Despite Nigeria passing the PIA, attracting new investment may be difficult – Report - Living Environment

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Sunday, August 29, 2021

Despite Nigeria passing the PIA, attracting new investment may be difficult – Report

Following the signing of the Petroleum Industry Bill by the President, Major General Muhammadu Buhari (retd.), Fitch Solutions Country Risk & Industry Research has said attracting new oil and gas investment to Nigeria over other destinations is likely to be a race as decarbonisation efforts divert more capital to alternative energy and high margin barrels.

The global provider of country risk and industry analysis said this in a new report titled ‘Investment uptick expected as Nigeria’s Petroleum Industry Bill becomes law’.

“We expect Nigeria’s Risk Reward Indices score to improve in next quarter’s scoring, once the changes from the PIB are integrated into our analysis,” it said.

According to its latest quarterly analysis, Nigeria ranks first in the sub-Saharan Africa region in both Upstream and Downstream RRI but ranks fifth for Upstream and 25th for Downstream when compared internationally.

Fitch Solutions said, “On the upstream side of things, Nigeria is competing for investment on global stage with newcomers Guyana, Senegal and Kenya while industry stalwarts Brazil and Norway continue to attract investment due to outsized reserves and friendly investor environment.

“Next quarter’s RRI should show Nigeria’s upstream position improve, although attracting new investment over other destinations is likely to be a race as overall investment is likely to decline in the long-term, as decarbonisation efforts divert more capital to alternative energy and high margin barrels.”

According to the report, the timing of the passage of the PIB is critical to ensuring production growth due in the mid-2020s remains on track with several pre-FID deep-water projects vying for investment.

Several planned deep-water projects in the country had been repeatedly pushed back because of uncertainties over the PIB.

Fitch Solutions said, “Existing discoveries of sizeable reserves are the most likely area of new investment as several are noted as pre-FID projects in various companies’ most recent filings.

“The biggest impact of the new PIB will be the increase in new investment expected from existing IOCs operating the deepwater sector.

“The oil majors are a significant part of the deepwater players and several have joint stakes in the key offshore growth projects, Bonga Southwest, Bonga North, Bonga Main Extension (OML 118), Preowei (OML 130), and Owowo (OML 139).”

The research firm noted that the fiscal changes made in October 2019 with the Deep Offshore and Inland Basin Production Sharing Contract Act were unfavourable to deep-water investment and would be repealed with the PIB, changing the royalty from 10 per cent to 7.5 per cent.

 

Source: Punch

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