Vienna, Austria | – Nigeria’s government is unlikely to consider any compromise on the fiscal regime laid out in the long-awaited Petroleum Industry Bill (PIB) on oil sector reform, as the country’s oil minister Thursday appeared to shrug off responsibility for the delay in the passage of the bill that has deterred key new investment in the oil sector.
It has been suggested that lower oil prices could force the government to seriously consider making concessions on the proposed higher taxes and royalty levies in the new law, which is now six years in the making.
But Diezani Alison-Madueke, who was speaking to reporters ahead of Thursday’s OPEC meeting in Vienna, said the bill was now “out of my purview,” and rests solely with parliament.
“That bill is with the National Assembly, the parliament, it is not under my purview so it is not for us to prescribe. But we do have to look at all possible enablers at this time in view of the sustained downward trend in oil prices,” the minister said.
The bill proposes to hike the government’s share of revenue to at least 73% from 61%, a move industry executives say will halt investment in deep offshore projects and risk reducing Nigeria’s oil output by 25% by 2022.
The government argues that previous terms introduced in 1993 were based on an oil price of $20/b, and are no longer realistic.
OIL OUTPUT AT 1.8 MILLION B/D
Oil is the key driver of the Nigerian economy and accounts for up to 95% of dollar earnings, but production has stagnated in the past two years and is currently averaging 1.8 million b/d, Alison-Madueke said.
The drop in output is largely due to widespread crude theft and a slowdown in investment.
The 30% slump in oil prices has also forced Nigeria to revise downward its oil price benchmark for revenue calculations in its 2015 budget to $73/b.
“We should be producing 2.5-2.6 million b/d so we are already facing very stringent cuts,” the minister said.
Nigeria in particular has suffered from the boom in shale oil production in the United States.
Barrels stopped flowing in July for the first time on record from an average of 64,000 b/d in the first eight months of 2014, according to the US Energy Information Administration, and compared with a full-year 2013 average of 239,000 b/d.
FOCUS ON ASIA
The West African nation hopes to offset the impact of the drop in US sales by increasing exports to China and India but faces competition from Middle East producers vying for key Asian markets.
The minister said Nigeria was more focused on Asian markets than European outlets but was looking at various alternatives for it sweet, light crude barrels.
“We are expecting to do a lot more work with our Asian colleagues on the export side. We are particularly targeting India and China as well. At the moment the Asian demand is a lot stronger,” than Europe, the minister said.
“But we are open at this point in time and we are having discussions with all possible takers. End-user markets are very important and we trying to develop those stringently at this point in time.”
Analysts say Latin America crude is fast displacing West Africa crude in both China and India, a development that could see West Africa face a significant demand shock next year.