Jessica Erobomhan
The Chief Investment Officer of VNL Capital Asset Management, Dr Ifeanyi Ubah, has said the federal government’s newly approved $50 billion deep offshore investment framework is designed to position Nigeria for the next oil cycle rather than capitalise on current crude oil prices.
Ubah who disclosed this during an interview on Arise News’ Global Business Report, said the long gestation period of deepwater developments meant projects approved under the framework would likely begin production around 2030 or 2031, by which time global oil demand is expected to record only modest growth.
Responding to questions on the timing of the offshore framework, OPEC’s demand projections and the outlook for crude oil prices, he said the policy was essentially a long-term investment strategy.
“These projects are usually long term, so starting a project this year will probably end around 2030/2031, which even from OPEC’s current reports, demand expectation is expected to be modest during that period. So this is more or less positioning for its own cycle, rather than Nigeria chasing the buck,” he said.
Ubah said the incentives under the framework were significant enough to improve the economics of deepwater investments and attract new capital into the sector.
According to him, qualifying projects could receive tax incentives of up to $11.50 per barrel, alongside a 70:30 profit-sharing arrangement between contractors and the government.
“The tax incentives are something almost like $11.50 on every barrel, and aside from that, we still have the 70/30 reset between the government and contractors. That is actually a huge incentive on the economics,” he said.
He said the framework could help attract fresh private and foreign investment into Nigeria’s oil and gas industry, while creating skilled employment and strengthening local technical capacity.