OrderPaperToday – The federal government has begun discussions with stakeholders on the inclusion of gas terms in Production Sharing Contracts (PSCs).
This is as the Minister of State for Petroleum Resources, Timipre Sylva, has assured that the issues around gas would be adequately addressed by the proposed Petroleum Industry Bill (PIB) which is before the National Assembly.
The Minister said these on Monday at a one day public hearing organised by the House Joint committees on Gas Resources, Petroleum Resources (upstream) and Petroleum Resources (downstream) entitled “Inclusion of gas terms in production sharing contracts (PSCs) by the NNPC.”
Mr. Sylva’s position was corroborated by the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, who identified good physical environment and pricing as two key conditions to issues of gas inclusion in the PSCs
The petroleum minister explained the history of PSCs which “came into being when the federal government decided to encourage the frontier territory in the offshore of Nigeria. Before then, most of the exploration was onshore. And those PSCs have always had some issues since they were signed; because at that time the offshore was considered the frontier territory.
“Today, the offshore of Nigeria is no longer a frontier; it is a proven territory. Since then, a lot of discussions have resolved around how we can change the terms. I believe that most of these issues will be cured by the PIB; especially the issues around gas terms, which we all believe were not properly captured in the earlier PSCs.
“Already, the NNPC is engaged in a lot of discussions around the PSCs and most of those discussions are purely commercial, and they are making good progress. But of course, knowing that the PIB is in sight and the National Assembly invited us still for this, we felt that there is a lot of wisdom also, and that is why we have come. I believe that the PIB will be able to cure most of those issues that will come up for discussion today.
“As I said, the issues around gas terms were not captured because before now, most of our activity in the oil industry was about oil and not about gas.”
Mr. Sylva said gas is a “very essential resource” that can “drive the growth of this country and the economy. That is why you can see this new push for gas. And I can assure you that because of the push that we are championing in the oil industry, gas terms will be fully captured in the PIB when it is passed.”
Again, the Minister disclosed that efforts were on top gear to get Nigerians to use gas in their cars in the near future.
“In terms of gas utilisation in the country, we are all aware that in December last year, we rolled out the Auto Gas initiative which we are actually pushing forward,” he said, adding that a task force is expected come up with details of the implementation of the “so that Nigerians will begin to use gas for their cars.
“Also in terms of domestic or household gas usage, we are also pushing for penetration because we feel that a lot of usage now is in the cities. So, we want to push for rural people to also begin to utilise gas for cooking. The general idea is to ensure that gas is pushed to the fore in Nigeria.
“All these that we have discussed will not make sense if the pricing regime for gas is not appropriate. That was why last year, I inaugurated a committee to look at the appropriate pricing for gas so that we (can) have gas that is affordable and accessible to Nigerians.”
On his part, the NNPC GMD noted “the PSC was designed around oil, that’s why provision in the PSC for development of the gas was very weak. It simply says that both parties can sit down and agree on the framework for monetising the gas on the terms that is mutually acceptable.
“Obviously as exploration and production activities took place, there were substantial important gas discoveries were made and non associated gas discoveries were made and obviously the PSC didn’t address how to monetize those. The focus was clearly on oil. The solution to this is getting certain framework right.
“But for the non associated gas, deep water gas is always more….because of the terrain and level of infrastructure that will require not just commercial conversations but it needs structural, physical response, which the minister has mentioned around PIB to resolve those issues.
“As we go on, we also know that constraint around physical environment will be key in resolving some of these issues. So side by side commercial negotiations are ongoing. We are also aware that we’ve made adequate provisions in PIB to respond to how we can manage the deep water issues. It is a very good timing to focus on deep water gas.
“The solution to this is setting certain framework right. First, the physical environment which the PIB will address. Secondly, pricing framework; once we don’t get the price right, no matter what we say here, those PSCs will not be developed.
Similarly, the Director, Department of Petroleum Resources (DPR), Mr. Sarki Anwalu said there were ongoing review of some key issues, which included funds realized from the existing PSCs and appropriate gas pricing.
“We will be working with NNPC to ensure that a good price mechanism is being put together”, he said.
Earlier the Speaker Femi Gbajabiamila while declaring the programme open, said that the anomaly around gas ought to have been corrected long ago to create the right climate for more investments.
He informed that on “19 November 2019, the House resolved to take necessary action to achieve focused utilisation of our nation’s abundant natural gas resources.”
He said “We have had to adjust plans and make modifications to accommodate the new realities imposed due to the emergence of the COVID-19 pandemic. Nonetheless I am certain that the assignment will shortly be completed, and a report presented to the House for consideration and adoption.”
He regretted that “for too long, Nigeria’s natural gas resources have existed almost as an afterthought both as a matter of policy making and as a focus of investment and exploration. Given the potential of natural gas for industrialisation, job creation and revenue generation for government, this is a significant error that ought now to be corrected with all urgency.
“It falls to this joint committee of the House of Representatives to articulate the way forward and to do so, taking into account the concerns of all the stakeholders and the expectations of the Nigerian people.”
The nation has shifted its goalposts on end to gas flares with the latest date being 2025.