Reprieve for oil/gas sector as Kachikwu seals $15bn investment deal
As part of the efforts to reinvigorate the Nigerian oil and gas sector, especially upstream, Nigeria has negotiated a $15 billion investment deal with some India public sector companies for crude oil purchase.
Ibe Kachikwu, minister of state for petroleum, who is currently in India for a business visit, did the negotiation on behalf of the country.
The terms of the negotiation, which would be agreed on later, require the Indian government to make an upfront payment for crude purchase to Nigeria, which would be repaid on the basis of firm Term Crude Contracts over some years.
When the deal is finally consummated life would be breath into the sagging upstream sector of the oil and gas industry, which has not witnessed any major investment in the last five to seven years and currently witnessing decline in production.
The country is indebted to the joint venture operations to the tune of $8 billion. Just as many of the projects that would help boost the country’s crude oil production have been abandoned by the joint venture operators because of lack of fund.
The package negotiated also includes collaborating in the refining sector as well as exploration and production activities on a Government-to-Government basis by Indian Public Sector Undertaking (PSU) companies, long-term contracts for supply of crude to Indian PSU companies from Nigeria and also possibilities of executing CGD and LPG infrastructure projects by Indian PSU companies in Nigeria.
The non-passage of the Petroleum Industry Bill has stagnated the entire oil and gas industry as the international oil companies have held back their investment in the sector because they wanted a favourable fiscal terms before they can put down their money.
According to a statement from Idang Alibi, director of press, Ministry of Petroleum Resources, Nigerian minister, who is currently on a three-day visit to India, concluded talks on the investments in Nigeria’s oil and gas sector in a bilateral meeting with his Indian counterpart in charge of Petroleum and Natural Gas, Shri Dharmendra Pradhan.
Both ministers noted the existing and significant engagement between the two countries in the hydrocarbon sector, while acknowledging that Nigeria was one of the largest trading partners of India in Africa, which is dominated by import of crude oil and gas from Nigeria.
In 2015-16, India imported nearly 23.7MMT of crude (nearly 12% of India overall imports) and over 2 MMTPA of LNG from Nigeria.
Following this negotiation, the two countries have agreed to work on a memorandum of understanding (MoU) to facilitate investments by India in the Nigerian oil and gas sector and specifically in areas such as Term Contract, participation of Indian companies in the refining sector, oil and gas marketing, upstream ventures, development of gas infrastructure and in the training of oil and gas personnel in Nigeria.
The MoU is expected to be firmed up in December 2016 during PETROTECH-2016.
Both ministers also agreed to strengthen the existing cooperation in oil and gas sector, and in particular to explore investment opportunities for Indian Public and Private sector companies in Nigeria.
On the sidelines of the official visit, the Minister of State had one-on-one meetings with top executives of Indian Public Sector Oil and Gas companies and also representatives of some Indian private sector Oil and Gas companies.
It would be recalled that the Minister of State for Petroleum Resources also signed Memorandums of Understanding (MoUs) with several Chinese firms for over $80 billion new investments, spanning five years, in the oil and gas industry covering pipelines, refineries, gas and power, facility refurbishments and upstream financing in June this year.
The China deal was executed during the three-day road show in the Asian country to attract investments to Nigeria’s oil and gas sector.
The objective, he said, is to bridge the infrastructure funding gaps in the Nigerian oil and gas sector.
He said: “I can confirm that we had a successful outing and finally raised investment commitments and signed MoUs worth $80 billion.
“Out of this, $10 billion approximately was raised on the sides with our steer and push for two Nigerian companies – Delta Tek and Salvic Petroleum – while the balance of $70 billion includes MoUs signed by investors and financiers for projects with the Nigerian National Petroleum Corporation (NNPC).”
Kachikwu also revealed that other than the agreements executed for investments totalling $80 billion, he also got commitments from Sinopec and China National Offshore Oil Corporation (CNOOC) to commit to further investments in Nigeria’s upstream oil sub-sector to the tune of $20 billion, which would be concluded in the next few months.
This, he said, would effectively bring the total amount of prospective investments by Chinese firms over a five-year period to over $100 billion.
“Outside these (MoUs for $80 billion investments), the two largest oil companies in China, Sinopec and CNOOC, signed investment MoUs agreeing to announce after further discussions on major investment increases in the Nigerian oil and gas in the next few months.
“Given the areas of focus of these two companies, we do not expect that investment to be less than $20 billion. The net effect of these and other agreements in principle reached with investor interest in China on this roadshow will potentially provide investment funds for Nigerian oil and gas of over $100 billion over the next five years.
“These investments cover every facet of Nigeria’s oil and gas sector – upstream, pipelines, downstream, gas and power, modular refining in the creeks, engineering services, etc.