Investment-friendly oil law could attract $400bn investments – Shell

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke and Sunmonu

Shell Nigeria has said the country is likely to attract investments worth between $200bn and $400bn if the law that comes out of the Petroleum Industry Bill is investment friendly.

The firm said it had yet to take its biggest investment decision in Nigeria, and was awaiting the outcome of the PIB currently debated in the National Assembly.

The Vice- President, Finance, Shell Exploration and Production, Mr. Bernard Bos, said this while making a presentation in Lagos to some stakeholders in the Oil and gas sector. The presentation was titled, “Upstream Oil and Gas Sector Review and Industry Overview of PIB.”

He said gas production had tripled over the last six years, and Shell had plans to invest more than $30bn in the next five years.

According to him, the firm is working towards growing its production by more than 60 per cent by investing $65bn and $67bn respectively in Production Sharing Contracts and Joint Venture oil over the next five years.

“Government has the right to change law, however, it needs to recognise sanctity of existing contracts and prior investments to maintain investor confidence,” Bos stressed.

Players in the country’s oil and gas sector had said that the PIB should be instrumental in positioning the industry for growth, going beyond a mere review of regulation.

Commenting on the presentation, some of the stakeholders present, said the bill, when passed into law, must be able to encourage investments into sector, as well as increased the participation of indigenous companies.

Bos, therefore, said government must balance its increased take in the PIB with project viability, while also stressing the need to consider the global competitiveness of Nigeria’s fiscal regime and its reputation as an attractive investment destination.

He said, “Statutory changes should recognise sanctity of existing contracts and prior investments to maintain investor confidence

“There are several misconceptions about the oil and gas industry in Nigeria which if not corrected can lead to unintended consequences.”

The Chief Financial Officer, Oando Plc, Mr. Femi Adeyemo, had said some of the intentions of the bill were to: act as a driver of growth, sustain investment in the industry, and aid long- term planning.

According to him the regulation is  needed because of the poor and unclear investment case for investors, opaque and unclear subsidy regime, misalignment between/within the industry, unfavourable access to capital markets, poor enforcement of rules and regulations, unrealistic targets, and unclear and overlapping roles within the sector.

He said, “There are too many vested interests in the sector. The interests are diverse and there cannot be a single solution that meets the requirements of all. We have wasted too many opportunities to get it right. This is yet another opportunity. We need to get it right, do what is right by the country; that is the only interest that counts in the long run.”

The Managing Director, Shell Petroleum Development Company and Chairman of Shell Companies in Nigeria, Mr. Mutiu Sunmonu, had, in September this year, said the bill was not fair to investors, as there were differences of views between industry and government, of which there were still gaps to close.

He had stated that it was important for the bill to take local business challenges in Nigeria into consideration and the impact on existing investments made in good faith at current legal and fiscal terms.

According to him, the PIB should create a level-playing field – “one that is fair to all investors – big, small, new or old”.

“What we have seen of the draft PIB to date does not indicate a bill that fits these criteria. And this is the opinion not only of the major players in Nigeria’s oil and gas industry, but, as I mentioned earlier, industry analysts as well,” he was quoted as saying.

The Shell boss had maintained that what the oil industry required was a balanced bill that would provide optimal revenue to the government and sufficient incentives for new investment to fuel growth.

He identified lower exploration activity and very few final investment decisions – meaning fewer reserves and reduced investments, as the consequences of the current fiscal and legal uncertainty in the country.

He noted that oil and gas production was not being replenished and that there was a serious threat of a significant reduction in production in the medium term with all of the consequences for revenue generation for the country.

Sunmonu stated that the oil industry needed to work with government to find a win-win solution.

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Investment-friendly oil law could attract $400bn investments – Shell