By Obas Esiedesa
The Society of Petroleum Engineers (SPE) has blamed regulatory uncertainties in the petroleum sector for the on-going divestments of oil and gas assets by International Oil Companies (IOCs).
Nigeria has in the past 16 years tried and failed to enact a new law for the petroleum industry to replace the obsolete Petroleum Act enacted in the late 1960s.
Chairman SPE Nigeria Council, Joseph Nwakwue who spoke to journalists in Abuja ahead of the annual Oloibiri Lecture Series and Energy Forum (OLEF), however pointed out that the divestments would allow smaller Nigerian owned companies operating in the sector play greater role in the sector.
Nwakwue also blamed the growing insecurity in the country as one of the factors that could trigger divestment, stressing that the cost of doing business in the country has risen due to security challenges as IOCs stake a lot of resources in performing basic activities in the fields.
According to him, “This state of affairs, alongside other drivers has birthed a budding secondary market for assets. We think it’s about time to set clear guidelines (technical, commercial and regulatory) for this secondary asset market, hence, our decision to use our major policy platform (The Oloibri lectures) to bring all the players (policy, regulatory and commercial authorities) together to discuss this issue”.
He pointed out that the divestments were not necessarily a bad thing, noting that the development is never a vote of no confidence in the country.
Nwakwue however stated that while the development was normal in business environment, the rules that lead to seamless divestment are not clear in the country.
It is a good thing that the secondary asset market is developing. But that market must have rules. All the players needs to clear what the rules are. We need to clearly understand the regulation for the secondary market”.
He noted that the maturing nature of the Niger Delta as well as scarcity of asset in the nation’s oil and gas sector have created barrier to entry and trigger divestment.
He explained that the IOCs would not be particularly interested in mature basins like the Niger Delta as they look to optimize their investments.
Nwakwue who was unhappy that the country has not conducted any bid rounds in the past 13 years, said it meant that no new asset has been put in the market, adding that the implications are not only affecting government, who would have earned revenues but the entire industry as the development increases the barriers to entry.
“The uncertainty occasioned by the delay in (Petroleum Industry Bill) PIB has been a huge blow to our competitive position. It is clear as reserves and output has stagnated and investment levels have dropped to record lows. It has really been a wait-and-see situation.
“The industry does a better job with geologic and project development uncertainties than with fiscal uncertainty. Nigeria must act to ensure clarity and reduce the uncertainty so we can get on with our business,” he added.