Jonathan's Energy Pledge: The Basis of President Goodluck Jonathan' Policies Will Be the Introduction and Implementation of His Much-Vaunted Oil, Gas and Power Sector Reforms. It Is Designed to Provide Sufficient Electricity to Power the Rest of the Economy. but Can the New President Deliver When His Predecessors Have Failed to Do So?
Ford, Neil, African Business
The centrepiece of the energy sector reforms is the Petroleum Industry Bill (PIB)> which the government states is "designed to create a comprehensive legal framework for the oil and gas industry".
The PIB was expected to be signed into law by Jonathan before the elections but progress was held up by political campaigning and debate over the content of the new legislation. The oil majors that dominate the country's oil and gas sector feared that the new regulations would penalise their operations.
However, the Minister of Petroleum Resources, Diezani Alison-Madueke, says that the new legislation will not pose any threat to upstream profitability. She said: "We have worked very closely and robustly to ensure that every area of the PIB that needed to be looked at and relooked at, to ensure that when it is finally promulgated into law it is a bill that we can stand on for years to come, has actually been done. We are quite comfortable now with the reforms, the changes and the alignments that have taken place between us and our committees and of course the legislatures themselves."
According to the Ministry, the PIB will consolidate, simplify and replace 16 other pieces of legislation that have been passed since independence.
Jonathan argues that it will create a more transparent oil industry, with foreign investors, the NNPC, Abuja, the state governments and the Nigerian public all aware of the terms of each and any deal.
The foreign oil companies that partner the NNPC in the joint ventures that produce most of the country's oil output have long complained that the state-owned company has failed to provide its share of investment costs. The PIB is designed to force the firm to provide its share of funding in a timely manner.
The development of a number of upstream oil projects has been delayed by a combination of uncertainty over the content of the PIB and the poor security situation in the Niger Delta, In addition, delays to the passage of the new legislation have already held up the latest planned hydrocarbon licensing round. If the PIB genuinely poses no threat to levels of foreign investment, these projects should boost national oil production capacity from 3m barrels a day (b/d) to 4m b/d and well above current output of about 2.3 b/d.
One of the government's biggest challenges will be to overhaul the operations of the NNPC. Often accused of enabling endemic corruption in the Nigerian oil industry, the company has the potential to act as a conduit for greater investment rather than as an obstacle to modernisation.
One of the main problems is that the company acts as both sector regulator and an upstream player in its own right, but it remains to be seen whether Abuja will take the brave step of separating these two functions.
Power to gas plans
With 4GW, Nigeria currently has roughly the same installed generating capacity today as it did in 1999 when military rule came to an end.
However, a number of gas-fired power projects are either planned or already under development that would collectively take this figure above 10GW, if and when sufficient gas feedstock is supplied. Oil companies have traditionally flared most associated gas production in the country, while the vast majority of identified non-associated fields have not yet been tapped.
At present, commercial prices are paid for gas feedstock supplied to the liquefied natural gas (LNG) plant on Bonny Island, which ships gas overseas, but domestic gas prices are tightly regulated at a very low rate. As a result, upstream investors have little incentive to invest in domestic gas projects.
Since coming to power, and particularly during his election campaign, Jonathan repeatedly promised to improve Nigeria's dire power supply situation. Speaking at a campaign rally in Benin City, he promised to ensure reliable electricity supplies by 2015 and added: "Our idea is to transform the economy to create space for all of us to operate. …