By Adewale Sanyaolu
THE Federal Government has announced plans to reduce the contracting cycle of projects in the oil and gas sector from two years to six months.
Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, stated this at a recent industry event in Abuja.
The cycle reduction is coming as Nigerian stakeholders in oil and gas sector are being choked by an unusually lengthy contracting cycle, which can take as long as 36 months, while competing African nations conclude the same process in a mere three months, thereby weakening Nigeria’s place in the ease of doing business index.
The Minister equally said that efforts are in top gear to review the existing Production Sharing Contracts (PSC), which is long overdue.
He noted that the President Muhammadu Buhari administration is focusing on developing the nation’s gas resources to boost revenue as part of the diversification policy of the Federal Government.
The Minister applauded the National Assembly on its efforts on the Petroleum Industry Bill (PIB), which he said, would go a long way to promote efficiency in the governance structure of the industry.
Kachikwu explained that for the Nigerian oil and gas industry to make remarkable progress, there is need for all the stakeholders in the upstream, midstream and downstream sectors to be on the same page on cost control, contracting cycle, technology and environmental issues.
He called on stakeholders to adopt integrated approach towards resolving some of the challenges of the industry in Nigeria. Nigeria’s slow and winding contract processes leave a sour taste in the mouth of would-be investors interested in the country, causing them to reroute billions of dollars in foreign direct investment to competing nations, to Nigeria’s loss, which is today mirrored in the fact that Nigeria attracts the least in investment dollars among its peers.
A recent industry analysis, which outlined the average contract cycle time of eight oil producing countries, including Australia, Kazakhstan, Indonesia, Venezuela, Argentina, Saudi Arabia, Angola and Nigeria, underscored the deep difference on how the country’s oil resources are managed.
Saudi Arabia, the world’s largest producer and exporter of oil, according to the analysis, has the shortest average contract cycle time, which is three months. It is followed by Argentina and Kazakhstan, both of which have five months as the latest time for contract approval.
Angola, Africa’s second largest oil producer, outperforms Nigeria, the continent’s largest producer of oil and the sixth largest oil producing country in the world. Average contract cycle time for Angola is six months. In Australia and Venezuela, contract approvals take seven months, while for Indonesia, the cycle time is eight months.
Like Nigeria, Venezuela’s oil revenues account for roughly 90 per cent of export earnings, and around 30 per cent of gross domestic product. But unlike Nigeria, it has recorded significant success in its oil and gas industry.
The investment arm of the NNPC, NAPIMS, is charged with contract approvals in the oil sector but analysts say whereas officials of the NNPC spend virtually all their time meddling in the contract process, the result does not compare with the effort they put in.