1. 18 TH NIGERIAN ECONOMIC SUMMIT, ABUJA – DECEMBER 4, 2012 THE PIB O. A. Avuru,fnape Managing Director/CEO Petroleum Development Company Limited & THE FUTURE OF NIGERIA’S OIL INDUSTRY

2. BROAD OUTLINE  PIB AND THE OIL & GAS SECTORIAL REFORM AGENDA  PIB AND FISCAL PROVISIONS  PIB AND THE FUTURE OF THE OIL & GAS INDUSTRY 2

3.  PIB AND THE OIL & GAS SECTORIAL REFORM AGENDA  The PIB was meant to be the result of an elaborate institutional reform process for the Oil & Gas Sector, initiated in 2000.  Similar Sectoral Reforms in:  Telecoms  Strong Regulator (NCC)  Private Sector as focus of new investments (MTN, AIRTEL, GLO & Etisalat)  Government Telco to compete in a free Market Environment (died in the process) 3

4.  PIB AND THE OIL & GAS … (cont’d)  Power  Strong Regulator (NERC)  Unbundling and Sale of State Monopoly  Huge, Private sector Capital Injection expected  Aviation  Liquidation of National Courier  Two Private Sector National carriers emerged  Private sector – led Infrastructure development envisaged  Process now in reverse gear 4

5.  PIB AND THE OIL & GAS … (cont’d)  Ports  Port terminals concessioned  NPA now quasi Regulator  Port Infrastructure development now private sector led  Key Oil and Gas Reform deliverables were: i.Strengthen Regulation Strong, Independent Regulator Entrench, transparent lease administration Regulation driven by National Aspiration ii.Eliminate Cash Call Bottlenecks Self-funding, commercial and listed NNPC 5

6.  PIB AND THE OIL & GAS … (cont’d) iii. Un bundle, deregulate and privatise the downstream Privatise the Refineries Deregulate Products pricing Spin off and sell the distribution package (Depots & Pipelines) Attract fresh investments in the Downstream Permanently solve the twin problems of Product scarcity and distribution nightmare. iv.Accelerate domestic gas supply for rapid Industrial growth Gas Infrastructure development led by the Private sector Deregulated Gas pricing Equitable fiscal Regime to stimulate investments in the sector 6

7.  PIB AND THE OIL & GAS … (cont’d) v. Rekindle investment in the Oil & Gas sector Grow Oil production and reserves Enhance linkage to the broader economy vi.Optimise Government Take Balanced Fiscal Regime (attract investments and optimise government take) Energise Indigenous Participation  THE DOTUN SULAIMON AND IDIKA KALU COMMITTEE REPORTS MEANT TO BE CRITICAL IMPUTS TO THIS PROCESS (Governance and Downstream reforms). 7

8.  PIB AND FISCAL PROVISIONS  The entire PIB has been reduced to a debate about fiscal provisions.  A simple amendment to the PPT Act (1959) and Petroleum Act (1969) would have addressed this.  The Industry (OPTS) believes that the fiscal terms are not competitive 8

9.  PIB AND FISCAL … (cont’d) 9

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11.  PIB AND FISCAL … (cont’d) 11

12.  The Indies claim they are short changed No access to Assets Harsh Gas Fiscal Terms (doubling of gas taxes) Harsh Tax and Royalty Rates for small fields (doubling of current rates)  Government insists it is time to claw back and increase take PSC GT from 30% to 77% Slight increase in JV GT (86 – 91%) Gas GT from Negative to 60%  Main gaps between Industry and Government Cost of doing business Hostile Environment High GT means very low company IRR 12  PIB AND FISCAL … (cont’d)

13.  PIB THE FUTURE OF THE INDUSTRY  Sectoral Reforms completely unaddressed  Downstream problems will get worse  Refineries not even mentioned  More uncertainties created in the Midstream (Gas processing and Distribution)  Regulation much more weakened  Cash Call Issues not addressed It is very much about strengthening failed institutions and excluding private capital!! 13

14.  PIB THE FUTURE OF THE INDUSTRY  Gap in Fiscal arguments must be bridged.  Ultimately the fiscals will self adjust (Investment inflow vs industry growth vs fiscals)  Too much short term damage if not properly addressed now. So…. Is the PIB an end or a means to an end?? 14

15. THANK YOU