The moment Nigeria’s oil sector has been waiting for two decades finally arrived this month when President Muhammadu Buhari sent the Petroleum Industry Bill to the national assembly.
The bill is intended to modernise the sector by commercialising the national oil company and ironing out revenue sharing agreements in joint ventures with oil majors in Africa’s largest crude producer.
An absence of a concrete regulatory framework has left the country’s most important industry mired in uncertainty since democracy returned in 1999. Oil is the lifeblood of Africa’s biggest economy.
It provides roughly half of government revenues The landmark reform — which the legislature, where Mr Buhari’s party has a majority, is expected to pass into law — comes just a few months after the government launched a bidding round for marginal, undeveloped oilfields that attracted interest from more than 600 companies.
It was Nigeria’s first in more than 15 years. Oil is the lifeblood of Africa’s biggest economy. It provides roughly half of government revenues and nearly all of its foreign exchange receipts as well as a big part of its presence on the global stage.
But it has also been overexploited by corrupt companies and politicians, and underutilised as a resource for Nigeria’s 200m people in the 64 years since Royal Dutch Shell first tapped a well in the swamps of the Niger Delta.
If Nigeria can unlock its gas potential, it may be able to solve some of its greatest crises Recent reforms may have been brought on, according to some observers, out of fear at a second recession in less than five years.
Recent moves by the government toward commercialising the national oil company, removing costly power and fuel subsidies and bringing more certainty to the sector could allow it to attract investment and the country’s nascent gas sector to flourish.
“The story of oil and gas in Nigeria is a story of missed opportunities, if we look at the resource base of the country, our ability to convert that resource base into production and subsequently money for the economy,” says Lekan Akinyanmi, chief executive of Lekoil, an indigenous company.
Recommended Nigeria Nigeria oil chief promises more transparency at state producer “A great example is we’re finally doing this marginal field round — we’ve been waiting for it for almost 15 years.
Can you imagine how much of a difference it would have made to the country if we’d done them every two years, or even five?” he asks. “Same thing with gas — we’ve always known Nigeria is primarily a gas basin and we have a bit of oil.” But only recently has gas become a priority.
The 650,000 barrel-per-day oil refinery being built by Africa’s richest man, Nigerian billionaire Aliko Dangote, outside Lagos is also expected to transform the industry and the country. Giant storage tanks at Dangote Industries © Tom Saater/Bloomberg Nigeria’s state oil refineries run at less than 10 per cent capacity, so it exports its crude raw, and spends billions of dollars annually importing most of its refined petroleum, like gasoline and diesel.