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Emeka Unachukwu fsm,fidpm,fciaPresident.Port Harcourt Chamber Of Commerce
& Partnership in Nigeria Oil and Gas Industry Future Outlook on Investment Potentials
Nigerian - Netherlands Economic Forum15-17 September, 2014Hotel NovohotelThe Netherlands
Hofweg 5-7 The Hague,
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Welcome to Nigeria
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Welcome to Nigeria
With A rebased GDP of $510 Billion
26th largest economy in the world, and the largest economy in Africa, of 160.3 million people and 923,678 Km2 land area.Per capita income has risen from $1,555 to $2,688, ranked 121st in the world from 135th position
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Welcome to Nigeria
GDP $522 billion (2013 est.)
GDP growth 7.1% (2012 est.)
GDP per capita $2,800 (2012 est.)
GDP by sectoragriculture: 40%; services: 30%; manufacturing: 15%; oil: 14% (2012 est.)
Inflation (CPI) 11.9% (2011 est.)
Gini coefficient 39.7 (2003)Labour force 48.53 million (2011 est.)
Labour force by occupation services: 32%; agriculture: 30%; manufacturing: 11%
Unemployment 24%
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Welcome to Nigeria
Main industries
crude oil, coal, tin, columbite, uranium; palm oil, peanuts, cotton, rubber, wood; hides and skins, textiles, cement and other construction materials, food products, footwear, chemicals, fertilizer, printing, ceramics, steel, small commercial ship construction and repair, entertainment, machinery, car assembly
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Building on a Solid Relationship
Reviewing 2003 Trading Year
Total Exports N14,245.3trillion Total Imports N7,015.8trillion Trade Surplus N7,229.5trillion
Contributions…India N613.8 Billion
Netherlands N393.7billion,Italy N310.7 BillionBrazil N289 Billion South Africa N218.9Billion
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Building on a Solid Relationship
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Our Historical Beginning
1908 Nigeria Bitumen Company - Activity terminated by 1st World War 1937 Shell D’ARCY Activity terminated by 2nd World War 1951 First Well Drilled by SHELL 1956 First Discovery (Oloibiri field) 1958 First Exportation 5000B/Day
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Our Historical Beginning
Nigeria joined OPEC 1971
Export Value of crude oil in 1958 1% 2013 90%
8th Largest producer of oil in the World
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Where do we have oil in Nigeria
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Where do we have oil in Nigeria
Oil Producing States In Nigeria
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How much oil do we have?
No. 1 oil exporter in Africa
Large oil reserves 30bln bbl 6000 wells & > 600fields
9th largest gas reserves in the World ( 187 TCF)*
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How much oil do we have?
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Other Abundant Natural Resources
Coal & Lignite – 2.7 billion tonnesTar Sands – 31 blnboeHydro Power – 14750 MWSolar – 7.0 Kwh/m2/dayWind – 2-4m/s at 10m heightBiomass – 320 mlnhectars
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Structure of our Oil Industry
Indigenous Oil Companies Summit Oil International Ltd (OPL 205), SaharaEnergy Field Limited7 (OPL 274,286,284), and Peak Petroleum Industries NigeriaLimited8(OML 122).
Upstream Sector
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How they are doing Business
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How they are doing Business
Joint Venture Operating Agreement
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How they are doing Business
Production Sharing Contract (PSC)
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How they are doing Business
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Signature Bonus
Payment in advance of exploration activities for the right to develop an exploration area.
The size of the signature bonus is based on the exploration licence's presumed recovery potential and value.
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Understanding Fiscal policies
Petroleum Profit TaxOnshore & Shallow offshoreFirst Five years (New comers) 65%First Five years (Existing Companies) 85.5%Subsequent Years (All Players) 85.5%
Deep Offshore & Frontiers 50.0%
Investment Tax AllowanceLand Operations 5%Offshore Depth @ 100M 10%Offshore from 100-200M 15%Offshore more than 200M 20%Deep Offshore 50%Inland basin 50%
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Understanding Fiscal policies
RoyaltiesOnshore 20.0%100m Water Depth 18.5%101-200M Water Depth 18.5%201-500M Water Depth 16.5%501-800M Water Depth 12.0%801-1000M Water Depth 8.0%Above 1000M Water Depth 0.0%
Inland basins 10.0%
Other TaxesVAT 5.0%NNDC and Education TaxTaxes to State and Local Governments
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Proven Confidence in our Industry
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Our Future is Bright
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Top investment choices Upstream
• Oil block acquisitionOil block acquisition• Drilling Rig Leasing and drilling Drilling Rig Leasing and drilling
related servicesrelated services• Engineering servicesEngineering services• Heavy Equipment leasingHeavy Equipment leasing• Seismic Acquisition and Seismic Acquisition and
processingprocessing
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Structure of Oil Industry
Downstream stream Sector
RefineriesTransportation & Marketing of Petroleum products
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Structure of Oil Industry-Downstream
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Structure of Oil Industry-Downstream
Refining Capacity 445,000BSPD
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Structure of Oil Industry-Downstream
National Daily Consumption
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Structure of Oil Industry-Downstream
• Near Term Impact• Expected Investment
estimated at US$23 billion.• Save about US$10.0 billion
spent annually on importation of White Petroleum Products.
• Engage about 15,000 construction workers at peak and 2,000 fulltime plant operators for the three Refineries.
• Long Term Impact• Achieve self sufficiency in
supply of Petroleum Products by 2018, and eliminate importation of Petroleum Products completely.
• Save over US$2.5 billion annually in subsidies on Petroleum Products.
• Become a major exporter of PMS in the energy market
• Trigger the switch from firewood, charcoal and kerosene to LPG
Invest & Partner with us!
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Investing in Our Gas Industry
9th Largest proven Gas reserves in the world. Estimated quantity of reserves 187 TCF Reserves/production estimated to last 109 years
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Investing in Our Gas Industry
“… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.”
The Gas Reform Maximum economic impact through gas.
Aims to drive linkages with agriculture, manufacturing and dispersed small enterprise through Power
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Gas Demand, Utilization & Export
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Gas Demand, Utilization & Export
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Reforms vs Opportunities
Regional PipelinesLNGGas to Power
HIGH VALUE EXPORT
Consolidate Nigeria’s position and market share in high value export marketsTargeted LNG export opportunitiesRegional gas pipelines that help consolidate nation’s footprint and influence
GAS TO POWER
Significantly increase gas supply to the Power Sector
Focused delivery plan to support existing and ongoing power plants by PHCN and NIPP
Deliver Gas for at least 12GW by 2015
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Reforms vs Opportunities
Africa and Regional
West African Gas PipelineNigeria – Algeria Pipeline
West African Gas Pipeline
Nigeria – Algeria Pipeline
National Gas Infrastructure Blueprint layout
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Exploring opportunities in the Gas value Chain
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Fiscal Policies in the Gas Sector
ITEM PRODUCTION
SUPPLYTO LNG
TRANSPORTATION/UTILISATION
TAXRATE 30% 45% 30%
ROYALTY
ONSHORE 7% 7% NA
OFFSHORE 5% 5% NA
ITA 5% 10%15% (35%FORNGL AND GTL
AGFA APPLICABLE APPLICABLE NA
ITEM PRODUCTIONSUPPLYTO
LNGTRANSPORTATION/
UTILISATION
CAPITALALLOW
Y1-4 20% Y1-3 Y160%
Y5 19% 33% Y220%
Y319%
TAXHOLIDAY NA NA
APPLICABLEFOR5+2YRS
DUTY/VATONCONSTRUCTIO
NEQUIPMENT
NONE NONE NONE
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Mouthwatering Incentives in the Gas Sector
Tax Free period of three years Renewable
Additional period of two Years
Accelerated Capital Allowances
Import duty exemption on plant, machinery and equipment.
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Reserved Areas for Oil & Gas Business
Onne Oil & Gas Free ZoneAmazing Incentives
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@ Kidney Island. Port Harcourt. NigeriaKidney Island. Port Harcourt. Nigeria. . Ready 2017Ready 2017
World Class Logistics Bases
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Relevant State Agencies
Ministry of Petroleum Resources Department of Petroleum resources Nigeria National Petroleum Corporation Ministry Of Environment Niger Delta Development Company Federal Inland Revenue Service
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5 Year Expenditure plan
Engineering Design• Over $500 Mln/year
Fabrication & Construction• Over $8 billion/yearMaterials, Manufacturing & Equipment Leasing• About $25bnBanking & Insurance• Financing of low risk Oil/Gas projects through direct funding
and venture capital• Partnering of Local insurance firms in the Insurance and
Reinsurance of small Oil and Gas projectsShipping & Logistics• Partnership with Nigerian shipping companies unlocks over $600 million annual spend on international transport of crude
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Understanding our Laws
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Nigeria Content Act
Quantum of composite value added to or created in the Nigerian economy, through a systematic development of capacity and capabilities through the deliberate utilisation of Nigerian human and material resources and services in the country’s oil and gas industry.
The ACT enacted 22nd April 2010.
Giving priority to Nigerian independent operators in the award of oil blocks, oil field licenses, oil lifting licenses and all projects, subject to the fulfilment of such conditions as may be specified by the Minister
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Nigeria Content Act
Aim & Justification
To increase national wealththrough:
Economic growth More employment of locals Value creation in the country Local Participation/ Investment Induced expenditure in the local economy Enhanced human capacity Technology transfer
After 50 years, percentage of local content in the oil & gas industry is only 5-15%Of the average US$8 Billion spent annually in the petroleum industry, only about 5% is retained in Nigeria.0
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• Develop local capacity in key areas such as manufacturing fabrication, engineering etc• Promote indigenous ownership of assets and utilization of indigenous assets in oil and
gas operations
• Develop local capacity in key areas such as manufacturing fabrication, engineering etc• Promote indigenous ownership of assets and utilization of indigenous assets in oil and
gas operations
• Develop indigenous skills pool across oil and gas value chain• Provides mandatory training requirements on the back of projects• Creates JQS to manage and track available skills
• Develop indigenous skills pool across oil and gas value chain• Provides mandatory training requirements on the back of projects• Creates JQS to manage and track available skills
• Promote establishment of support industries that will sustain oil and gas industry operations
• Enhance multiplier effect of oil and gas investments in economy
• Promote establishment of support industries that will sustain oil and gas industry operations
• Enhance multiplier effect of oil and gas investments in economy
• Develop pool of competitive supply chain rooted in oil bearing communities • Create customized training and sustainable employment opportunities • structured awareness and enlightment campaigns
• Develop pool of competitive supply chain rooted in oil bearing communities • Create customized training and sustainable employment opportunities • structured awareness and enlightment campaigns
Maximize utilization of Nigerian made goods
Maximize utilization of Nigerian human resources
Link the oil and gas industry with other sectors of the Economy
Focus on community participation in the supply chain
Foster institutional collaboration
1
2
3
4
5
Nigeria Content Act
FOCUS
• Institutionalize inter-agency collaboration on local content development• Integrate NCDMB into planning and contracting process to ensure Nigerian Content COUNTS• Dedicated NCDF for capacity building
• Institutionalize inter-agency collaboration on local content development• Integrate NCDMB into planning and contracting process to ensure Nigerian Content COUNTS• Dedicated NCDF for capacity building
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The Act further provides for exclusive consideration to be given to Nigerian companies with at least 51 per cent equity holding by Nigerians for all oil and gas projects in inland and swamp water areas, subject to proof of acquisition or lease of the equipment to be utilised during the project, verifiable by satisfactory evidence of such acquisition or lease. Compliance with the Act is mandatory for the award of all necessary licenses and permits in the industry.
The Act establishes the Nigerian Content Monitoring Board and charges it with the responsibility of providing guidelines, monitoring, coordinating and implementing the provisions of the Act.
Nigeria Content Act
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The Act makes it mandatory for operators to submit a Nigerian Content Plan to the Board in the bidding stage and prior to executing any project.
The Act provides for minimum percentage specifications of Nigerian content in any project to be executed in the Nigerian oil and gas industry
The Act also provides for domestic provision of insurance, legal and banking services, except where it is impracticable to do so.
Nigeria Content Act
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The Act further provides for operators to establish their offices within the catchment areas/host communities and to submit an employment and training plan, capacity building and succession plan where there is no immediate local capacity.The Act also establishes a fund to be known as the Nigerian Content Development Fund (‘the Fund’), for purposes of funding the implementation of Nigerian content development in the Nigerian oil and gas industry. Every operator, contractor, subcontractor, alliance partner or any other entity involved in upstream activity shall contribute one per cent of the contract value to the Fund.
Nigeria Content Act
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An indigenous company, which has the capacity to execute a project, would not be disqualified in the bidding process as long as its quoted value is not 10 per cent higher than the lowest bid.
Operators and Project Promoters to give priority to bids containing the highest level of Nigerian content where the bids are within one per cent of each other at commercial stage, provided the Nigerian content in the selected bid is at least five per cent higher than its closest competitor
Nigeria Content Act
50 per cent of the equipment deployed for the execution of work will be owned by Nigerian subsidiaries where the international/multinational companies are working through such subsidiaries
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• Strict compliance without disrupting industry activities –
Capacity Gaps
• Handling increased cost + schedule
• Transparent effective model for NCDF Management
• Ensuring Quality of delivery
• Absence of manufacturing capability and confidence to use
local goods- case for strong R&D base and interface with
RMRDC
• Extending implementation to Downstream
• Growing new organization to meet wide responsibility
• Exposure to frequent litigation
Nigeria Content Act- Challenges
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Industry Challenges
Community and Environmental issues Infrastructure development and
capacity expansion Quota Restriction Local Content- To increase indigenous
participation in industry services
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Summary & Conclusion
Active hydrocarbon exploration has been going on for
more than 50 years Nigeria has abundant Oil and Gas resources Exploration activities are shifting to deep offshore
areas Government objective is to grow reserve to 30MMMB Opportunities are abound in E&P and other related
service activities Government will continue to provide enabling
environment for prospective investors Fiscal terms and incentives are generous Abundant opportunities abound in the emerging Gas
and Down stream sectors
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Ranking of the World's Happiest Countries
1. Nigeria2. Mexico3. Venezuela4. El Salvador5. Puerto Rico
Source: http://thehappinessshow.com/HappiestCountries.htm
The World Values Survey, an inter-university study
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We are working Real Hard!
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Thanks for Listening is open for Business
Emeka Unachukwu President Port Harcourt Chamber Of Commerce [email protected] +447924575439, +2348134489407