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President pledges to implement far-reaching reforms in oil, gas sector

By Collins Olayinka, Abuja
14 July 2015   |   1:33 am
PRESIDENT Muhammadu Buhari has assured investors that his administration would implement far-reaching reforms to boost accountability and transparency in Nigeria’s oil and gas industry.
Oil and Gas

Oil and Gas

El-Rufai, Kasali, others seek abolition of subsidy

PRESIDENT Muhammadu Buhari has assured investors that his administration would implement far-reaching reforms to boost accountability and transparency in Nigeria’s oil and gas industry.

Meanwhile, the calls continued yesterday for urgent reform of the operations and composition of the Nigerian National Petroleum Corporation (NNPC) as well as an end to subsidy of petroleum products if Nigeria is to reap the full benefits of its oil and gas resources.

The canvassers of those positions, Governor of Kaduna State, Nasir el-Rufai and former Executive Secretary of Petroleum Equalisation Fund (PEF), Adefunke Kasali, who spoke in Abuja at the Seventh Wole Soyinka Centre lecture series also said the measures would minimise the impact of the current low price of crude oil.

A statement by the Senior Special Assistant on Media and Publicity to the President, Garba Shehu quoting the President as giving the assurance at a meeting with senior officials of Chevron led by the company’s President for Africa and Latin America, Mr. Ali Moshiri, also said he declared his administration’s readiness to effectively address the myriad of challenges in the sector.

“We understand the situation in the industry and we will do our best to address the challenges affecting exploration, production and distribution of oil products in the country.”

While acknowledging the merits of the Amnesty Programme initiated by the late President Umar Yar’Adua to reduce violence in the Niger Delta region, Buhari noted that his administration will build on good aspects of the programme.

In his response, Mr. Ali Moshiri urged Buhari to restore the confidence of international investors in the industry, adding that improved security in the Niger Delta is key to increased investment in the oil and gas sector in Nigeria.

The Kaduna State governor was emphatic about the need to replace the NNPC with another national oil company that would be commercially driven and stripped of its regulatory duties.

His words: “This new national oil company should be capitalised once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties.”

He said the Buhari government must review the Joint Venture strategy, with the governing principle being to shift the financing and operational risks to the markets and operators respectively, while avoiding owing the oil companies, and should more proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it.

The Kaduna State governor, who also called for stoppage of subsidy on petrol, stressed that the regime is unsustainable.

“I daresay that the oil subsidy regime has neither grown our people nor guaranteed stability of refined product supplies. What subsidy has achieved is create a huge hole in the budget and a new array of overnight billionaires. The downstream oil business in Nigeria has morphed into one optimised for the pursuit of subsidy payments. “

The governor also submitted that the Turn Around Maintenance (TAM) of the four ailing refineries may not solve their problems, adding: “We should incentivise competent investors to acquire majority shares and management control in all our refineries and sell to them crude oil at market prices, and remit the proceeds directly into the Federation Account!”

But to the immediate past Executive Secretary of PEF, Kasali, spending about N6.5trillion on subsidy between 2006 and 2014 cannot be said to make economic sense.

She also stated that with the price of crude projected to be low for the foreseeable future, government must now begin to see the development as an opportunity to begin a strategic liberalisation of the downstream sector in other to attract investment.

In her submission, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Mrs. Zainab Ahmed said government must use the Natural Resources Development Fund, which receives 1.68% of revenue from the Federation Account to develop alternative sources of revenue from natural resources other than oil for the purpose it is established.

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