The needed changes to the current legislation governing the operations of the oil and gas sector have been dragging for about 8 years and this has deterred the development of the industry in the country. The general trend has been a decline in the activities of the major oil corporations in all sectors of the industry.
From January to October, just over three wells a month were drilled in Nigeria, down from a monthly average of almost 22 in 2006, according to petroleum ministry data, Bloomberg reports. Output is just about 50% of the goal of the government at 2000.
Royal Dutch Shell Plc and Chevron Corp. are among the oil companies that quit fields in Nigeria. To end the regulatory uncertainty. The major problems cited in Nigeria include the need to set tax rates that spur investment in a stagnating deep-water sector.
Since 2008, multi-nationals have sold about $5.2 billion of assets to local companies. And the problems cannot be attributed to the slump in oil prices as they occurred before mid-2014. Nigeria may have lost $200 billion in investment, according to the Abuja-based Nigeria Extractive Industries Transparency Initiative.
“Any business requires clarity on the operating environment before committing to investments, the uncertainty surrounding the passage of the petroleum industry bill definitely stalled possibly hundreds of billions of dollars commitments on many projects.” said Pabina Yinkere, an energy analyst and head of research at Lagos-based Vetiva Capital Ltd.
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Antony Goldman of London-based PM Consulting, which advises on risk in West Africa’s oil and gas industry also says “The lack of clarity was one of the main contributory factors behind divestment by Shell, Chevron and ConocoPhillips. No other international company, including the Chinese, were among the buyers.”