IOC: Nigeria Must Legalise Oil Reforms to Retain Deepwater Investments

Peter Uzoho 

A top official of one of the International Oil Companies (IOCs) operating in Nigeria has called for urgent conversion of recent oil and gas Executive Orders to legislation, warning that failure to do that will lead to the country losing the next wave of deepwater investment to faster, more competitive West African frontiers.

In an interaction with THISDAY, the official, who spoke on condition of anonymity, also said the ongoing licensing round being conducted by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) holds little appeal for the oil majors, who are now prioritising deep and ultra-deep offshore acreage with clear fiscal terms and one-stop regulatory processes. 

Arguing that Nigeria is no longer the favourite and sole destination for oil and gas investment in West Africa, the oil executive argued that the country’s historical dominance in sub-Saharan Africa has eroded.  This, he said, called for a change of approach by the country’s policymakers towards attracting investments.

“Before now, we have not been very competitive. And one thing we are forgetting in Nigeria is this. In those days, when you talk of Nigeria, then you would be talking of Angola, Congo, Egypt, and Libya. But now, look at the West Coast of Africa. Almost all of them have discovered oil”, he recalled. 

The source singled out Cote d’Ivoire as a new benchmark for oil and gas investment climate. 

“You talk of Cote d’Ivoire, it’s a very big thing for ENI now, for instance. And that is what is motivating them to get new additional blocks in Sierra Leone, Gambia, and all the rest. Because these are undiscovered reserves.” 

Those countries, he explained, are offering better incentives and faster project cycles. “And when they get to those places, they will be able to get better incentives. So, in a way, we Nigerians have to be competitive. We have to realize that what this industry used to be in the West Coast, in sub-Saharan Africa, in the whole of Africa, is no longer the same.” 

According to him, the previous stance of “take it or leave it” posture of Nigerian authorities in the past no longer works as oil majors such as Shell, ENI, ExxonMobil,  Total, Chevron and the rest, think of the most competitive environment where incentive is better to invest their billions of dollars. 

“For instance, if Shell, ENI or Total has maybe $20 billion to invest globally, the company has the option of going to Cote d’Ivoire or Ghana or Angola or Egypt or Congo. So, the question will be: for every dollar spent, where will I get enough returns? And where will I get enough incentive to be able to move fast? Because that is key”, he said.

He pointed to Cote d’Ivoire, where ENI moved from discovery to production “in about 18 months, in record time.simply because the country has enough incentive for the IOCs.

He flagged the existence of multiple regulatory agencies in Nigeria, whose missions are not even in alignment with that of the government, in contrast with what obtains in  other countries that have just a one-stop shop that enables projects to progress faster. 

The official, however, gave credit to the Special Adviser on Energy, Olu Verheijen, and other government authorities for driving reforms through executive orders. 

“But, of course, this regime in Nigeria, in fairness to them, they have done well in the last couple of years. I give kudos to Olu Verheijen, the special advisor on Energy, of course, together with the other government authorities. They have been able to implement some reforms through the Executive Order. That is giving more confidence to, especially the big oil majors, and that is why you see a lot of them coming back.” 

Yet he stressed that executive orders are not law. He recalled that Nigeria still has the Deep Offshore Act that was passed some fews years ago under the administration of the late President Muhammadu Buhari. 

He said the task before the current government is to build on the Executive Orders by taking them to the National Assembly to ensure they become law.

He raised the fear that another government may come and reverse all the Executive Orders since they are not yet legalised, thereby plunging the oil and gas industry into backwardness. 

“You know that if such happens, then the industry is back to square one. And nobody wants to put an investment of about $10 billion and somebody will come and say, “Sorry, we are not part of this.” 

With Nigeria moving into an election period, he said investors may slow down and watch how the environment will be after the next general election.

“So it’s critical that everybody looks at these Executive Orders and anticipate what will happen if there is change of government at the centre, because a lot of these reforms were implemented through executive orders. If another person comes on board today and says, sorry, I wasn’t part of this, it’s not law, it’s an executive order, then there is a problem and that will take the oil and gas sector back again. So a lot of these Executive Orders need to be taken to the parliament, to the legislators so that they integrate them and they become law. So that nobody can change it,” he stated. 

The risk, he noted, is a return to outdated thinking. “But what if somebody comes and he wants to go back to the basics? And wants to go and implement the Petroleum Act of 1959. Because there are some people that think that way they think. Forgetting that, we need to be progressive. We need to be competitive. And just as I said, if every investor is multinational, they have options. Even in sub-Saharan Africa, they have options.” 

Nevertheless, the IOC official said the ongoing licensing round is not so attractive for oil majors, saying what will be attractive to them now is the deep offshore.

He noted that the bid round contains only one block likely to interest a player with adjacent assets. 

“So let us hope the next one will be deep offshore. It will be the next one that we are hoping that there will be enough deep offshore blocks offered. That is the plan,” he added.

He added that Nigeria’s next growth frontier will be ultra-deepwater, which demands advanced technology and massive capital. 

He further explained: “Because we are moving into the ultra-deep now, which is requiring a lot of technology, a lot of investment, and is really capital-intensive. So you need that confidence for people to be able to put their money down.

“For every $10 billion project, investors will ask: What are the incentives I’m getting to be able to ensure that I can push my projects on time? Two, my returns. Then I can repatriate my investment? And the sustainability of this thing within the system.” 

According to him, the message to policymakers is direct: The Verheijen-led reforms have changed the mood, but they must be institutionalized. 

To this end, he called on the Ministry of Petroleum Resources, NUPRC, the Presidency, and the National Assembly to move key executive orders on fiscal incentives, contracting cycles, and regulatory alignment into law. 

He warned that failure to do so will result in project delays, capital flight, and a replay of missed opportunities. 

With Cote d’Ivoire, Ghana, Angola, and others streamlining approvals and offering competitive terms, he said Nigeria cannot afford another cycle of policy reversal. 

“The industry is supplying the acreage and the technology partners are willing. The question is whether Nigeria’s legal framework will absorb them. If it does not, the next $10 billion deepwater FID will not be signed in Nigeria but in other countries that have better incentives, more competitive and predictable business environments.