The terms for the resolution of all the issues relating to gas under the Production Sharing Contracts (PSC) regime are ready for unveiling soon.
Maikanti Baru, Group Managing Director of Nigeria’s state-oil company, the Nigerian National Petroleum Corporation (NNPC) addressing executive council members of the Nigerian Gas
Association (NGA) said the issues of the PSC gas which made contractors dither on gas projects would be fully resolved with the terms.
The implication of this is that investors would begin to make the much needed investments with the aim of developing gas for utilisation by other sectors of the economy, such as power, methanol, ethanol and fertiliser, thereby creating more jobs in the economy. The power sector would then have enough gas to generate electricity.
Baru said the PSC gas terms have been clearly defined and categorised under three regimes; oil or liquid dominant, mixture or equal gas, equal liquid and gas oil regimes.
“For each of the regimes, we have specific terms that govern negotiations with the PSC contractors”, said Baru.
For the oil or liquid dominant regime, all the development of gas is chargeable to liquids or oil because it is the dominant resource.
“In that environment, we essentially give some beneficial interest to the contracting party”, said Baru.
For the equal gas, equal liquid regime, all the gas development costs are put into the liquid CAPEX and some beneficial interests in terms of profit gas from the NNPC will still be given to the contractor.
Under the gas dominant regime, whatever little oil or liquid obtained will go into defraying the CAPEX.
“For this gas dominant regime, the gas will be sufficient to support its own economics and that is where we could share some of our profit gas with the contractors”.
The NNPC stated clearly that under the terms, “PSC gas is 100 percent NNPC”.
On the other steps being taken by the state oil company to ensure that Nigeria’s gas potential reserves of 600 Trillion cubic feet (tcf) are identified and developed, Baru said that budgets for gas
exploration and development with the PSCs and JV contractors have been ring-fenced.
“The import of this is that you cannot take that portion of the budget and use it for anything else. We don’t veer gas budget and we will ensure that priority is given to gas exploration and development”, said the NNPC GMD. He added that companies which support development would be clearly rewarded.
It will be recalled that in June this year, Gbite Adeniji, Technical Assistant to the Minister of State for Petroleum, Emmanuel Kachikwu, in his presentation at the 2016 Nigerian Gas
Association (NGA) Business Forum in Lagos, said the much awaited terms to provide clarity around Production Sharing (PSC) gas which has lingered for years, would be ready in not later than three weeks from then.
Adeniji had said that once the document was ready, government would embark on wide and far-reaching consultations with the stakeholders to ensure that all the lingering issues pertaining to the PSC gas terms are laid to rest.
Analysts have been lamenting the paradox of gas resource abundance in the country where Nigeria is swimming in gas yet the country is desperate for growth; growth that can be powered by gas. Much of the hindrance is as a result of the legal and regulatory framework for gas development.
To fast track gas development, there is need for fundamental structural reforms which the soon-to-be released PSC gas term would resolve. The current law and regulatory framework in the country is not responsive enough as the sector is still being governed by outdated legal and regulatory frameworks.
Experts say gas is not recognised in the petroleum laws and licenses as existing Production Sharing Contracts are all written for oil.
FRANK UZUEGBUNAM
