The legal and regulatory framework for
investing in gas projects in Nigeria:
challenges and opportunities
SALLY UDOMA
UDO UDOMA & BELO OSAGIE
PRESENTED AT THE IBA CONFERENCE
LAGOS, 6 – 8 NOVEMBER, 2013
Introduction
Nigeria stands in 9th
place in the world in
terms of gas reserves
(approx. 181 tcf), but
with the estimated
capacity to move up to
the ranks of the top 3
(600 tcf)
Quantities of gas flared
reduced by 30% over
the last 5 years;
currently flare approx.
15% of gas production;
Government targeting a
reduction to 2% by
2014!
5,118
Source of figures: OPEC Annual Statistical Bulletin, 2013
Natural gas production in Nigeria, 2012
MARKETED
10%
PRODUCTION
(42,571MSCM)
24%
50%
FLARED
(13,182MSCM)
REINJECTED GAS
16%
(20,520MSCM)
SHRINKAGE
GROSS PRODUCTION: 84,845MSCM
(8,573MSCM)
Source of figures: OPEC Annual Statistical Bulletin, 2013
MINISTER
DPR
Gas Value Chain
Regulates the
entire value
chain & industry
participants
Fed. Govt., through
Dept. of Pet. Res.,
regulates the entire
value chain.
Fed. Govt., through
NNPC and its
subsidiaries,
participates in the
entire value chain.
Upstream – NPDC;
Midstream – NGC;
Downstream – NNPC &
NLNG
EXPLORATION
&
PRODUCTION
Upstream
PROCESSING –
CPFs,
LIQUEFACTION
PLANTS, ETC
TRANSPORTATIONDOMESTIC &
TRANSBOUNDARY
PIPELINES; LNG
Midstream
Govt. participation is through the
NNPC – NPDC (and NAPIMS) in
the upstream; NGC in midstream
gas transmission; mostly NLNG in
the downstream
MARKETING & SUPPLY DOMESTIC (POWER GENERATION,
CEMENT & FERTILIZER PRODUCTION)
& EXPORT MARKETS (LNG, ETC)
Downstream
PRIVATELY-OWNED
COMPANIES – IOCS,
INDEPENDENTS,
INDIGENOUS
COMPANIES,
PARTICIPATE IN
VARIOUS
ACTIVITIES ACROSS
THE VALUE CHAIN
Current legal & regulatory framework
 Petroleum Act, 1969 &
NNPC model PSC terms
 Associated Gas Re-
injection Act
 Set out the rights &
obligations of license or
lease holders & PSC
Contractors respectively
 All producers to submit
plans for implementation
of gas reinjection and
cease gas flaring subject
to payment of fees for
permitted flaring, or
forfeiture of concession
for breach of the Act
Current legal & regulatory framework
 National Domestic Gas
Supply & Pricing Policy
and Regulations
 Oil Pipelines Act &
Regulations
 Institute a Domestic Gas
Supply Obligation for
producers and establish a
transitional pricing
framework
 Provides the licensing
regime for, and regulates
construction, operation
and maintenance of oil &
gas pipelines and
associated infrastructure
Current legal & regulatory framework
 Petroleum Profits Tax
Act, Companies Income
Tax Act, and Finance
Miscellaneous Taxation
Provisions Acts 18 & 19
of 1998 and Act 30 of
1999
 Nigerian Oil & Gas
Industry Content
Development Act, 2010
 Regulate the taxation of
profits from upstream
(PPTA) and midstream
or downstream (CITA)
activities, and provide
various incentives for
companies engaged in
gas utilization projects
 Requires preferential or
exclusive consideration
to be given to Nigerian
companies
Current legal & regulatory framework
 DPR Environmental
Guidelines & Standards
for the Petroleum
Industry in Nigeria
(EGASPIN);
Environmental Impact
Assessment Act; National
Environmental
Standards and
Regulations Enforcement
Agency Act; state
environmental
legislation may apply.
 EGASPIN provide the
primary regulations
governing environmental
standards and their
enforcement in the oil
industry.
Inauguration
of OGIC
Challenges
Uncertainty over
the regulatory
framework
Commercial
Viability
Gas Transmission
Infrastructure
Insecurity
Community Issues
Financing/
Funding
Constraints
YEARS
2000
Reinauguration of
OGIC
2004
Draft
National Oil
and Gas
Policy
2007
Approval of
National Oil
and Gas
Policy
Inauguration
of Task Force
and Tech
Committee
Inauguration
of IAT
2008
2009
2010
2011
OGIC Report completed;
submission of PIB to the
6th session of the National
Assembly
2012
Submission of new PIB
to the 7th session of the
National Assembly
 “The biggest problem we have in Nigeria is
that the government is still the dominant
player in the upstream …where the money
required to gather the gas, compress it and
use it has to come from ….I believe that if
you get government out of the investment
area, you will see a rapid change …” Chima
Ibeneche, Chairman, Nigerian Gas Association
Opportunities
SIGNIFICANT INVESTMENT OPPORTUNITIES INCLUDE…
Power Sector Reform
PARTICIPATION IN
UPSTREAM GAS
DEVELOPMENT
The “Gas Revolution” –
turning Nigeria into a
regional hub for gasbased industries
Accelerated Gas
Development and
Utilization Programme
CONSTRUCTION &
OPERATION OF GAS
TRANSMISSION
PIPELINES; REMOTE
PIPELINE
MONITORING
LNG & LPG
STORAGE,
ETC
Infrastructure
Development
Transportation
DEVELOPMENT OF
GAS PROCESSING
FACILITIES, LNG &
LPG PLANTS, ETC;
GAS METERING &
MONITORING
DEVICES
EXPORT – REGIONAL
AND INTERNATIONAL
Export - Regional and
International
LPG Storaage and
distribution
GAS TO POWER,
DOMESTIC AND
INDUSTRIAL USE
INVESTMENT IN PIPE
MILING &
FABRICATION YARDS,
MAINTENANCE
SERVICES
PIB 2012 – key provisions
 Separates upstream and downstream regulatory bodies:




Upstream Petroleum Inspectorate and Downstream
Regulatory Agency.
Restructures NNPC: new incorporated National Petroleum
Assets Management Company Ltd, National Oil Company
and Nigerian Gas Company
Provides detailed gas transportation licensing regime;
guidelines for a network code governing the downstream
gas network; open access to gas transportation and
distribution networks; gas pricing principles; prohibits
anti-competition practices.
Incorporates the DGSO; prohibits flaring except in limited,
defined circumstances with Minister’s consent.
Revised fiscal provisions for upstream operators – new
Hydrocarbon Tax to replace PPT, and CIT now applicable.
Conclusion
 The PIB 2012 still has gaps in its attempt to effectively
address the current challenges for investment, BUT
 The Federal Government is focused on getting the PIB
passed this year, and is working with the IOCs to
establish an effective and robust commercial and fiscal
framework.
 Nigeria’s gas potential is huge. Opportunities for
domestic gas utilization are waiting to be seized. With the
right infrastructure, regulatory and fiscal frameworks,
economic stability and insecurity issues addressed,
Nigeria’s growth and development is assured.
THANK YOU
SALLY UDOMA
UDO UDOMA & BELO OSAGIE