Despite Nigeria being one of the top oil-producing countries in the world with the largest gas reserves on the African continent, it faces difficulties in attracting the necessary investments to grow its oil and gas industry. The Petroleum sector, which although makes up 90 percent of the foreign exchange earnings of the nation and is a significant source of government revenue, only contributes about 8 percent to the Gross Domestic Product (GDP) of the country.
This poses a major economic hurdle for the country. The Petroleum Industry Act (PIA) was ushered into law by the federal government of Nigeria in 2021 with the aim of transforming the Oil and Gas Industry of the country and enticing foreign direct investments. Despite its implementation, there remains a lack of interest from both local and international investors, largely attributed to concerns regarding fiscal shortcomings and overall economic instability in the Market Environment of the nation.
Their goal is to enhance the competitiveness of the country.
More so, the new administration of President Bola Ahmed Tinubu, in collaboration with the Special Adviser on Energy Olu Verheijen, has taken decisive action to aid the improvement of the energy sector of Nigeria, working by with various agencies and ministries. Their goal is to enhance the competitiveness of the country and appeal to investors, ultimately driving increased Investment in the country. Tinubu, the Nigerian President, unveiled a new set of reforms. These reforms consist of three key directives.
The three major directives are aimed at providing financial incentives for oil and gas ventures, lowering expenses related to contracting, and encouraging cost-effective practices for local content obligations. Within a short period of time, Nigeria is experiencing a surge in investment. The Ubeta project, with a capacity of 350 million standard cubic feet of gas per day, has recently received the Final Investment Decision (FID) approval from the Nigerian National Petroleum Company Limited (NNPCL) and TotalEnergies.
Ubeta project is set to enhance Nigeria’s local market and support NLNG.
Thus, the Final Investment Decision (FID) will signal the start of new opportunities for growth in the country. Investing $550 million into the extraction process of 900 billion cubic feet of non-associated Natural Gas from OML 58, located around 85 kilometres from Port Harcourt in Nigeria’s Niger Delta Region, marks a significant financial commitment. Investing in the TEPNG Joint Venture is in line with the current Presidential Directives that seek to enhance Nigeria’s local gas supply and foster economic growth.
These directives are expected to bring in fresh investments and breathe new life into previously inactive projects, with a total value of more than $10 billion within the next 18 months. The Ubeta project is set to enhance Nigeria’s local market and support NLNG by increasing its supply capacity. This initiative is a key component in the Nigerian government’s efforts to boost energy security, a crucial element in their strategy to promote continuous Economic Growth by maximizing the use of local gas resources.
Related Article: $25bn Annual Investment Needed for 2m bpd
Additionally, the project aims to spark a revival in the Economy and generate job opportunities within the sector, while also boosting growth for small and medium enterprises in nearby areas. The recent announcement from the administration signals a push to enhance the PIA through fresh directives, ultimately making Nigeria more appealing to investments in the oil and gas sector. The initial move with the TEPNG JV seems to pave the way for enhancing Nigeria’s gas supply capacity, particularly in domestic gas, and fostering economic growth as a result.