Government underfunding

A recurring problem in the upstream sector is the inability of the NNPC to meet its funding obligations to the JVs. Under JV terms, the NNPC shares costs with its foreign partners. Since 1993, budgetary constraints on the NNPC have resulted in it being unable to meet its JV commitments leading to cut backs in exploration and production. The government is seeking to diversify funding for the industry and alternative funding schemes have been approved for Shell’s EA project and are being considered for Elf’s development of the Amenam field.

OPEC Limit

Nigeria is an OPEC member and must keep to the statutes governing the body. All OPEC members comply with their periodic limits in exports of petroleum products. To this end, it is expected that the new refinery must work within these bounds.

There is therefore a major risk of minimising the export market growth potential as a result of the OPEC limits.

Union (PENGASSAN & NUPENG)

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas (NUPENG) workers are one of the strongest unions in the country. Both represent those activities of skilled and unskilled workers in the oil and gas industry.

Their past strike actions over the years have paralysed the economy during such periods.

It is expected that Shayaz maintain a good rapport and understanding with the Union management.

Petroleum Industry Bill

Wide-ranging overhaul of the energy industry will redefine Nigeria’s relationship with foreign partners. It is touted by government as the solution to everything from funding shortfalls for exploration and production projects to budget-debilitating fuel subsidies, although some in the oil industry fear it will make Nigeria less competitive as an investment destination.

Shayaz Private Refinery must understand the proposed Petroleum Industry Bill will impact on its business and make appropriate adjustments.

Ethnic and religious unrest

Clashes between Christian and Muslim gangs in central Nigeria, the country’s main ethnic and religious fault line, have killed hundreds of people since the start of the year. The violence is rooted in decades of resentment between Christian villagers and Muslim settlers from the north, who compete fiercely for control of fertile farmlands as well as economic and political power. The region is seen in some ways as a microcosm of the wider country, highlighting how sensitive it is to shifts in the balance of power between its main ethnic and religious groups.

The worst of the violence this year was in January and March and a curfew on Plateau State has been lifted, but sporadic killings have continued. The unrest has had no major economic impact.

Further outbreaks of violence to other parts of the country such as Ondo State are a possibility. Bolstered military or police presence in the refinery environ at all times will mitigate these consequences.

16.0 Proposed OKFTZ Refinery SWOT ANALYSIS

Below is the summary of the OKFTZ refinery SWOT ANALYSIS indicating the project Strengths, Weaknesses, Opportunities and Threats:

Date: 2015-01-29; view: 871