Sylva, Kyari, Anwalu seek inclusion of gas in production sharing contract

By Kassim Omomia
Petroleum Minister, Timipre Sylva, NNPC GMD, Mele Kyari and , DPR boss, Engr. Sarki Anwalu have made strong demands that gas should henceforth be included in  production sharing contracts terms.

They spoke at a public hearing in Abuja that concerted efforts should be made to include, gas just like crude oil  as part of  Production Sharing Contracts  terms (PSCs).

The oil sector bureaucrats disclosed that discussions were already in that line with critical stakeholders

This is just as speaker of the House of Representatives, Femi Gbajabiamila raised concern that the issue ought to have been dealt with long time ago when the National Assembly amended  the Petroleum Act of several decades which  reviewed the PSC

According to the Nigeria oil sector helmsmen, at the one day public hearing on “Inclusion of Gas Terms in Production Sharing Contracts (PSCs) by the Nigerian National Petroleum Corporation (NNPC)”, organized by Joint Commitee on Gas Resources, Petroleum Resources (Upstream) and Petroleum Resources (Downstream) discussions were already ongoing, especially as all issues bothering on Psc was centred on oil alone.

Minister of state,  Timipre Sylva, speaking at the event, assured that the gas component will be included and properly addressed  this time under the PIB currently under consideration in the National Assembly

“On the issues to be discussed today, we will say that the first Production Sharing Contracts came into being when the Federal Government decided to encourage the frontier territory in the offshore of Nigeria. Before then, most of the exploration was onshore. And those PSCs have always had some issues since they were signed; because at that time the offshore was considered the frontier territory. Today, the offshore of Nigeria is no longer a frontier; it is a proven territory. Since then, a lot of discussions have resolved around how we can change the terms. I believe that most of these issues will be cured by the PIB; especially the issues around gas terms, which we all believe were not properly captured in the earlier PSCs.

“Already, the NNPC is engaged in a lot of discussions around the PSCs and most of those discussions are purely commercial, and they are making good progress. But of course, knowing that the PIB is in sight and the National Assembly invited us still for this, we felt that there is a lot of wisdom also, and that is why we have come. I believe that the PIB will be able to cure most of those issues that will come up for discussion today.

“As I said, the issues around gas terms were not captured because before now, most of our activity in the oil industry was about oil and not about gas.

“Today, we have come to see is a very essential resource; it is a resource that can drive the growth of this country and the economy. That is why you can see this new push for gas. And I can assure you that because of the push that we are championing in the oil industry, gas terms will be fully captured in the PIB when it is passed.”

Sylva also said  that efforts were ongoing to get Nigerians to use gas in their cars in the near future.

According to him, “In terms of gas utilisation in the country, we are all aware that in December last year, we rolled out the Auto Gas initiative which we are actually pushing forward. Yesterday we had a discussion around it; we had a meeting and during this week, a tax force is expected sit on it and come up with details of how we are going to implement the Auto Gas programme, so that Nigerians will begin to use gas for their cars.

“Also in terms of domestic or household gas usage, we are also pushing for penetration because we feel that a lot of usage now is in the cities. So, we want to push for rural people to also begin to utilise gas for cooking. The general idea is to ensure that gas is pushed to the fore in Nigeria. All these that we have discussed will not make sense if the pricing regime for gas is not appropriate. That was why last year, I inaugurated a committee to look at the appropriate pricing for gas so that we (can) have gas that is affordable and accessible to Nigerians. This committee has met. It is chaired by the COO Gas and co-chaired by the DPR, and they have worked tirelessly.

“Tomorrow, by coincidence, they are coming to present their report to me, which will be discussed at the leadership level in the oil industry before we make it public. But in general, I am just saying that we in the oil industry are on the same page with the National Assembly in the push for gas in Nigeria. That is why we are very hopeful that the deliberations here will make a lot of sense to Nigerians and will produce major decisions that will form part of the PIB already before you, and hopefully, we are still looking forward to your promise that the PIB will be passed in April”, he said.

But making his presentation, GMD, NNPC, Mele Kyari’, noted that the right  environment was important to pricing  of gas condition  in  PSC

He said ,good physical environment and pricing as two key conditions to issues of gas inclusion in the PSCs.

The GMD said “The PSC was designed around oil, that’s why provision in the PSC for development of the gas was very weak. It simply says that both parties can sit down and agree on the framework for monetizing the gas on the terms that is mutually acceptable and when the contractor, that’s the IOC chooses not to participate in the process.

Obviously as exploration and production activities took place, there were substantial important gas discoveries were made and non associated gas discoveries were made and obviously the PSC didn’t address how to monetize those. The focus was clearly on oil. The solution to this is getting certain framework right.

“But for the non associated gas, deep water gas is always more….because of the terrain and level of infrastructure that will require not just commercial conversations but it needs structural, physical response, which the minister has mentioned around PIB to resolve  those issues.

“As we go on, we also know that constraint around physical environment will be key in resolving some of these issues. So side by side commercial negotiations are ongoing. We are also aware that we’ve made adequate provisions in PIB to respond to how we can manage the deep water issues. Its a very good timing to focus on deep water gas.

“The solution to this is setting certain framework right. First, the physical environment which the PIB will address. Secondly, pricing framework which the Honorable minister has mentioned. Once we don’t get the price right, no matter what we say here, those PSCs will not be developed. We are already on the same page with the national assembly on this so that we can migrate this to reality. Lastly, the gas activities today is focused on bringing gas into demostic market.

“This is a very right moment to focus on gas and we will surely deliver on this. We have already made submission.”

On his part the arrow head of DPR, admitted that his agency was already  with NNPC on the issue .

Engr. Sarki Anwalu , explained that DPR was reviewing some critical areas like funds realized from  the existing PSCs and appropriate gas pricing.

“We will be working with NNPC to ensure that a good price mechanism is being put together”, he said.

However, declaring the hearing open, Speaker of the House, Femi Gbajabiamila said that they were ever ready to get full benefits from the country’ s gas resources and would adjust to accommodate the new realities

“For too long, Nigeria’s natural gas resources have existed almost as an afterthought both as a matter of policy making and as a focus of investment and exploration. Given the potential of natural gas for industrialisation, job creation and revenue generation for government, this is a significant error that ought now to be corrected with all urgency. It falls to this Joint Committee of the House of Representatives to articulate the way forward and to do so, taking into account the concerns of all the stakeholders and the expectations of the Nigerian people.”