Regulatory & Competitive Policies for Investment in the Current - - PowerPoint PPT Presentation

Regulatory & Competitive Policies for Investment in the Current Global Low Price Regime

MARCH 3 2016

DEPARTMENT OF PETROLEUM RESOURCES

1. Overview 2. Oil as definition of Nigerian state 3. Effects of price dips 4. Opportunities 5. Challenges 6. Policy options

Content

The Role of Technology in boosting Reserves and Production

3

Onshore

Biafr a war

Shallow Offshore Deep Water

Oil as definition of the Nigerian state

The Role of Technology in boosting Reserves and Production

4

17

Department of Petroleum Resources

20 40 60 80 100

1950 1955 1960 1965 1970 1975 1980 1985 1990

Agric Oil Manufacturing Others

Within a Decade Oil & Gas Had Surpassed the Real Sectors

As % of total Export earnings

Submergence of the real sector- An enduring theme

• f the Nigerian oil narration

DEPARTMENT OF PETROLEUM RESOURCES

5

Price instability – The Bane of over-dependence

• n crude oil
• 20

20 40 60 80 100 120 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DEPARTMENT OF PETROLEUM RESOURCES

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Echoes of price slides

Year 2007 2008 % Change

Price

US$ 90 US$ 45 50%

Revenue

US$74,033 millions US$43,623 millions 41%

Rate N/$

118/1 148/1 20% Year 2014 2015 % Change

Price

US$ 90 US$ 40 56%

Revenue

US$77.5 millions US$67.5 millions 13%

Rate N/$

155/1 197/1 20%

DEPARTMENT OF PETROLEUM RESOURCES

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What should be the worth of a barrel?

=

• How much direct benefits can be derived

from the resource value-chain for linkage to domestic development and job creation

• What aspects of the E&P & downstream
• perations should be domiciled
• How could the tertiary institutions derive
• pportunities for R&D, reduce cost &

promote Local Content

• How much of the resource should be

ploughed internally for present and future development

DEPARTMENT OF PETROLEUM RESOURCES

8

The road not taken – Comparative Refinery Capacities

Country Population Total Refinery Capacity India 1.27 Billion 4,200,000 Iran 54.16 Million 1,618,000 Saudi Arabia 29.2 Million 3,300,000 Singapore 5.4 Million 1,395,000 Nigeria 170 Million 446,000

DEPARTMENT OF PETROLEUM RESOURCES

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Energy Intensity Relative to economic growth

Country A Daily oil Consumption/ per bbl** B Population** C E nergy Intensity per 1,000 A/ (B

/ 1,000)

China

7,578,000 1,313,973,713 5.77

Malaysia

501,000 24,385,858 20.54

S ingapore

834,600 4,492,150 185.79

B razil

2,372,000 188,078,227 12.61

Nigeria

312,000 131,859,731 2.36

India

2,722,000 1,095,351,995 2.48

Iran

1,679,000 68,688,433 24.44

S

• uth Korea

2,140,000 48,846,823 43.81

** Culled from NationMaster.com

DEPARTMENT OF PETROLEUM RESOURCES

KRPC WRPC NEW PHRC OLD PHRC NDPR TOTAL Designed Capacity, (BPSD)

110,000.00 125,000.00 150,000.00 60,000.00 1,000.00 446,000.00

Crude Oil Processed, (BPSD)

2010

21,986.72 53,345.20 19,345.38 0.00 0.00

94,677.30

2011

20.896.79 49,731.41 31,853.02 0.00 0.00

102,481.22

2013

31,981.86 34,868.71 24,530.97 0.00 1,000.00

92,381.54

2014

32,452.43 20,925.04 44,937.47 0.00 1,000.00

98,314.93

2015

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Low Refinery Capacity – Evidence of

DEPARTMENT OF PETROLEUM RESOURCES

The Opportunities

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DEPARTMENT OF PETROLEUM RESOURCES

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JV PSc Ind O MFO Oil + Condensate 36.2 blnbbl

Gas 182.8 Tscf

• AG 92.6
• NAG 90.2

Reserves @ 1/1/2012

Current Reserves

DEPARTMENT OF PETROLEUM RESOURCES

Lack of Integration in the local oil & gas value chain has further compounded the effects of low crude price

DEPARTMENT OF PETROLEUM RESOURCES

Export Market Domestic Market Power

Industrial Commercial

NGC & Local Distributors

Gas Producers

Fuel + Gas-lift + Gas Re-injection

LNG WAGP

NGC & IOCs Transmission

Gas infrastructure sector proffers visible options for investment

42%

14%

32%

12%

4.95 3.16

Avg Daily Production (8.11Bscfd) – 1st Half 2015

AG NAG 42 14 32 12

Breakdown of Production (%)

Export Domestic Fuel + Gas-Lift + Gas Re-injection Flare

Flare

DEPARTMENT OF PETROLEUM RESOURCES

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The African dark night point to the for gas monetization

DEPARTMENT OF PETROLEUM RESOURCES Acquisition at Market rate, with applicable discounts, if subsidy regime continues Allocation of up to maximum turn-down ratio Lifting tied to mechanical completion Consideration for

• il concession

 VISION 2020:20 – Federal Government policy thrust to refine over 50% of crude oil produced in Nigeria to enhance national refining capacity and deepen Nigeria’s industrial development.  PRIVATE INITIATIVE – Inclination towards establishment and

• peration of

privately owned refineries  MODULAR REFINERY INITIATIVE – Squeeze-out value from stranded hydrocarbon in remote locations and marginal fields to enhance resource

Also the need to fill the huge Refinery gaps

DEPARTMENT OF PETROLEUM RESOURCES

• Capital
• Expertise
• Security
• Enabling laws

Challenges to creating needed domestic values

DEPARTMENT OF PETROLEUM RESOURCES

• Today’s market conditions have essentially created a

buyers’ market, as governments launch more licensing rounds

• The world already holds more opportunities for oil and

gas finds than companies have money to pursue and develop

• The fiscal terms on offer in Nigeria will play a critical role

in determining how attractive the opportunities are perceived

Challenges ….

DEPARTMENT OF PETROLEUM RESOURCES

• Regulation should take more cognizance of the growing

global competition for investment dollars

• Streamline governing regulation
• Streamline taxation regimes
• Emplace predictable fiscal structure across board

Ways out…

DEPARTMENT OF PETROLEUM RESOURCES

Harness & effectively implement existing policies

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• Address multiplicity of Regulatory Agencies
• Entrench transparency
• Remove bottlenecks in approval processes
• Digitize approval processes to reduce turn around time

DEPARTMENT OF PETROLEUM RESOURCES

Synergize strategy on FDP

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• Shared Capital; Shared risk; Shared returns
• Joint Development Projects
• Surface production facilities
• Oil transportation/ Gas transmission

DEPARTMENT OF PETROLEUM RESOURCES

Innovative financing models

22

• Financing Models different from traditional
• New thinking: Contractors offering services in

lieu of returns in kind for the development of the asset

• Turn-key Operations Model

DEPARTMENT OF PETROLEUM RESOURCES

The case for integration

DEPARTMENT OF PETROLEUM RESOURCES

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Road to the future would be better paved with products from our refineries

DEPARTMENT OF PETROLEUM RESOURCES

Passage of PIB important to create trust and regain investors’ confidence Yet-to-be-passed Bill needs to be situated in today’s reality on competition for investment capital

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The PIB Imperatives

DEPARTMENT OF PETROLEUM RESOURCES

Closing

• Effects of price downturn is dire due to wholesale

reliance on trading unprocessed crude

• Revising strategies to optimize the hydrocarbon

value chain and riding out of the raw material dilemma key to getting out of perennial slough of price slides

• The

season

• ffers
• pportunities

for reconsideration of strategy

DEPARTMENT OF PETROLEUM RESOURCES

End

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