Oil & Gas
Stakeholders want new and active legislations for gas development
TAFT, CA - JULY 21: An oil rig south of town extracts crude on July 21, 2008 in Taft, California. Hemmed in by the richest oil fields in California, the oil town of 6,700 with a stagnated economy and little room to expand has hatched an ambitious plan to annex vast expanses of land reaching eastward to Interstate 5, 18 miles away, and take over various poor unincorporated communities to triple its population to around 20,000. With the price as light sweet crude at record high prices, Chevron and other companies are scrambling to drill new wells and reopen old wells once considered unprofitable. The renewed profits for oil men of Kern County, where more than 75 percent of all the oil produced in California flows, do not directly translate increased revenue for Taft. The Taft town council wants to cash in on the new oil boom with increased tax revenues from a NASCAR track and future developments near the freeway. In an earlier oil boom era, Taft was the site of the 1910 Lakeside Gusher, the biggest oil gusher ever seen in the US, which destroyed the derrick and sent 100,000 barrels a day into a lake of crude. (Photo by David McNew/Getty Images)
Stakeholders in the Oil and Gas industry have urged the Federal Government to put in place legislations that would attract investors to the develop the gas sector stating that the current legislations and policy are not far reaching enough to attract investors for gas development.
They expressed the view that current efforts by the government to attract investments into the gas sector will fail because the legislations and policies guiding the sector serve as disincentives rather than incentives.
The stakeholders who spoke at a three-day Nigeria Gas Summit 2017 held in Lagos are of the view that the desire to achieve a gas intensive future by the country in the nearest future may not be feasible if she depends on the current legislations and policies and therefore advocated the need for modern petroleum legislation.
Chiagozie Hillary-Nwokonko, Partner and Head of Energy and Natural Resources at Streamsowers & Kohn, in his presentation at the summit , which was titled, ‘Updating the Nigerian Gas Framework for a Gas Intensive Future,’ he said, with what is happening in Nigeria and the broader world, the country is destined for a gas-intensive future. But that what is at stake now is how she can maximise her gas potential under the current policies and legislations.
“My view is that for us to achieve maximisation of our potential for a gas-intensive future, a lot of what is operating in the sector today is either contractual or policy-based has to be legislated and not just in secondary legislation but in primary legislation because that is what is going to create the certainty that investors need to be able to invest in gas projects, which are long term projects,” he explained
He therefore called for the modernization of the legislations and policies so that the necessary investments can be attracted for gas development.
Chiagozie Hillary-Nwokonko who described the 2017 national gas policy as a wish list said it cannot be a basis for significant new investment in gas because the framework is structured only to favour some investors, especially those who are able recover their gas cost against their oil income.
“In this sense, it could be argued that the plain is not level for all kinds of investors.”
He stated that for those who have the policies to their advantage, they have invested across the value chain and invariably what they tried to do is that they focus on export especially the Joint Venture companies that are now forced to invest in domestic gas utilization.
According to him, the existing solution to develop gas has created their own problems which include pitching those that are already producing oil against those that want to develop gas. He added that there is lack of attractive framework for gas development and this has created uncertainty and hampered its development.
“So there is need to kick against those uncertainty by passing legislation that will give investors some level of comforts”.
He advocated for modern petroleum legislation where the power of the minister to make policy is separated from that of the regulator of the industry. “You may have government institutions involved in the commercial sales but not regulating as it is presently with an institution like the Nigerian Gas Company.”
He said there must be clear focus on unbundling and definitions of roles in the legislation so that there would not be conflicts.
The lease administrations he said, must be fixed, saying this is important because the country currently have ancient lease administration system unlike what is obtained in other places.
“This has hampered the development of gas intensive future .We must develop a system that forces people to either develop the assets or let go. This is to avoid anybody sitting on them”.
He said part of what needs to be done is to modernise policies and legislations, and this will include legislating a great system, making acreages smaller than what we have now, commercial bids for assets, licenses at every stage of the value chain, they should also be designed in such a way that it would allow enough time to find gas and develop the market.
Everything must have a programme with bank guarantee so that it is only those that are serious that will take up the challenge.
Manish Maheshwari, chief executive officer of Seven Energy, in his speech, said that the operators in the power and gas sectors cannot access funding as a result of the dysfunctional state of the value chain.
He argued that only a quarter of the country’s 12,000 megawatt electricity installed capacity gets to the consumers as a result of the dysfunctional state of the value chain.
According to him, 5,000MW is lost to vandalism; 3,000MW is non-operable; seven per cent is lost in the transmission grid; while 12.5 per cent is lost in the distribution assets as technical losses.
Maheshwari, who was represented by James Odiase, added that only 50 per cent of electricity consumed by customers is paid for.
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