The Federal Government will proceed with the planned review of the Production Sharing Contracts (PSCs), notwithstanding the controversy trailing the exercise, the Minister of Petroleum Resources, Dr. Rilwanu Lukman, has said.
The minister also stated that plans to develop the Olokola Liquefied Natural Gas Project (OKLNG), would go ahead, amid reports that one of its partners, United Kingdom (UK) gas giant BG, has reviewed its interest in the deal,
The Minister made the government’s position known to journalists yesterday in Abuja, on the sidelines of the Society of Petroleum Engineers (SPE) conference.
Lukman stated that the current reforms in the Oil and Gas Sector is in the interest of Nigeria and its investors.
He stated that no law, including the controversial Petroleum Industry Bill (PIB) is perfect. He however quickly added that the Nigerian Government has to review the provisions in the existing contracts relating to oil and gas projects because of new developments over the years.
His words: “the current Production Sharing Contract (PSCs) that are in place were negotiated 10 to 20 years ago. Things have changed since then and we have costs that are different and prices of oil went from less than $10 to $180 per barrel.”
He continued: “you expect that we should keep the law the same? Naturally we have to review those provisions and put them in line with current situation, not only for our own interest but in the interest of our partners and those who want to come in.”
Lukman noted that a law that is static would either discourage current players in the industry or discourage new investors. The Minister described the ongoing debate on the PIB as a healthy development.
He stressed that it would afford everybody an opportunity to make an input. He explained that when passed, the law may not be perfect, the reason why an ongoing review is needed.
The minister argued that Nigeria needed to craft a law that will take care of the most urgent and general problems facing the country. Some of the provisions, he said, may be modified in the future in the face of new developments.
Lukman explained that government intends to encourage indigenous participation in the industry. This situation gives Nigerians an opportunity to provide services done by big companies, he said.
On the benefits of the reform, he said: “it is planned to put the industry on a better level and ensure that our industry can compete favourably and competently with other similar industries in the world and our regulatory bodies are in good shape and our policies are in keeping with national requirements and at the end of the day that our people benefit maximally from the resource exploitation in the years to come."
The minister charged petroleum engineers in the country to make an input in the PIB as well as act as technical champions for the implementation.
The constitution, he noted, vests the property and sovereign ownership of petroleum within Nigeria, its territorial waters, the continental shelf and the Exclusive Zone.
This, he said, includes the management and allocation of petroleum resources and their derivatives, which will be conducted strictly in accordance with the principles of good governance, transparency and sustainable economic development.
BG Group has said that it is reducing funding of its Nigerian Liquefied Natural Gas export project and switching investment to develop newly acquired assets in Australia.
THISDAY learnt that the company’s step may not be unconnected with the decision of the Federal Government to place priority over domestic gas projects with a view to ensuring availability of gas for steady power supply.
The company, it is believed, sees the move as capable of affecting its export target, hence the decision to re-direct investments to the US, Australia and Brazil
Before the latest development, BG, Chevron, Shell and the Nigerian National Petroleum Corporation (NNPC) had struck a deal to construct a liquefied natural gas plant at Olokola, a border town between Ogun and Ondo States.
Experts say when completed, the project will be of immense benefit to the country.