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PwC harps on importance of quick passage of PIB


Oil rig / AFP PHOTO / Paul McGinley

Oil rig / AFP PHOTO / Paul McGinley

Until the Federal Government passes the Petroleum Industry Bill (PIB), regulatory uncertainty will continue to hinder the development of the Nigeria’s oil and gas sector, according to a Price Waterhouse and Coopers (PwC) report on current developments in the oil and gas industry in Africa.

Dwelling on the impact of low crude oil prices on the economy, PwC said a number of Africa’s top oil producers, including Nigeria and Angola, were being significantly impacted since the majority of their fiscal revenues originate from crude sales, and they are struggling to cope with the low oil prices.

It noted that while some nations are taking advantage of the low oil price environment to fill up their strategic stocks, most African countries have not developed the infrastructure capacity to stockpile, and the exporters of crude can expect to carry high stocks.

Specifically, it said that Nigeria is not only affected by the decline in the oil price, but also by the reduced production due to the severe security issues onshore and increased piracy incidents.

This, it hinted, is adding an additional layer of complication, causing hesitation among oil majors to invest further, hinting that many are considering postponing additional investment.

The report stated: “Considering Nigeria’s dire situation, the newly-elected president made promises to wean the Nigerian economy off its dependence on oil revenue and to cut corruption. There are plans to improve tax collection and cut costs within government. Fuel subsides were cut, which hiked the fuel price by 67.7 per cent in May 2016.

“The country has imposed limits on the availability of foreign currency and has used reserves to control inflation of the currency. However, with no additional revenues flowing into the government coffers, this is only a short-term solution.

“The Nigerian Content Development and Monitoring Board (NCDMB) has made a clear statement that despite the substantial drop in crude oil prices, the Nigerian content requirements for new and current oil & gas projects will not be reduced.”

On a broader perspective, PwC explained that exploration and production has, and always will be, a high-stakes, high-rewards game therefore the need for oil & gas players to look for ways to minimise the risk and maximise value.

For many, that means exploring proven hydrocarbon provinces with lower government take as a preference, but the fact of the matter is that those types of plays are few and far between. Many companies are simply taking their chances to see what they can find. Various approaches are being taken to minimise risk, but the safest bet is to have a balanced portfolio. Just as governments should diversify their economies, oil & gas players must maintain diversified portfolios.

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