PIA: fuel and gas taxes cannot finance infrastructure, stakeholders say

The levies stipulated in the Oil Industry Law to be paid by operators in the mid and downstream sectors of Nigeria’s oil and gas industry are insufficient to shut down infrastructure in the sectors, some stakeholders said.

They said so in a report sponsored by Seplat Energy Plc to commemorate its 2021 Energy Summit, with the headline “Hidden in Sight: Nigeria’s Energy Transition”.

They noted that the PIA created the Intermediate and Downstream Infrastructure Fund to capture 0.5% of sales of all petroleum and natural gas products sold locally.

The report said, “This tax will bring in around $ 70 million to $ 80 million per year based on current consumption levels. The total amount of investment needed to close the infrastructure gap is in the order of $ 6-7 billion, spread over 10 years and amounting to $ 600-700 million per year.

“The provision of the law will clearly not suffice; 0.5 percent is insufficient to fund the infrastructure campaign by the government. Even if it is a question of financing the participation of the government in the respective projects, it remains largely insufficient as a contribution to the capital.

Stakeholders noted that the Petroleum Law Implementation Committee has been established by the government to implement the provisions of the new governance law.

However, they said: “A major challenge for them will be to find the right model to facilitate the development of the compressed natural gas and liquefied petroleum gas market.

“There are no LPG cylinders and vehicle conversion kits, which are beyond the reach of most Nigerian households and motorists.

“The country also has a policy of universal cylinder ownership, which discourages private sector initiatives for cylinders.

“As such, a market infrastructure provider will be required to provide these cylinders and conversion kit free of charge to end users in order to remove the biggest barrier to entry for most users – affordability. “

They said the market infrastructure provider would then recover its investment from the consumption tax to be collected and appropriated by the Midstream and Downstream Infrastructure Fund established by the PIA.

According to the report, while crude oil plays a critical role in financing Nigeria’s growth and long-term energy transition, the reality and threat of climate change requires the decarbonization of the country’s energy systems.

As such, the provision of the law for the establishment of a gas infrastructure fund, for appropriate levies on the consumption of oil and gas products for investment in intermediate and downstream infrastructure is a clear disruptor. to change the paradigm of energy supply in Nigeria as the gaps in the market are filled, ”he said.

Stakeholders described gas and renewables as the future of energy markets.

They said: “Nigeria and its development partners must rise to the occasion by creating its 200 tcf of proven gas reserves, a captive market of 14 GW and a growing population of 206.1 million.

“Growth of the natural gas sector is expected to come from industrial consumption, transportation, petrochemicals and alternative fuel consumption by Nigerian homes and automobiles.”

According to the report, the role of the solar market in Nigeria is set to grow with more than $ 10 billion in annual revenues expected from solar home systems and mini-grids.

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