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Energy

FG assures oil companies of lower taxes in new PIB

Timipre Sylva has disclosed that the much anticipated PIB will include provisions for lower taxes to sustain stable investments in Nigeria’s oil sector.

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NCDMB launches LPG Composite Cylinder Manufacturing plant in Bayelsa, IOCs, Nigeria, Timipre Sylva, crude oil, Minister proposes 2020 timeline for rehabilitation of Warri, Kaduna refineries , FG to cut huge energy cost through gas commercialisation initiative, FG discloses plan to sell fuel at N97 per litre , FG give reasons why it won’t allow marketers determine petrol price despite deregulation, FG explains reasons for deregulating downstream oil sector

The Minister of State for Petroleum Resources, Timipre Sylva, has revealed that the much anticipated Petroleum Industry Bill (PIB) will include provisions for lower taxes to sustain stable investments in Nigeria’s oil sector.

Sylva also pointed out that Nigeria’s plan to ensure the growth of its oil industry has not been heavily impacted by the coronavirus pandemic, as key priority projects that had been up for execution in 2020 have not been derailed.

According to a report from ThisDay, this disclosure was contained in a statement by Sylva, while delivering a speech at the seventh joint International Energy Forum and International Gas Union (IEF-IGU) ministerial gas forum that was held virtually.

The Minister said that the government is not unaware of serious concerns raised by oil companies over high taxes, especially on onshore and shallow water operations, which it hopes to address with the PIB.

What the Minister is saying

Sylva, in his speech during the event, said, “We are not unmindful that the industry players are of the view that the current level of taxation on onshore and shallow water operations is excessive and therefore the proposed PIB should include a significant lowering of these taxes for new investments and for existing operations.’’

“As a government, we have identified major constraints that have delayed recent projects from reaching financial close or caused projects to be delayed and/or abandoned altogether. The PIB before Nigeria’s legislative arm that we propose will, I believe, provide this new framework.”

“To secure the future of the industry in Nigeria, fiscal and other terms must be based on a more conservative economic outlook. A framework must be created for the Nigerian petroleum industry to grow and invest in additional petroleum production even under difficult economic conditions.’’

“For this reason, we are proposing grandfathering in the new PIB. The proposed PIB framework shall be based on core principles of clarity, dynamism, neutrality, open access and fiscal rules of general application,” he added.

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On the development of its gas resources, which appears to be a major area of priority for the government, especially with its diversification drive, and how well they have gone, the Minister stated that they are focused on the development of industrial and transport gas markets as well as gas-for-power.

He said: “We believe gas will become the dominant fuel for generating power not only in Nigeria but in Africa as well. We have commenced the implementation of carefully conceived initiatives to foster productivity and attract investments along the gas value chain.” This, he explained includes the promotion of natural gas as an alternative fuel in Nigeria.

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Substituting traditional white products with gas will cushion the effects of deregulation and create enormous job opportunities for Nigerians. It is expected that this will stimulate economic growth, further improve our energy mix, drive investments, and provide jobs in Nigeria,” Sylva added.

What you should know

  • The Petroleum Industry Bill which is an oil reform bill, was submitted to the National Assembly by President Muhammadu Buhari, in September, is key to the repositioning of Nigeria’s oil and gas industry, especially under its post-covid-19 agenda.
  • The laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxation, payment to local communities, terms and revenue sharing within Nigeria and so on.
  • Nigeria has repeatedly failed to pass the PIB, which is considered relevant to the country’s quest to make its oil industry regain its competitiveness, attract investments, 20 years after it was initially conceived.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Business News

FG to distribute 10 million LPG gas cylinders in 1 year

The FG is set to inject up to 10 million gas cylinders into the market to help improve safety and deepen cooking gas utilization.

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The Federal Government has announced plans to inject 5 to 10 million Liquefied Petroleum Gas (LPG) cylinders into the market in the next one year.

This is to help improve safety and deepen LPG (otherwise known as cooking gas) utilization across the country.

This disclosure was made by the Programme Manager, National LPG Expansion Implementation Plan, Mr Dayo Adeshina, at a sensitisation workshop on LPG Adoption and Implementation for Industry Stakeholders, on Wednesday in Lagos.

According to a report from the News Agency of Nigeria (NAN), Adeshina said the National LPG Expansion Implementation Plan, domiciled in the Office of the Vice President, was committed to achieving Nigeria’s target of 5 million Metric Tonnes of LPG consumption annually by 2027.

What the Programme Manager for LPG Expansion Implementation Plan is saying

Adeshina said, “The Federal Government is working towards injecting five to 10 million cooking gas cylinders into the market within the next one year. We are starting the cylinder injection under the first phase in 11 pilot states and FCT, with two states from each of the geopolitical zones.

The states are Lagos, Ogun, Bauchi, Gombe, Katsina, Sokoto, Delta, Bayelsa, Ebonyi, Enugu, Niger and the Federal Capital Territory. The cylinders will be injected through the marketers. The marketers will be responsible for the cylinders and the exchange will take place in homes and not in filling stations.

What this means is that going forward, cylinders will not be owned by individuals but by the marketers who will ensure that they are safe for usage.’

Adeshina pointed out that apart from household consumption, the government was trying to increase LPG usage in agriculture, transportation and manufacturing adding that this will enable the country to reduce CO2 emission by about 20% and create millions of jobs for Nigerians.

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He said that the government had also granted waivers on importation of LPG equipment and removed Value Added Tax (VAT) on LPG in addition to investment in infrastructure.

The President of the Nigerian Liquefied Petroleum Gas Association, Mr Nuhu Yakubu, said efforts should be made to ensure the availability, accessibility and affordability of cooking gas in the country adding that this would encourage more Nigerians to embrace gas usage in their homes with the attendant benefits to the country.

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Mr Olalere Odusote, Lagos State Commissioner for Energy and Mineral Resources, said the population of Lagos makes it imperative for residents to adopt cleaner energy sources for cooking, transportation and power generation adding that the government was targeting the conversion of 45% of about 4 million vehicles in the state to autogas over a four-year period in partnership with marketers.

What you should know

  • It can be recalled that the Federal Government had in November 2020, announced plans for the conversion of cars to autogas in a bid to have cheaper and cleaner energy especially with the high cost of petrol.
  • The government at different levels are pursuing cleaner energy sources for cooking, transportation and power generation.

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Energy

Nigeria’s Untapped LPG Market: Where Policy and Investment Meet

Investments in LPG are needed to drive the market and make it more available domestically.

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Nigeria's Natural Gas Liquids

Certain statistics would irk the average Nigerian. One of them is that Nigeria is the country with the largest proven gas reserves in Africa and 9th largest reserves in the world, yet the country imports about 70% of its Liquefied Petroleum Gas (LPG).

LPG, which is known to be able to tackle clean cooking challenges, power vehicles and machinery, serve as a component for industrial production, and agricultural processes and provide a key component for refrigerators. Also, a vibrant LPG market is certain to provide jobs for millions of Nigerians.

One would wonder why, with the enormous benefits to be had from LPG, Nigeria has a largely untapped LPG market and seems hardly bothered about it, while it continues to import LPG from other countries- including from Trinidad and Tobago.

READ: Sahara Gas Vessel boosts LPG availability with historic 7,000MT delivery to Nigeria

Various problems trail Nigeria’s LPG market. Primarily, there are the key problems that typically pervade the country’s oil and gas industry, like lack of infrastructure and an uncertain regulatory and policy framework. Other specific challenges include the continuous subsidies allocated to kerosene, a close and much dirtier alternative to LPG for cooking.

With kerosene being subsidised, and LPG having significant importation costs as well increased costs resulting from the LPG infrastructure gap, the end-user price for LPG is not attractive. One report by the Nigerian LPG Association reveals that Nigeria spends over $1 billion per annum on kerosene subsidies.

Apart from kerosene, we see wide usage of coal and firewood as cooking fuels. A United Nations Framework Convention on Climate Change (UNFCCC) report reveals that Nigeria has one of the highest deforestation rates in the world as a result of burning wood as fuel.

READ: FG moves to appoint fund manager for $37 billion infrastructure company

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This is not surprising, as research by the Clean Cooking Alliance shows that 94% of Nigerians (about 181 million people) do not have access to clean cooking and still continue to use dirty fuels for cooking.

Another challenge facing the domestic LPG market is the issue of standardisation of LPG cylinders, which are the most common means of storing LPG. With substandard cylinders flooding the market, safety concerns remain on the rise. Added to that, with a lax regulatory environment for procurement, route to market and consumer outlets for LPG in Nigeria, the concerns are further exacerbated.

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Investments in LPG are needed to drive the market and make it more available domestically. However, investors will remain wary until the legal and policy framework for the market is standardised. There is no doubt that a significant investment gap exists for LPG in Nigeria.

READ: Would the Nigeria-Morocco gas pipeline succeed where the Trans-Saharan failed?

According to the Programme Manager in charge of LPG Penetration and Implementation at the Office of the Vice President, Mr Dayo Adesina, “The federal government is targeting the consumption of five million tonnes of LPG by Nigerians in 2023, a project that requires about $750 million worth of LPG transport and retailing infrastructure across the country to achieve.” In order to make this happen, however, policy, regulation and investment have to meet.

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While the National Gas Policy so neatly identifies the challenges the domestic LPG market is facing with possible solutions, the challenges still remain four years later. No one will invest in building jetties, distribution storages, LPG plants or depot terminals when the roads for trucking are bad, the railway systems are yet to materialise or the alternative fuel source is still heavily subsidized. The government needs to be very active in creating an enabling environment for any investment to thrive.

The government promised under the National Gas Expansion Plan to deliver at least one million autogas vehicle conversions by the end of 2021. At least half of these vehicles will be LPG-powered, so investment is needed to build autogas filling stations and other infrastructure, but the doing business and regulatory framework have to be favourable.

Additionally, the Department of Petroleum Resources (DPR) should work closely with the Standards Organisation of Nigeria (SON) to establish effective monitoring on gas cylinder production and/import throughout the LPG value chain to ensure substandard products are removed. This will improve the safety of LPG usage and positively affect perception on customers’ side. This may involve banning consumer ownership of gas cylinders as once proposed by the Federal Government, and transiting to market ownership. In urban areas, States should put in place mechanisms for gas reticulation, as that will both ensure safety and ease of use for consumers.

The director of LPG Summit Group, Neasa Haplak, at the Annual LPG International Conference in 2019 indicated that “with the 2019 demand of about one million tons per annum (mtpa), and growth projection of about two mtpa for 2020, Nigeria remains one of the fastest-growing LPG market in the world.”

With such a ready market and the many advantages LPG has for our economy and environment, the case for significant policy and regulatory support for the industry is made.

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