PIB: Moving to Break a 13-Year Jinx

The passage of the Petroleum Industry Governance Bill, penultimate Thursday by the Senate, after nearly 13 years in the works is arguably a great feat by the current administration. Olawale Olaleye writes

The Petroleum Industry Governance Bill aimed at addressing some of the ills in the petroleum industry if enforced to the letter was long in coming. And after nearly 13 years of politics and orchestrated frustration of the bill, the Senate, penultimate Thursday, breathed life into it by passing the bill into law.

“This is a bill that has been here for many years. We made a commitment and it’s being fulfilled…This bill is not only for Nigerians but for our investors. We are proud of what has been done,” said an elated Senate President Bukola Saraki, while commenting on the bill.

Read the third time at plenary, the bill was passed after the Senate, in the committee of the Whole considered the report of the committee on Petroleum Upstream, Petroleum Downstream and Gas presented by Senator Donald Alasoadura.

Generally identified as a comprehensive instrument for the oil sector development and diversification, the PIB, amongst others, pushes for a more inclusive development from crude oil to other product lines and by-products as well as robust engagement between international oil companies (IOCs) and the government in the area of investment and modifications in the joint Venture Partnerships/cash call obligations.

In addition, the bill, as a whole, also advocates the activation and extension of indigenous participation and local content development, just and fair engagement of the oil producing communities and transparency/accountability in the industry.

Interestingly, for the period the bill was in the works, concerns had always been that it should not end up another elite project as against an idea devoted to the expansion of the common wealth.

Curiously, whilst the bill was being perfected time and time again, there appeared to be some sort of consensus between the executive and the legislature on some potentially crucial areas that are germane to the very essence of the bill. Some of the issues include oil spills, gas flaring, agitation in the host communities, funding of the Nigerian National Petroleum Corporation (NNPC), contract cycles, status and structure of the refineries and the management of the upstream sector vis-à-vis liberalisation.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, corroborated this position when he said in the course of his presentation at the National Assembly last November that, “All studies conducted on the petroleum sector since 1999 are settled on the issue that the role of government in the sector needs to be better clarified whilst the policy, regulatory and commercial institutions need to be given a refocused mandate to ensure better sector governance, transparency of regulations.”

To address some of these challenges, therefore, Kachikwu hinted that the federal government had come up with a draft national oil policy, a draft national gas policy and a draft fiscal policy. Although the role to be played by the minister in the sector post-reform was not identified as the minister is currently limited to the policy function and does not sit on the board of the regulator, Kachikwu, like many before him, would rather he was in charge of petroleum and to chair the board of the regulator. But that, many reckoned, negated the idea of shielding the industry from undue control and abuse, especially political.

The fact that the IOCs operating in Nigeria once expressed concern over the federal government’s intention to change the laws governing the oil and gas industry, including the fiscal terms, explains one of the reasons the bill had faced stringent challenges in the period it was in the works. They claimed that the proposed fiscal terms would affect them and unsettle their investments in the upstream sector.

A research, some time ago, by the duo of Sani Saidu and Abdel Rasheed Mohammed from Aberdeen Business Schoool, Robert Gordon University, United Kingdom and titled: “The Nigerian Petroleum Industry Bill: An Evaluation of the Effect of the Proposed Fiscal Terms on Investment in the Upstream Sector, did profound justice to some of the uncertainties that seem to dog the initiative despite its huge potential.

“The results show that even though petroleum projects remain profitable under the proposed fiscal terms, the lack of fiscal stability will negatively affect investment at least in the short term,” they stated.

Borrowing from their conclusion, therefore, the PIB clearly represents the single most transparent legislation that comprehensively addresses all issues in the Nigerian petroleum industry, while the economic indicators of upstream investment under the PIB terms reveal profound results. Besides, the non-neutrality of the PIB fiscal terms, the duo of Saidu and Mohammed reckoned might not be a major concern as it is often a general practice in the industry that majority of petroleum fiscal systems are non-neutral.

But since profitability without stability cannot sufficiently attract investment, fiscal stability might be required to create and sustain investor confidence. It is therefore hoped that the fiscal stability of the PIB, geared towards encouraging investment in the upstream sector, would be consciously factored into cause by the time the other part of the bill, which is at its second reading is being considered, because now that the law is gradually berthing safely at the shores of the nation’s body of laws, result is no longer negotiable.