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

Regulatory & Competitive Policies for Investment in the Current Global Low Price Regime M ARCH 3 2016

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

Oil as definition of the Nigerian state Deep Water Shallow Offshore Biafr a Onshore war The Role of Technology in boosting Reserves and Production 3

Submergence of the real sector- An enduring theme of the Nigerian oil narration Within a Decade Oil & Gas Had Surpassed the Real Sectors 100 As % of total Export earnings 80 60 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 Agric Oil Manufacturing Others 17 Department of Petroleum Resources The Role of Technology in boosting Reserves and Production 4

on crude oil Price instability – The Bane of over-dependence 100 120 -20 20 40 60 80 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 DEPARTMENT OF PETROLEUM RESOURCES 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 5

Echoes of price slides Year 2007 2008 % Change Price US$ 90 US$ 45 50% Revenue US$74,033 US$43,623 41% millions millions Rate N/$ 118/1 148/1 20% Year 2014 2015 % Change Price US$ 90 US$ 40 56% Revenue US$77.5 US$67.5 13% millions millions Rate N/$ 155/1 197/1 20% DEPARTMENT OF PETROLEUM RESOURCES 6

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 operations should be domiciled =  How could the tertiary institutions derive opportunities 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 7

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 29.2 Million 3,300,000 Saudi Arabia Singapore 5.4 Million 1,395,000 Nigeria 170 Million 446,000 DEPARTMENT OF PETROLEUM RESOURCES 8

Energy Intensity Relative to economic growth A B C Daily oil Population** E nergy Intensity per Country Consumption/ 1,000 per bbl** A/ (B / 1,000) China 5.77 7,578,000 1,313,973,713 Malaysia 20.54 501,000 24,385,858 S ingapore 834,600 4,492,150 185.79 B razil 2,372,000 188,078,227 12.61 Nigeria 2.36 312,000 131,859,731 India 2.48 2,722,000 1,095,351,995 Iran 1,679,000 68,688,433 24.44 S outh Korea 2,140,000 48,846,823 43.81 ** Culled from NationMaster.com DEPARTMENT OF PETROLEUM RESOURCES 9

Low Refinery Capacity – Evidence of NEW OLD KRPC WRPC PHRC 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, 2010 (BPSD) 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 DEPARTMENT OF PETROLEUM RESOURCES 10

The Opportunities DEPARTMENT OF PETROLEUM RESOURCES 11

Current Reserves Reserves @ 1/1/2012 Gas Oil JV + 182.8 Tscf Condensate -AG 92.6 PSc -NAG 90.2 36.2 blnbbl Ind O MFO DEPARTMENT OF PETROLEUM RESOURCES 12

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

Gas infrastructure sector proffers visible options for investment LNG 42% Export Market WAGP Avg Daily Production (8.11Bscfd) – 1 st Half 2015 Domestic Market Power 3.16 AG 4.95 NAG Industrial 14% NGC & Local NGC & IOCs Distributors Transmission Commercial Breakdown of Production (%) Export 32% Domestic 12 Fuel + Gas-lift + 42 Fuel + Gas-Lift + Gas Gas Re-injection Re-injection 32 12% Flare Gas Producers 14 Flare DEPARTMENT OF PETROLEUM RESOURCES

The African dark night point to the for gas monetization DEPARTMENT OF PETROLEUM RESOURCES 15

Also the need to fill the huge Refinery gaps  VISION 2020:20 Allocation of up to maximum – Federal Government turn-down ratio policy thrust to refine over 50% of crude oil produced in Nigeria to enhance national refining Consideration for capacity and deepen oil concession Nigeria’s industrial development.  PRIVATE INITIATIVE – Inclination towards establishment and operation of privately owned Acquisition at Market refineries rate, with applicable discounts, if subsidy  MODULAR REFINERY regime continues INITIATIVE – Squeeze-out value from stranded Lifting tied to mechanical hydrocarbon in completion remote locations and marginal fields to DEPARTMENT OF PETROLEUM RESOURCES enhance resource

Challenges to creating needed domestic values  Capital  Expertise  Security  Enabling laws DEPARTMENT OF PETROLEUM RESOURCES

Challenges ….  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 DEPARTMENT OF PETROLEUM RESOURCES

Ways out…  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 DEPARTMENT OF PETROLEUM RESOURCES

Harness & effectively implement existing policies • Address multiplicity of Regulatory Agencies • Entrench transparency • Remove bottlenecks in approval processes • Digitize approval processes to reduce turn around time DEPARTMENT OF PETROLEUM RESOURCES 20

Synergize strategy on FDP • Shared Capital; Shared risk; Shared returns • Joint Development Projects • Surface production facilities • Oil transportation/ Gas transmission DEPARTMENT OF PETROLEUM RESOURCES 21

Innovative financing models • 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 22

The case for integration DEPARTMENT OF PETROLEUM RESOURCES

Road to the future would be better paved with products from our refineries DEPARTMENT OF PETROLEUM RESOURCES 24

The PIB Imperatives 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 DEPARTMENT OF PETROLEUM RESOURCES 25

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 offers opportunities for reconsideration of strategy DEPARTMENT OF PETROLEUM RESOURCES

End DEPARTMENT OF PETROLEUM RESOURCES 27