Nigeria: Oil Majors Delay Investment On $23.5Bn Offshore Projects
International Oil Companies (IOCs) operating in Nigeria may have devised means to compel the Federal Government into changing its fiscal policy on the Petroleum Industry Governance Bill (PIGB).
The Guardian learnt the IOCs have deliberately put on hold the Final Investment Decision (FID) on five offshore oil and gas projects to make government alter fiscal terms in the new bill deemed unfavourable to deepwater projects.
Already, the FID on the 225,000bpd Bonga Southwest-Aparo project; 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko deepwater project has been delayed.
Estimated at over $23.5 billion, the projects were expected to assist the Federal Government achieve a 40 billion-barrel target and daily production of four million barrels per day (bpd).
FID on these projects ought to be taken before the end of 2018.
Some draft versions of the PIGB have prompted questions about the commercial viability of deepwater projects under the proposed changes to the fiscal terms.
Deepwater projects have typically included more favourable fiscal terms than onshore/shallow water projects. But the PIGB, if passed into law, is expected to increase the government’s share of production revenue coming from deepwater projects.
Experts believe that until the fiscal aspect of the bill is considered and is satisfactory to the Federal Government and IOCs, the uncertainty regarding FID on offshore projects would continue.
FID is the “final decision of the Capital Investment Decision (CID) as a part of the long-term corporate finance decisions based on key criteria to manage company’s assets and capital structure. It is the point at which contracts for all major equipment can be placed, allowing procurement and construction to proceed and engineering to be completed.”
An example of an affected project is Offshore Processing Licence (OPL) 245 on the southern edge of the Niger Delta, which is being jointly developed by the Nigerian Agip Exploration Limited and Shell Nigeria Exploration and Production Company (SNEPCo) at a cost of $13.5 billion.