All Eyes on PIB
Players in the Nigerian oil and gas industry and economic policy analysts are fixated on the passage, signing and implementation of the protracted Petroleum Industry Bill this year, with the hope that the proposed legislation will eliminate the fiscal unc
The striking revelations by the duo of the Senate President, Dr. Ahmad Lawan and the former Secretary of the Nigerian National Petroleum Corporation (NNPC), Prof.Yinka Omorogbe, that some powerful internal and external forces with vested interests led to the long delay of the passage of the Petroleum Industry Bill (PIB), have heightened the apprehension in the current effort to pass the bill into law.
No doubt, such timely revelations will go a long way to prepare those presently working on the passage of the bill to be wary of such forces and vested interests and ensure that nothing stalls the all-important and badly needed PIB this time.
Players in the Nigerian oil and gas industry as well as industry watchers and economic analysts, are watching very closely, with keen interest, the happenings around the PIB, which is currently undergoing its passage at the National Assembly.
This is because of the fact that one of the challenges facing the Nigeria oil and gas industry is the lack of a legislation that is in line with the current industry and market realities, especially as regards fiscal terms. This has been a major concerns always highlighted by industry players at various meetings and fora, which they blame for the inactivity and low investments being recorded in the sector for decades.
The situation has resulted to the flight of new investments opportunities from Nigerian to neighbouring countries of Ghana, Angola and Equatorial Guinea, who have more defined laws and governance structure. Some of the international oil companies have had to sell some of their assets and found their ways into those countries where they believed they would get commensurate value for their investments.
The fallout was the decline in industry activities and attendant drop in national revenue as well as unemployment as hundreds of thousands of jobs were lost. Experts estimate that the country loses approximately $15 million annually due to the dampened investor confidence in the industry.
The Delayed PIB
The PIB has been in the works for close to two decades, as it was first introduced in the National Assembly in 2000, thereby making it the longest stalled bill in the nation. The Nigeria oil and gas industry has for long been begging for such reform as the law guiding the industry at the moment has become obsolete and no longer relevant to the present realities having been in place since 1969.
Having suffered a setback in the Seventh National Assembly, it was decided that a new approach would be adopted to facilitate its passage and signing into law. Subsequently, it was unbundled into several segments by the Eighth National Assembly, which was aimed at making it easier for the less-controversial aspects of the bill to have easy passage while the more controversial aspects were dwelt more upon.
The PIB was therefore split into four parts, namely: Petroleum Industry Governance Bill (PIGB); Petroleum Industry Administrative Bill
(PIAB); Petroleum Host and Impacted Community Bill (PHIB); and Petroleum Industry Fiscal Bill (PIFB).
Another Failed Attempt
In January 2018, the Petroleum Industry Governance Bill was passed by the House of Representatives. This marked a significant milestone in the journey of replacing the obsolete Petroleum Act of 1969, as the Senate had earlier passed the PIGB in May, 2017.
Some of the underlying principles included: effective and capable institution, clear roles and accountabilities, and transparency and ease of doing business.
Core objectives in the PIGB include: provision of a one-stop-shop regulatory authority, provision of functional commercial entities, abolition of discretional powers, engendering improved technology and innovation, ensuring clarity of roles and accountabilities and creation of efficient and effective governing institutions with clear and separate roles in the petroleum industry
Others are establishment of a framework for the creation of commercially-oriented and profit-driven petroleum entities that ensure value addition and internationalisation of petroleum industry, promotion of transparency and accountability in the administration of the petroleum resources of Nigeria, and creation of conducive business environment for the petroleum industry operations.
The key institutions in the PIGB are: The minister for policy formation, directing, industry co-ordination and supervision); Nigerian Petroleum Regulatory Commission, which will succeed Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and Inspectorate - to regulate, promote enabling environment for investments, issue licenses and conduct bid rounds, measurement & hydrocarbon accounting, and environmental regulation.
It will also issue regulations, administer and enforce laws, to have a special investigations unit, to monitor and ensure compliance, to regulate, to ensure best practice, to promote investment and value creation, it has inbuilt accountability mechanisms, and board supervision.
National Petroleum Company (for commercial operations), National Petroleum Asset, Management
Company (for commercial operations), Nigerian Content Development & Monitoring Board, Petroleum Technology Development, Petroleum Infrastructure Fund
The PIAB deals with issues relating to administration in the oil and gas industry and it sets out to provide robust regulations, licensing and permits, simplicity and predictability, access to assets, and Encodes Executive Order 001.
On its part, the PHIB bothers on host communities and it sets out to ensure inclusiveness, shared prosperity direct disbursement, harmonious relationships, reducing deferments.
Also, the PIFB focuses on the fiscal regimes in the oil and gas industry and it sets out to achieve profitable growth, cost efficiency, increased revenues, making gas work and staying competitive.
However, when the bill was transmitted to the President for assent, he declined assenting, citing some provisions he was not comfortable with, thereby prolonging the PIB to becoming a law.
New Zeal for Passage
The emergence of the Ninth National Assembly led by Lawan (Senate) and Mr. Femi Gbajabiamila (House of Reps) which is obviously in aligned with the Buhari-led executive arm, has expressed its determination to ensure the PIB was passed and assented to.
The PIB, which went through a redraft by the executive, with inputs from the legislators and industry players, has scaled through the first and second reading at both the Senate and the House of Representatives, and the federal legislators have promised to get it passed in this first quarter of 2021.
Among some of the provisions in the new version of the PIB are the creation of the upstream commission to be the sole regulator of the upstream segment of the industry; and the creation of the Midstream and Downstream Regulatory Authority to be saddled with the responsibility of regulating and monitoring activities in the sectors, including issuance of licenses.
Also proposed in the new PIB is the establishment of the Nigerian National Petroleum Company Limited to replace the existing Nigerian National Petroleum Corporation (NNPC), thereby making the national oil company a commercial entity.
The PIB also proposed the establishment of the Petroleum Industry Host Community Trust Fund, where oil companies are made to contribute 2.5 per cent of their Operating Expenditure (OPEX) to, for the development of oil communities in the country.
Addressing Grey Areas
While they are consistently yearning and calling for a new legislation that will meet current realities, experts in the industry have raised some concerns on some of the provisions in the new PIB.
They said the federal government and the National Assembly should not make the mistake of producing a petroleum law in the form of PIB that would further stifle investments in the sector.
They said while it is necessary to reform the industry through the PIB, Nigeria should not miss another opportunity to reassure and encourage existing investors to continue to have faith in the country as they look forward to a PIB that will significantly raise their investment appetite in the country, while attracting more investors to relocate to the country.
For instance, the Managing Director of Total Exploration and Production Limited, Mr. Mike Sangster, had stated that the uncertainty coming from the PIB does not appear to improve Nigeria’s attractiveness as an investment destination, and would continue to stifle investment in the country.
He pointed out that such fiscal provisions contribute to Nigeria’s unattractiveness to investors, adding that Nigeria had attracted only four per cent of the $70 billion committed to new upstream projects in Africa from 2015 to 2019, despite having the largest reserves on the continent.
“That is why the industry is working hard with the relevant authorities and lawmakers to make the case for a win-win Petroleum Industry Bill that will attract new investment and jobs to Nigeria,” Sangster had said.
The oil major had suspended the development of its Preowei field, a deepwater hydrocarbon pool located north of the Egina field in Oil Mining Lease (OML) 130, off Nigeria, with expected production capacity of 50,000 barrels of oil per day, at peak.
Among the reasons cited by Total for the suspension of the project was the new fiscal regime in the Nigerian oil and gas sector, saying, it would recommence the development of the asset when conditions, including a win-win PIB allowed them to.
In its intervention, the Lagos Chamber of Commerce and Industry (LCCI), also advised the National Assembly to produce a legislation that would promote effective and efficient governance, administration, host community development and fiscal framework for the petroleum industry.
The chamber, in a recent statement issued by its Director General, Dr. Muda Yusuf, also advised that the new legislation should help preserve the integrity of existing projects in the industry, while encouraging future growth of production in order to make Nigeria an investment destination of choice.
Yusuf, who declared the support of the chamber to the PIB, said the current bill marked a positive step toward achieving the objectives of the PIB 2020 to reform the institutional and fiscal framework and develop Nigeria’s gas sector by creating a framework to support the development of host communities, foster sustainable prosperity and attract investments to grow the country’s production capacity.
He, however, observed that some of the sections in the current PIB habours some provisions that could adversely affect the growth of the industry and the overall economy, stressing that the PIB should seek to protect existing investments from value erosion as the assets and operations from these investments are the foundation upon which
We are hoping that finally, we will see a PIB in place, but not just a PIB for the sake of it, but a PIB that will actually enhance and help the industry to grow and attract investment and all that