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

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 Km 2 land area.
 Per capita income has risen from $1,555 to $2,688,
 ranked 121st in the world from 135th position

$522 billion (2013 est.) GDP
GDP growth
GDP per capita
GDP by sector
Inflation ( CPI )
7.1% (2012 est.)
$2,800 (2012 est.) agriculture: 40%; services:
30%; manufacturing: 15%; oil: 14% (2012 est.)
11.9% (2011 est.)
Gini coefficient
Labour force
Labour force by occupation
Unemployment
39.7 (2003)
48.53 million (2011 est.) services: 32%; agriculture:
30%; manufacturing: 11%
24%

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

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

 1908 Nigeria Bitumen Company -
Activity terminated by 1 st World War
 1937 Shell D’ARCY
Activity terminated by 2 nd World War
 1951 First Well Drilled by SHELL
 1956 First Discovery (Oloibiri field)
 1958 First Exportation 5000B/Day

 Nigeria joined OPEC 1971
 Export Value of crude oil in 1958 1%
2013 90%
 8 th Largest producer of oil in the World

Oil Producing States In Nigeria

 No. 1 oil exporter in Africa
 Large oil reserves
30bln bbl
6000 wells & > 600fields
 9th largest gas reserves in the
World ( 187 TCF)*

 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

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).

Joint Venture
Operating
Agreement

Production Sharing Contract (PSC)

 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.

Petroleum Profit Tax
Onshore & Shallow offshore
 First Five years (New comers) 65%
 First Five years (Existing Companies) 85.5%
 Subsequent Years (All Players) 85.5%
Deep Offshore & Frontiers 50.0%
Investment Tax Allowance
 Land Operations
 Offshore Depth @ 100M
 Offshore from 100-200M
 Offshore more than 200M
 Deep Offshore
 Inland basin
5%
10%
15%
20%
50%
50%

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
NNDC and Education Tax
5.0%
Taxes to State and Local Governments

•Oil block acquisition
•Drilling Rig Leasing and drilling related services
•Engineering services
•Heavy Equipment leasing
•Seismic Acquisition and processing

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
12MLitres
PMS
35MLitres
HHK
8MLiters
JETA1
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

 9 th Largest proven Gas reserves in the world.
 Estimated quantity of reserves 187 TCF
 Reserves/production estimated to last 109 years

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
ROYALTY
ONSHORE
OFFSHORE
ITA
AGFA
PRODUCTION
30%
SUPPLY
TO LNG
45%
TRANSPORTATION/
UTILISATION
30%
7%
5%
5%
APPLICABLE
7%
5%
10%
APPLICABLE
NA
NA
15% (35%FOR
NGL AND GTL
NA
ITEM PRODUCTION
SUPPLYTO
LNG
TRANSPORTATION/
UTILISATION
CAPITALALLOW
Y1-4
Y5
20%
19%
TAXHOLIDAY NA
Y1-3
33%
NA
Y160%
Y220%
Y319%
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
 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 utilisation of Nigerian human and material resources and services in the country’s oil and gas industry.
The ACT enacted 22 nd April 2010.
Giving priority to Nigerian independent operators in the award of oil blocks, oil field licenses, oil lifting licenses and all projects, subject to the fulfilment of such conditions as may be specified by the
Minister

Nigeria Content Act
Aim & Justification
To increase national wealth through:
 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
 Economic growth 5% is retained in Nigeria.0
 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
Maximize utilization of
Nigerian made goods
• 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
2
3
4
Maximize utilization of
Nigerian human resources
• 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
• Promote establishment of support industries that will sustain oil and gas industry operations
• Enhance multiplier effect of oil and gas investments in economy
Focus on community participation in the supply chain
• Develop pool of competitive supply chain rooted in oil bearing communities
• Create customized training and sustainable employment opportunities
• structured awareness and enlightment campaigns
5
Foster institutional collaboration
• 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!

is open for Business
Emeka Unachukwu
President
Port Harcourt Chamber Of Commerce emeka.unachukwu@gmail.com
+447924575439, +2348134489407