Transcript Netherlands Economic Forum

Future Outlook on Investment Potentials
& Partnership in Nigeria Oil and Gas Industry
Nigerian - Netherlands
Economic Forum
15-17 September, 2014
Hotel Novohotel Hofweg 5-7 The Hague,
The Netherlands
Emeka Unachukwu fsm,fidpm,fcia
President.
Port Harcourt Chamber Of Commerce
Welcome to Nigeria
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
Welcome to Nigeria
GDP
$522 billion (2013 est.)
GDP growth
7.1% (2012 est.)
GDP per capita
$2,800 (2012 est.)
agriculture: 40%; services:
30%; manufacturing: 15%;
oil: 14% (2012 est.)
11.9% (2011 est.)
GDP by sector
Inflation (CPI)
Gini coefficient
Labour force
Labour force by occupation
Unemployment
39.7 (2003)
48.53 million (2011 est.)
services: 32%; agriculture:
30%; manufacturing: 11%
24%
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
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 Billion
Brazil N289 Billion
South Africa N218.9Billion
Building on a Solid Relationship
Our Historical Beginning
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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
Our Historical Beginning
 Nigeria joined OPEC 1971
 Export Value of crude oil in 1958
2013
1%
90%
 8th Largest producer of oil in the World
Where do we have oil in Nigeria
Where do we have oil in Nigeria
Oil Producing States In Nigeria
How much oil do we have?
 No. 1 oil exporter in Africa
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Large oil reserves
30bln bbl
6000 wells & > 600fields
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9th largest gas reserves in the
World ( 187 TCF)*
How much oil do we have?
Other Abundant Natural Resources
Coal & Lignite – 2.7 billion tonnes
Tar Sands – 31 blnboe
Hydro Power – 14750 MW
Solar – 7.0 Kwh/m2/day
Wind – 2-4m/s at 10m height
Biomass – 320 mlnhectars
Structure of our Oil Industry
Upstream Sector
Indigenous Oil Companies
Summit Oil International Ltd (OPL 205), Sahara
Energy Field Limited7 (OPL 274,286,284), and Peak Petroleum Industries
Nigeria
Limited8(OML 122).
How they are doing Business
How they are doing Business
Joint Venture
Operating
Agreement
How they are doing Business
Production Sharing Contract (PSC)
How they are doing Business
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.
Understanding Fiscal policies
Petroleum Profit Tax
Onshore & Shallow offshore
 First Five years (New comers)
 First Five years (Existing Companies)
 Subsequent Years (All Players)
65%
85.5%
85.5%
Deep Offshore & Frontiers
50.0%
Investment Tax Allowance
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Land Operations
Offshore Depth @ 100M
Offshore from 100-200M
Offshore more than 200M
Deep Offshore
Inland basin
5%
10%
15%
20%
50%
50%
Understanding Fiscal policies
Royalties
Onshore
100m Water Depth
101-200M Water Depth
201-500M Water Depth
501-800M Water Depth
801-1000M Water Depth
Above 1000M Water Depth
20.0%
18.5%
18.5%
16.5%
12.0%
8.0%
0.0%
Inland basins
10.0%
Other Taxes
VAT
5.0%
NNDC and Education Tax
Taxes to State and Local Governments
Proven Confidence in our Industry
Our Future is Bright
Top investment choices Upstream
•Oil block acquisition
•Drilling Rig Leasing and drilling
related services
•Engineering services
•Heavy Equipment leasing
•Seismic Acquisition and
processing
Structure of Oil Industry
Downstream stream Sector
Refineries
Transportation & Marketing of Petroleum
products
Structure of Oil Industry-Downstream
Structure of Oil Industry-Downstream
Refining Capacity 445,000BSPD
PHRC1
60,000BSPD
PHRC2
150,000BSPD
WRPC
125,000BSPD
KDRPC
110,000BSPD
Structure of Oil Industry-Downstream
National Daily Consumption
AGO
PMS
12MLitres
35MLitres
HHK
JETA1
8MLiters
2.5MLiters
Structure of Oil Industry-Downstream
Invest & Partner with us!
• 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
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
Investing in Our Gas Industry
The Gas Reform
Maximum economic
impact through gas.
 Aims to drive linkages
with agriculture,
manufacturing and
dispersed small
enterprise through Power
“… By 2014, we would
have positioned Nigeria
firmly as the
undisputed regional
hub for gas-based
industries such as
fertilizer,
petrochemicals and
methanol.”
Gas Demand, Utilization & Export
Gas Demand, Utilization & Export
Reforms vs Opportunities
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
Gas to Power
HIGH VALUE EXPORT
Consolidate Nigeria’s
position and market share in
high value export markets
 Targeted LNG export
opportunities
 Regional gas pipelines that
help consolidate nation’s
footprint and influence
LNG
Regional Pipelines
Reforms vs Opportunities
Africa and Regional
West African Gas Pipeline
Nigeria – Algeria Pipeline
West African Gas Pipeline
National Gas Infrastructure
Blueprint layout
Nigeria – Algeria Pipeline
Exploring opportunities in the Gas value Chain
Fiscal Policies in the Gas Sector
ITEM
TAXRATE
PRODUCTION
SUPPLY
TO LNG
TRANSPORTATION/
UTILISATION
30%
45%
30%
ONSHORE
7%
7%
NA
OFFSHORE
5%
5%
NA
ITA
5%
10%
ROYALTY
AGFA
APPLICABLE
APPLICABLE
15% (35%FOR
NGL AND GTL
NA
ITEM
PRODUCTION
SUPPLYTO
LNG
TRANSPORTATION/
UTILISATION
CAPITALALLOW
Y1-4
20%
Y1-3
Y160%
Y5
19%
33%
Y220%
Y319%
TAXHOLIDAY
NA
NA
APPLICABLEFOR
5+2YRS
DUTY/VATON
CONSTRUCTI
O
NEQUIPMENT
NONE
NONE
NONE
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.
Reserved Areas for Oil & Gas Business
Onne Oil & Gas Free Zone
Amazing Incentives
World Class Logistics Bases
@ Kidney Island. Port Harcourt. Nigeria. Ready 2017
Relevant State Agencies
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Ministry of Petroleum Resources
Department of Petroleum resources
Nigeria National Petroleum Corporation
Ministry Of Environment
Niger Delta Development Company
Federal Inland Revenue Service
5 Year Expenditure plan
Engineering Design
• Over $500 Mln/year
Fabrication & Construction
• Over $8 billion/year
Materials, Manufacturing & Equipment Leasing
• About $25bn
Banking & 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 projects
Shipping & Logistics
• Partnership with Nigerian shipping companies unlocks over
$600 million annual spend on international transport of crude
Understanding our Laws
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
Giving priority to Nigerian
utilisation of Nigerian human and independent operators in the award
material resources and services in of oil blocks, oil field licenses, oil
lifting licenses and all projects,
the country’s oil and gas industry. subject to the fulfilment of such
The ACT enacted 22nd April 2010.
conditions as may be specified by the
Minister
Nigeria Content Act
Aim & Justification
To increase national wealth
through:
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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
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
Nigeria Content Act
FOCUS
1
2
3
4
5
Maximize utilization of
Nigerian made goods
Maximize utilization of
Nigerian human resources
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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
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•
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
Link the oil and gas
industry with other sectors •
of the Economy
•
Focus on community
participation in the supply
chain
Foster institutional
collaboration
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•
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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
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
Nigeria Content Act
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.
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.
Nigeria Content Act
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
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
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
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
Nigeria Content Act- Challenges
• 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
Industry Challenges
 Community and Environmental issues
 Infrastructure development and
capacity expansion
 Quota Restriction
 Local Content- To increase indigenous
participation in industry services
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
The World Values Survey, an inter-university study
Ranking of the World's Happiest Countries
Source:
http://thehappinessshow.com/HappiestCountries.htm
1. Nigeria
2. Mexico
3. Venezuela
4. El Salvador
5. Puerto Rico
 We are
working
Real
Hard!
Thanks for Listening
is open for Business
Emeka Unachukwu
President
Port Harcourt Chamber Of Commerce
[email protected]
+447924575439, +2348134489407