Dayo Okusami, Partner at Templars, one of the top full services law firms in Nigeria talks to PGR about the recently signed into law Deep Offshore Act, growth in African oil and gas industry and local funding for the Alternative Energy space.
Ayobami Adedinni brings the excerpt
PGR : You are obviously one of the most knowledgeable and experienced people in this industry. What in your view is the significance of the Deep Offshore Act Amendment Bill recently assented to by the President?
D.O: This is possibly one of the most significant laws that have been passed in the sector in the last 15 years.
The indisputable intent of the amendment is to increase government earning.
As you know, the Act changes the royalty rates currently paid by firms operating production sharing contracts, especially in deep offshore projects.
We have a situation in Nigeria where there is need to have additional incremental investments in the sector to maintain and increase crude oil production, but these investments are not happening due to a lot of uncertainty:, economic, and legislative as well as commercial.
However, we need to balance things out.
You see this week that Springfield announced that it has become the first independent African company to discover oil in deep water.
You see what’s going on in Namibia, Angola and what’s happening in Mozambique offshore the Horn of Africa therefore we need to be circumspect before we give investors another excuse to go to other neighboring countries while being cognizance of the fact that the effects of our actions now might not be immediate.
The import of these actions is that it is going to take years to play out and may make Nigeria less favorable for oil and gas investments.
PGR : Still on legislation, what change will the PIGB bring to the Nigerian Oil and Gas industry?
D.O: Speaking about the PIGB will be speculative because we don’t know what we have in the bill.
It is certain it will change the oil and gas industryindustry, but the challenge is how and when.
I can’t give specifics because it hasn’t yet been passed and the Bill before the National Assembly now is still subject to change.
The PIB would definitely have an impact on investment decisions.
I do believe that if the PIB was passed, it certainly would lead to an increase in activity, but that in itself has not stopped those who are operating here from working, or new parties from entering.
But I will say this, the Nigerian Oil and Gas industry is changing from this year onwards.
The scope of this and how that will impact and how we will be able to develop our asset is the question.
PGR: Where do you see Growth in the African oil and gas value chain?
D.O : A lot of IOCs are divesting their assets so I see Indigenous Upstream firms acquiring some of these assets.
Also, there will be growth in Gas Utilization projects. And this has a knock-on effect on services.
There will be a number of developmental and ancillary oil and gas services that are to be provided.
It’s arguable that the most growth might be services because there will be required services from both international and indigenous service companies to service this growth that is happening.
For me, there’s an opportunity of significant growth in the Upstream, Midstream via Gas utilization and Services which is the largest because it has more direct impact on people.
PGR : Do you think we can achieve Universal Access by 2030?
D.O: In theory, it is possible. Right now, Nigeria is generating and distributing we’re doing about 4,5,000 MW. It is universally recognized that we need at least 45,000 MW more to have some parity.
But right now, we are having Transmission issues.
If we are having Transmission and Distribution issues now, how then do we in 10 years build, generate and distribute the needed 45,000 MW? It’s a huge challenge but it can be done.
However, there’s need to have a commercial and Regulatory framework that will allow for the growth of the power sector.
Yes, it’s true that Renewable energy such as Solar and Wind help but, in my opinion, it would be difficult for wind and solar to fill in the 45,00MW gap they can’t take us to where we need to be.
Additionally, we have the ongoing various balkanisation of the electricity sector by various off grid solutions that are actually very helpful but we need to consider that how to aggregate this in solving the country’s power challenges is the question.
PGR :How do we get more local capital investing in the Renewable Energy industry?
D.O: There’s been quite a bit of international money coming into the Renewable Energy sector.
An instance is Arnergy which just closed a $9 million deal.
Fact remains that once local players see such activities, their interest in the sector grows.
The questions will now be if it is bankable and making returns on investment?
This now grows the confidence of local investors that it is something they can also do having found out the viability of these projects.
PGR : Your top predictions for 2020
D.O: There will be a lot of Mergers & Acquisitions activities in the Upstream sector.
The Gas Flare Commercialization Program will lead to a flurry of activities.
