Sylva, kyari seek Inclusion of Gas Terms in PSCs

March 9, 2021
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•Say clear fiscal framework will enhance gas devt

By Emmanuel Addeh and Udora Orizu in Abuja

The Minister of State for Petroleum Resources, Mr. Timipre Sylva and the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, yesterday advocated the inclusion of gas terms in the Production Sharing Contracts (PSCs).

They called for a legislative framework with clear fiscal terms in order to tap the full potential of the gas resources in the nation’s deepwater acreages.

Kyari and Sylva spoke at a one-day public hearing on ‘Inclusion of Gas Terms in Production Sharing Contracts (PSCs) by the Nigerian National Petroleum Corporation (NNPC)’, organised by the House of Representatives’ Joint Committee on Gas Resources, Petroleum Resources (Upstream) and (Downstream).

In his presentation, Sylva said issues of PSCs were restricted to oil when the contracts were signed.

He stated that the NNPC is engaged in discussions around the PSCs, adding that most of the discussions are commercial, and they are making good progress.

He, however, assured the gathering that the issues around gas would be addressed in the proposed Petroleum Industry Bill (PIB), now before the National Assembly for passage.

He said: “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.”

The minister added that efforts are ongoing to get Nigerians use gas in their cars.

“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 task force is expected to 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,” Sylva said.

A press statement by the Group General Manager, Group Public Affairs Division of the NNPC, Dr. Kennie Obateru, quoted Kyari as saying that investors needed clarity on fiscal terms to be encouraged to commit their capital for gas development projects.

He stated that a functional legislative framework that provides a clear sight on how investors can recoup the capital on investment and make gains is what the PIB was all about, adding that the passage of the bill would help resolve issues of fiscal terms in the PSCs.

Kyari said the PSC agreements were focused mainly on crude oil production, leaving the gas development component to the discretion of the parties thus making the provision in PSC for development of gas very weak.

According to him, the Ministry of Petroleum Resources is driving gas pricing policy as part of the federal government’s gas commercialisation initiative.

Kyari identified good physical environment and pricing as two key conditions to issues of gas terms inclusion in the PSCs.

Kyari 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 monetising the gas on the terms that is mutually acceptable.

The focus was clearly on oil. The solution to this is getting certain framework right.”

Kyari stated that the PIB will address fiscal environment, adding that pricing framework is key.

He said if the country didn’t get the price right, those PSCs would 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 are focused on bringing gas into domestic market. This is a very right moment to focus on gas and we will surely deliver on this. We have already made submission,” he added.

Earlier, while declaring the hearing open, the Speaker of the House, Hon. Femi Gbajabiamila, had said Nigeria’s gas sector could create millions of jobs, bring about industrialisation as well as generate more revenue for the government, if it could correct all anomalies in the sector.

He said: “We have had to adjust plans and make modifications to accommodate the new realities imposed due to the emergence of the COVID-19 pandemic. Nonetheless, I am certain that the assignment will shortly be completed and a report presented to the House for consideration and adoption.”

On his part, the Chairman of the Joint Committee, Hon. Nicholas Mutu, said Nigeria’s enormous gas reserves demanded a robust public policy to drive gas development, boost the economy, create jobs, stimulate incomes for gas value-chain resources and earn revenue for the government.

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