairs, Environment and the Office of the Vice President. Idang said the remarkable nature of the SIWP is that it serves as the foundation for the Federal Government’s new vision for the Niger Delta region.

Big Win 6: Transparency and Efficiency:

Ensuring transparency and efficiency in the industry and automating business processes to account for every drop of oil produced in the country.

– The Ministry has developed a Sustainable Alternative Funding Option for the Cash Call Obligations of the Nigerian National Petroleum Corporation (NNPC) under the Joint Venture Agreement (JVA) on petroleum production that will lead to an increase in national production to about 2.5mmbpd by 2019.

– On the Reduction of Oil Production Cost per Barrel, work program for the identification of areas causing high cost of production have been concluded. Stakeholder’s consultation in implementation strategy is ongoing and a reduction per barrel cost from an average of $27 down to $15 is being targeted.

– On the Reduction of Contracting Cycle, a program for the identification of areas causing long contracting cycles has been completed and development of implementation strategy is ongoing. The program when implemented will install a transparent, fast and efficient process in all Oil and Gas contracts.

– Aquila II, a devise for tracking transportation of refined products to their destinations with high precision has been developed and deployed. Still underscoring this Big Win 6, the Ministry of Petroleum Resources’ Management has said: “Before the emergence on the political scene of President Buhari and Kachikwu, the words that were most frequently used to describe the conduct/operations of the oil and gas industry in Nigeria were ‘sleaze’, ‘opaque’, ‘scandal’, etc. due to our inability to account for the exact volume of crude oil molecules produced. This narrative necessitated the evolution of Big Win 6 which dwells on creating transparency and efficiency as the governing ethos for the running of the country’s hydrocarbons industry.”

To entrench transparency, integrity and probity in running the affairs of the Ministry of Petroleum Resources, a systematic approach to integration was deployed through the introduction of new templates to assess key performance indicators and encourage goal setting for meetings and tasks.
A monthly reporting system has been developed for all Ministry of Petroleum Resources (MPR) agencies. This has yielded positive results and made meetings more proactive and reports more result- oriented.

The present Administration through the MPR, Department of Petroleum Resources (DPR) and the Nigeria National Petroleum Corporation (NNPC) are working on a process to track oil production to destination. The objective of this initiative is to automate the tracking of crude oil molecules from the wellhead to the final destination globally.
Big Win 7: Stakeholder Management and International Coordination: Adopting a sustainable and well-structured stakeholder management frame work that will address the peculiar needs and circumstance of the oil and gas industry.

1. Production management, consolidation of Nigeria’s role in Africa’s energy sector more especially the West African region, sustaining media engagement with MPR and managing stakeholder groups are all on track.

2. Annual Mandate Compliance Assessment on Parastatals: The Ministry through Oil Services Department conducted a review and assessment of the Mandate of the Parastatals under its supervision, starting with the Petroleum Equalization Fund (PEF) and the Department of Petroleum Resources (DPR) in 2017. The project is ongoing and a review of the Mandate of Nigerian Nuclear Regulatory Agencies (NNRA) and Petroleum Technology Development Fund (PTDF) was planned for 2018. The essence of the project was to realign the Parastatals with their core mandate in areas where they have derailed.

3. The Development and Production of Guidelines/Criteria for the Allocation of OPL’s, OML’s and Marginal Fields: The Ministry through Oil Services Department executed the project in 2017 by examining the weaknesses associated with the existing guidelines/practices for issuance of operating licenses to applicants by the DPR and recommended international best practices of Acreage Allocation which includes open competitive bidding, setting up of transparent criteria and incorporation of Transparency and Civil Society Organisations to monitor the process.

4. ECOWAS Hydrocarbon Sector Development Policy (EHSDP): The Ministry was represented by professionals at the validation meeting at the ECOWAS secretariat for the validation of the draft of ECOWAS Hydrocarbon Sector Development Policy (EHSDP) and implementation Matrix. The EHSDP is being developed by ECOWAS for the region to have an effective integrated Hydrocarbon resource sector to assist and anchor the sustainable development of the Community from 2019-2025.

5. Projects for Construction of Pipeline from Republic of Niger to Nigeria and Establishment of a New Refinery in Nigeria: The President and the Commander in Chief of Armed Forces inaugurated the Technical Committee (TECOM) and Steering Committee for the Niger – Nigeria Pipeline construction and Refinery establishment in a border town in Nigeria. An MOU was signed by Nigeria and Niger on 23rd July, 2018 at Abuja. TECOM and Steering Committee are to supervise the conceptualization and implementation of the projects. The G to G MOU has been signed between Nigeria and Niger Republic. The Steering and Technical Committee for Construction of pipeline from Niger Republic to Nigeria and the establishment of refinery at border town in Nigeria have been commissioned.

6. Tripartite Committee on Methanol Fuel Implementation Project in Nigeria: A Tripartite Committee on Methanol Fuel Implementation Project in Nigeria was inaugurated in August 2018. The Committee comprises the Ministry of Petroleum Resources, Ministry of Science and Technology and Nigeria National Petroleum Corporation, NNPC. The aim of the project is to work on the implementation of Methanol Fuel as alternative source of energy for Nigerian transportation system as well as Electricity Power Generation at a lower cost while staying within the requirement of Clean Air International Laws. The construction of the Local Methanol Product Facility is to encourage the development of a natural gas-based industry providing supply to the local demand as well as creating a new economic base and new employment opportunities.

7. Gas Sale Aggregation Agreement (GSA):

i. Signing of GSA between
Greenville Oil and Gas company limited and Total Exploration Production Nigeria (TEPNG). The objectives of the agreement are to:
• Create over 2,000 direct jobS and 5,000 indirect jobs across Nigeria,
• Reduce Green House Gas emission from gas flaring,
• Deepen the utilization of gas for power generation,
• Revive moribund industries,

ii. Indorama GSA for Fertilizer
Phase II has also been signed. Objectives of the agreement are to:
• Create jobs and boost agricultural activities in the Country,
• Reduces gas flare.

8. Gas Pipeline Project (Ongoing)

i. The OB3 Gas Pipeline Project: Completion and commissioning of OB3 Gas pipeline link has been shifted to December 2018.

ii. The Ajaokuta-Kaduna-Kano (AKK) Pipeline Project: The project would enable gas supply and utilization to key commercial centers in the northern corridor of Nigeria with the attendant positive spin-off on power generation and industrial growth and also enable connectivity between the East, West, and North which is currently non-existent. The project is ongoing, as Project Team and Chinese Consortium are working tirelessly to ensure timely finalization of the team sheet for the project’s contract financing agreements.

9. Study on Gas Pricing/Updating of Gas Regulation: Study on Gas Pricing was conducted to ensure adequate and steady supply of natural gas for power generation and update of new gas pricing regulations to support gas industrialization in Nigeria. The new regulation will replace the 2008 Gas Pricing Regulation.

10. The Present Administration has also been working on having a legacy in the Nigerian oil and gas industry which is the establishment of a database for oil and gas. It is codenamed Database for the Oil and Gas Historic Project. A Historical Project Database provides a collection of information, including estimated costs, actual costs of projects and a variety of key cost metrics and ratios on completed projects. This would facilitate effective cost benchmarking, review and validation, thus improving our project management performance. The project scoping and definition has been completed. Steering and Technical Committees are to be inaugurated any moment from now.

11. Under the Present Administration also, Nigeria was mandated by the African Petroleum Producers Organisation (APPO) Council of Ministers to lead the organisation’s transformation process. Nigeria’s Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, was unanimously appointed by the Council of Ministers to assume the Presidency of APPO barely two years after he had completed his term, in order to lead the transformation of both the Secretariat and the APPO Fund. The APPO Secretariat was moved from Congo Brazzaville to Abuja with effect from last month, 1st April, 2018. It is noteworthy to say that Dr. Emmanuel Ibe Kachikwu has been elected for the third time and remains the President of APPO.

12. The passing four years also witnessed the first ever Nigeria International Petroleum Summit (NIPS). For 5 days (18-22 February, 2018) Nigeria hosted what is considered the premium African
petroleum conference and Africa’s own version of Offshore Technology Conference (OTC) in Houston, Texas, USA to proffer strategies to harness the continent’s hydrocarbon resources. It is instructive to note that delegates affirmed the fact that for Africa to achieve a common response to global oil and gas challenges regional collaborations powered by events such as the NIPS which will eventually evolve into a platform for shaping petroleum policies must be sustained. The second edition of the Nigeria International Petroleum Summit (NIPS) has since been held from Monday, 28th January, and lasted till Wednesday, 30th January, 2019.

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