Nigeria's president Goodluck Jonathan is seen as the likely winner in next year's elections despite growing unpopularity and the emergence of a viable opposition party, but if elected he faces many challenges from the country's crucial crude oil and gas sector.
Support for the 56-year old Jonathan has been hemorrhaging largely due to his weak stance on corruption, his inability to end the Boko Haram violence in the northeast and his party's failure to implement key economic policies such as energy sector reforms.
The proposed Petroleum Industry Bill, aimed at overhauling the country's oil and gas industry, is unlikely to be passed into law before the elections scheduled for February 15 despite repeated promises by Jonathan and his oil minister Diezani Alison-Madueke.
"The politicians are focused on winning elections at the moment. It's unlikely that they will spare thoughts for most outstanding legislative bills at this time in the political calendar," said Chijioke Nwaozuzu, a petroleum policy expert at the university of Port Harcourt. Analysts suggest a watered-down version of the bill may be implemented in 2015, and while not perfect, it may put in place some guidelines that would guarantee a stable operational environment for operators and remove funding constraints.
However, the International Energy Agency Monday said it does not anticipate a "more stable regulatory fiscal" regime, reflecting the key aims of the PIB, until 2020.
Investments of around $28 billion in Nigeria's oil sector have been lost or deferred since 2010 as a result of the non-passage of the bill, according to government figures. The Nigerian economy is heavily dependent on oil and gas exports, which provide 95% of export revenues.
"You don't expect new investments to roll in as the uncertainty over the PIB continues to linger," a senior official of an international oil company said.
"The scenario we have now is that, apart from the oil companies, all other major drivers of the PIB, the Nigerian National Petroleum Corporation and the ministry of petroleum resources, have lost interest in the bill. This is mainly due to the fact that key officials in these institutions who are familiar with the draft bill have been replaced," the official said.
But uncertainty over the regulatory environment is just one of Nigeria's key challenges facing its oil sector. The IEA in its first-ever Africa energy outlook said a more pressing immediate concern is the impact of unrest in the Niger Delta, which results in oil theft and pipeline sabotage.
The Paris-based agency estimates Nigeria is losing 150,000 b/d to oil theft at a cost of $5 billion/year, equivalent to the total sum budgeted in 2013 for federal spending on education and health together.
Babs Omotowa, Nigeria LNG managing director, told Platts the company is concerned that the non-passage into law of the PIB could hinder expansion at the six-train LNG plant despite having already signed agreements with potential buyers in Japan, China, India and Malaysia.
"The long deliberations around the passage of the PIB have put much of the investments in oil and gas on hold because of a lack of clarity around the policy direction of the government," Omotowa said. "This development may impact on gas supplies to feed additional trains," he added.
Nigeria LNG says it is already losing global market share due to the delay in expanding the plant's output from 22 million mt/year to 30 million mt/year. The delay in building the seventh train has cost Nigeria $2.5 billion/year due to revenue, as well as the opportunity to further reduce gas flared from oil fields in the Niger Delta.
While Nigeria is Africa's largest oil producer with an average output of 2 million b/d, the country's output may fall by 40% by 2020 if the government fails to implement regulations, according to industry figures.
The director of the Department of Petroleum Resources George Osahon urged the government to stop its "foot-dragging" and said Nigeria's target of producing 4 million b/d by 2020 looked unlikely unless it acknowledged the impact of the significant lack of investment in the sector.
OPPOSITION CHALLENGES RULING PDP
Jonathan's ruling People's Democratic Party has in recent months been plagued by in-fighting and unprecedented divisions in the run-up to the elections.
The All Progressive Congress was formed in February last year after several senior politicians defected from the PDP. The APC party has put forward former vice president Atiku Abubakar and former military ruler Muhammadu Buhari, who lost against Jonathan in the 2011 polls, as presidential contenders for 2015.
While the rise of the APC has undoubtedly jostled Nigeria's political landscape, it has paradoxically strengthened Jonathan's bid for the presidency, Thomas Hansen, a senior analyst at Control Risk, said.
"There is now limited overt opposition to him in the ruling party, which is likely to smooth his path to the presidential nomination," Hansen said.
Africa Practice, a strategy and communications consultancy, agreed that Jonathan is the favorite but was unlikely to secure his majority landslide of 2011 when he won over 58% of the votes.
The group's director, Tim Newbold, said the opposition may be able to force a second round of voting due to the requirement for the winner to secure at least 25% in 24 of the 36 states for a first round victory, than it is for the opposition to be able to win outright.
However, what plays out in the northeast where Boko Haram has launched its violent campaign could be vital to the outcome of the elections, said Newbold.
"With an ongoing insurgency and extended state of emergency, the viability of elections in that region may ultimately be the key factor in a result, or whether elections can even take place," he said.
