1. SALLY UDOMA UDO UDOMA & BELO OSAGIE PRESENTED AT THE IBA CONFERENCE LAGOS, 6 – 8 NOVEMBER, 2013 The legal and regulatory framework for investing in gas projects in Nigeria: challenges and opportunities

2. Introduction Nigeria stands in 9 th 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 GROSS PRODUCTION: 84,845MSCM Source of figures: OPEC Annual Statistical Bulletin, 2013

3. Gas Value Chain 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 PROCESSING – CPFs, LIQUEFACTION PLANTS, ETC TRANSPORTATION- DOMESTIC & TRANSBOUNDARY PIPELINES; LNG MARKETING & SUPPLY - DOMESTIC (POWER GENERATION, CEMENT & FERTILIZER PRODUCTION) & EXPORT MARKETS (LNG, ETC) UpstreamMidstreamDownstream MINISTER Regulates the entire value chain & industry participants Govt. participation is through the NNPC – NPDC (and NAPIMS) in the upstream; NGC in midstream gas transmission; mostly NLNG in the downstream DPR PRIVATELY-OWNED COMPANIES – IOCS, INDEPENDENTS, INDIGENOUS COMPANIES, PARTICIPATE IN VARIOUS ACTIVITIES ACROSS THE VALUE CHAIN

4. 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

5. 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

6. 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

7. 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.

8. Challenges Uncertainty over the regulatory framework Commercial Viability Gas Transmission Infrastructure Insecurity Community Issues Financing/ Funding Constraints 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 YEARS20002004200720082009201020112012 Draft National Oil and Gas Policy Approval of National Oil and Gas Policy OGIC Report completed; submission of PIB to the 6 th session of the National Assembly Submission of new PIB to the 7 th session of the National Assembly Inauguration of OGIC Re- inauguration of OGIC Inauguration of IAT Inauguration of Task Force and Tech Committee

9. Opportunities Power Sector Reform The Gas Revolution – turning Nigeria into a regional hub for gas- based industries Accelerated Gas Development and Utilization Programme Infrastructure Development Transportation Export - Regional and International LPG Storaage and distribution SIGNIFICANT INVESTMENT OPPORTUNITIES INCLUDE… PARTICIPATION IN UPSTREAM GAS DEVELOPMENT CONSTRUCTION & OPERATION OF GAS TRANSMISSION PIPELINES; REMOTE PIPELINE MONITORING DEVELOPMENT OF GAS PROCESSING FACILITIES, LNG & LPG PLANTS, ETC; GAS METERING & MONITORING DEVICES INVESTMENT IN PIPE MILING & FABRICATION YARDS, MAINTENANCE SERVICES GAS TO POWER, DOMESTIC AND INDUSTRIAL USE EXPORT – REGIONAL AND INTERNATIONAL LNG & LPG STORAGE, ETC

10. 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 Ministers consent. Revised fiscal provisions for upstream operators – new Hydrocarbon Tax to replace PPT, and CIT now applicable.

11. 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. Nigerias 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, Nigerias growth and development is assured.

12. THANK YOU SALLY UDOMA UDO UDOMA & BELO OSAGIE