Nigeria Gets New Oil Policy

The Nigerian state gets a new policy on oil administration; the new policy approval was the outcome of a memo presented to the Federal Executive Council (FEC), by Mr.IbeKachikwu, the Minister of State, Petroleum.

The new National Petroleum Policy, according to the ministry, defines the strategy of the federal government with respect to Nigeria’s oil resources. It also articulates the vision of the federal government for the petroleum (specifically oil and gas) sector and proposes some fundamental reforms to improve the operational efficiency, effectiveness and performance of NNPC. The new policy is contained in a 112-page national petroleum policy document approved by the federal executive council.

The main aspects of the policy are: Governance (Legal and Regulatory Framework) and Industry Structure which proposes the establishment of a new National Oil Company of Nigeria (NOCN, Restructuring of NNPC: Into autonomous business units) and among others.

In the Upstream, maximizing production of hydrocarbons, additions to reserves and future production as well as allocation of oil licences and leases are some of the highlights of the policy.

The policy focuses on the value chain especially refining and petrochemicals. It also advocates for the expansion from oil into gas based industrialisation due to Nigeria largely untapped gas reserve.

In addition, as part of government efforts to ensure peace and stability in the Niger-Delta, the new policy focuses on the region with clear emphasis on what needed to be done to achieve stability and peace in the oil producing areas.

The new policy advocates for a new legislature that would replace the old and out-dated legislatures and policies .The  policy will promote new legislature ,the modernisation of the  Nigeria petroleum sector governance , institutional framework ,fiscal regime ,corporate structures  of NNPC especially in transparency , accountability  and environmental issues.

The policy will also ensure transparency and accountability for production figures from operators.

Also in the funding of the operations, the JVs are to become independent and self-funding. The policy also indicates that existing JVs are to be closely monitored  for  the ” Effectiveness and performance; Compliance to agreements; Allocation of Oil Licences and Leases Oil and gas licences and leases will no longer be awarded under opaque procedures with allocations of blocks or production.”

The implementation of the policy, also envisaged that the joint ventures would produce about 67 per cent of Nigeria’s output, which is expected to culminate in increasing the nation’s oil production from about 2.2 million bpd to 3.0 million bpd in 2017, before dropping by 2.0 million bpd in 2026.

The policy indicated that “total production is expected to be: Gas: around 46 tcf; Oil: around 10 billion bbls. Unless there are additions to reserves and those reserves are brought into production, Nigeria can expect to see absolute declines in production from around 2020.

On cost of production, the Federal Executive Council (FEC) also revealed that the country would be seeking to significantly reduce the cost of producing a barrel of crude oil in her fields to $10 from the current $27. This could effectively make her one of the cheapest oil-producing destinations within the Organisation of Petroleum Exporting Countries (OPEC) group. At the moment within OPEC, records indicate that Saudi Arabia and Kuwait have the lowest production costs at $10 and $8.50 per barrel respectively, while Nigeria, Libya, and Venezuela reportedly have the highest at $27; $23.80; and $23.50 per barrel, respectively.

Paul Ogwu: Publish What You Pay-Nigeria