The 2021 oil and gas year in Nigeria suffered a spillover of the 2020 Covid-19 burden, but with innovation, technology, discipline and resilience, a number of industry achievements eventually turned the year into a truly historic one for the nation’s entire petroleum industry
By Yange Ikyaa
It is unarguably a fact that the passage of the Petroleum Industry Bill (PIB), with Presidential assent, making it a law in Nigeria, represented the most historic moment for individuals and institutions with business interests in the nation’s oil and gas industry. It is also a historic year for the country’s leadership at all levels and for countrymen and women in all places.
This is particularly due to the prolonged time that was taken to push this legislation through to becoming a law. The PIA had been in the making for about 20 years before it was finally made a law; thanks to the efforts of Nigerian legislators in the National Assembly.
For Mallam Mele Kyari, who is Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, the newly passed Petroleum Industry Act (PIA) will attract more business investments into Nigeria.
Speaking during the 23rd World Petroleum Congress (WPC) in Houston, Texas recently, where over 5,000 participants from over 70 countries were in attendance, Kyari said that “our industry has been struggling with the fiscal environment in Nigeria, issues surrounding investors investing money and getting it back with the returns they deserve and with fiscal stability and sanctity of contracts, but our new law has brought all these in focus to ensure that the fiscal environment is very competitive, with world-class practices that can help you to find stability and security.”
He also said that partnerships are now required for the energy transition in a way and manner that will secure energy security.
“We have a robust partnership today working for us; we are also looking forward to more partnership,” he said.
One of the key challenges the Nigerian oil and gas faces is the requirement for a careful balancing of the aspirations of energy transition and energy security, and the lack of requisite investment capital for oil and gas is already creating energy crises around the world.
However, with a clear fiscal climate for business in place as an incentive, the estimated $70 billion that Nigeria needs to develop deep-water oil and gas projects could come in and aid the country to leverage volumes in production and compete favourably in the global energy market, especially as higher prices are being projected for 2022.
Another important fallout of the PIA has been the scrapping of the Department of Petroleum Resources (DPR), the Petroleum Products Pricing Regulatory Agency (PPPRA) and the Petroleum Equalisation Fund (PEF). However, as specified by the PIA, the two regulatory agencies that have replaced the three defunct ones are to perform the duties of the decommissioned DPR, PPPRA and PEF.
The new agencies are the Nigerian Upstream Petroleum Regulatory Commission (NURC) and the Nigerian Downstream and Midstream Petroleum Regulatory Authority (NMDPRA).
During the inauguration of Gbenga Komolafe, as Commission Chief Executive (CCO) of NUPRC and Farouk Ahmed as Chief Executive Officer (CEO) of NMDPRA, the Minister of State for Petroleum Resources, Timipre Sylva, said the occasion marked the beginning of a new era in the oil and gas industry, further emphasizing what the law states that all assets and even staff of the DPR and other affected agencies are to be transferred to both the commission and the authority.
He also reiterated that with the passage of the PIA into law, after spending over 20 years in the process, the coast is now clearer for investors to invest in the Nigerian oil and gas sector.
His comments: “Today’s event marks the beginning for the new agencies. Their assignment is simple – to make sure that they take off immediately, and I am expecting a lot of growth and development in the oil and gas industry, which has been stagnated for a long time because the process of passing the PIA was on for over 20 years.
“So a lot of companies, a lot of investors took a sit-down-and-watch approach. The PIA has clarified the legal framework around the sector and the agencies are in place. I don’t see anything now stopping investors from coming.
“And we are very lucky to have very competent industry people with proven experiences. So, we believe that they can hit the ground running and Nigerians should brace up for exponential growth in the oil and gas sector.”
Meanwhile, the year began with President Muhammadu Buhari’s inauguration of the National Oil and Gas Excellence Centre (NOGEC) in Lagos, as part of effort to boost the operations of the nation’s oil and gas sector. The Director of the Department of Petroleum Resources (DPR), now defunct, Sarki Auwalu, had announced that the centre was structured to drive the three-prong objectives of safety, value and cost efficiency which are critical for oil and gas industry stability, growth and sustainability. He said the centre would afford the Nigerian oil and gas industry the crucial elements for competitive advantage in a changing global energy landscape.
Also in March this year, the Federal Executive Council (FEC), approved the plan by the Ministry of Petroleum Resources to rehabilitate the Port Harcourt Refinery with a total sum of $1.5bn. The decision was taken at the weekly meeting of the council presided over by the President, Muhammadu Buhari. The Minister of State for Petroleum Resources, Timipre Sylva, who disclosed the approval to newsmen at the end of the meeting said: “The Ministry of Petroleum Resources presented a memo on the rehabilitation of Port Harcourt refinery for the sum of $1.5bn, and it was approved by council. The contract, according to Sylva, was expected to run in three phases of 18 months, 24 months and 44 months, respectively. The project is being funded by the NNPC, the Internally Generated Revenue (IGR), budgetary provisions, and the Afrexim Bank.
In January, the oil and gas industry was thrown into a state of shock following the announcement of the death of Chief Festus Remi Ayodele Marinho, the first Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC). Marinho’s death came at a time the nation’s oil and gas industry was yet to come to terms with the demise in quick succession, of two former NNPC GMD’s, Maikanti Baru and Joseph Dawha in late 2020.
From an undesirable position of importing LPG (cooking gas) cylinders, Nigeria, in March, came on course, to become the world’s largest manufacturer of composite cylinders with the groundbreaking ceremony of Rungas ALFA plant performed by the Minister of State for Petroleum Resources, Chief Timipre Sylva at Alaro City, Free Trade Zone, Epe, Lagos State.
The facility alongside its sister plant – Rungas Prime in Polaku, Bayelsa State are being developed with equity investments by the Nigerian Content Development and Monitoring Board (NCDMB), and would on completion have a combined capacity of over 1.2 million cylinders per annum, surpassing the record held by a European firm that produces 900 cylinders.
One of the oil and gas companies that clearly stood out in performance this year was Seplat Energy Plc, as the company recorded an impressive half-year (H1) 2021 scorecard with profit before deferred tax (PBT) of $62.1million, representing an increase of 142.7percent as against H1’20.
Highlights of the company’s financials further show that revenue went up 32 percent to $308.8 million in H1’21, from $233.5million in H1’20; earnings before interest, taxes, depreciation, and amortization (EBITDA) of $178.9 million; cash generated from operations ($125.8 million); cash at bank ($298.8 million) and net debt of $456.4 million.
Seplat also successfully issued $650 million 7.75% senior notes to redeem existing $350 million 9.25% senior notes and repay $250 million drawn on $350 million Revolving Credit Facility (RCF); Refinanced $100 million Westport RBL facility; raised a $50 million offtake linked to the RBL in July; and total capital expenditure of $57.5 million.
Another issue that attracted attention in the Nigerian oil and gas industry in 2021 was the successful sealing of oil and gas leak at Oil Mining Lease (OML) 29, operated by Aiteo Eastern Exploration and Production Company in Nembe, Bayelsa State.
The leak, which was reported to regulatory agencies on Nov. 5, 2021, continued till foreign and local experts, deployed to cap the well, achieved a breakthrough on December 8, after over two million barrels of crude oil had reportedly leaked from the well.
Eyewitnesses said that oil-spill response workers were ecstatic and sang songs when the well stopped discharging oil and gas into the nearby Santa Barbara River. Aiteo had contracted the services of Boots and Coots, one of the best companies in the world in terms of spill containment, to stop the oil and gas leak from the well.
As the year was about rounding up in December, Butane Energy commissioned its 100 metric-tonne LPG storage and bottling plant at Kabukawa Layout in Kastina State, with assistance from the Nigerian Content Development and Monitoring Board (NCDMB) in the form of equity investment and in accordance with the dictates of the Nigerian Oil & Gas Industry Content Development (NOGICD) Act of 2010.
Section 70(h) of the Act mandates NCDMB to assist local contractors and Nigerian companies to develop their capabilities and capacities to further the attainment of the goal of developing Nigerian Content in the Nigerian oil and gas industry.
Butane Energy Limited, one of the gas-based businesses supported with equity investment from NCDMB, has projected that by next year, the company will build new storage and bottling depots for liquefied petroleum gas (LPG) in 10 states across the country, as well as in the Federal Capital Territory (FCT).
Engr. Simbi Kesiye Wabote, who is executive Secretary of NCDMB, confirmed that the LPG storage and bottling plants currently in the plans of Butane Energy would be sited in Abuja, Kano, Kaduna, Katsina, and Bauchi States, while six depots would be located in Zamfara, Jigawa, Gombe, Plateau, Niger and Nasarawa States.
The chairman of Butane Energy Limited, Alhalji Isa Mohammed Inuwa, described the motivations of the project as “the desire to preserve natural vegetation and discourage the use of wood to heat food, and also to create job opportunities for the teeming youths and grow business profitably.”
He underscored the importance of NCDMB’s equity investment to the project’s development, adding that the plant in Kastina could eventually be expanded to 160 metric tonnes.
“Our aspiration under the first phase is to establish five plants in Kano, 180 tonnes; Bauchi, 120 tonnes; Abuja 180 tonnes and in Kaduna, 180 tonnes; and our expectation is that by September 2022, the firm would have five plants with total storage capacity of 820 metric tonnes,” Inuwa concluded.
For the Nigerian National Petroleum Corporation (NNPC), after making losses in the past 44 years of its existence, the company on August 26, 2021 declared a profit after tax (PAT) of N287 billion.
NNPC’s Group Managing Director (GMD), Mele Kyari, who came into office promising to open the books of the organization, had also repeatedly promised profit declaration. The company published its first audited statement for 2018, indicating that the corporation incurred losses close to N1 trillion, which were reduced in 2019 to N1.7 billion.