There is considerable concern and outrage among many stakeholders in the country’s oil and gas industry over the delay in the passage of the Petroleum Industry Bill (PIB), which has been in the coffers for close to 20 years.
Indeed, the stakeholders are worried that while other countries are fast moving with the times by changing obsolete oil and gas laws to attract fresh investments for the development of their countries, through increased revenue to government, infrastructure development and job creation, Nigeria, which needs revenue and investment more, has failed to pass the law in decades.
Former Group Coordinator of Corporate Planning and Strategy in the Nigerian National Petroleum Corporation (NNPC), Mr Tim Okon, warned that the oil industry is going away and that it is important not to waste the last stages.
The PIB was first introduced to the National Assembly in December 2000. A presidential committee set up in 2007 to look into the oil and gas sector came up with the idea of this bill, which aims to increase transparency at the NNPC and to increase Nigeria’s share of oil revenue.
Drafts of the bill, however, became very contentious due to objections from the international oil companies (IOCs) and the Nigerian National Petroleum Corporation (NNPC). Consequently, the bill was never passed into law.
Towards the end of 2015, the then Minister of State for Petroleum Resources, Dr Ibe Kachikwu, noted that the PIB was to be amended to speed up its passage.
Consequently, the PIB was broken into four different bills, which included the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administrative Bill (PIAB), Petroleum Host and Impacted Community Bill (PHIB) and Petroleum Industry Fiscal Bill (PIFB).
The PIGB, which was considered the least contentious, set the ball rolling to address various aspects of the oil industry. In January 2018, the PIGB was passed by the House of Representatives. This marked a significant milestone in the journey of replacing the obsolete Petroleum Act (1969), as the Senate had earlier passed the PIGB in May 2017.
Regrettably, the PIGB suffered a major setback, as President Buhari withheld assent, citing constitutional and legal reasons.
Presidential Aide on National Assembly Matters, Ita Enang, said the President wanted a more comprehensive and current legal framework that aligned with global standards.
However, the Senate President, Ahmed Lawan, noted that the plan was to pass quickly the aspects of the old law that were not controversial while the controversial bits could wait.
The PIB, among other things looked into the ownership and management of petroleum resources, functions and powers of the Minister of Petroleum, the establishment of the Nigerian Petroleum Regulatory Commission (NPRC) which was to act as a regulator for the entire petroleum industry (upstream, midstream and downstream) and the restructuring of the NNPC.
Many oil companies believe new investments in the oil sector are dependent on the passage of the PIB which would take a more holistic approach in addressing issues around the fiscal terms, especially following the passage of the Deep Offshore and Inland Basin Production Sharing Contracts (amendment) Bill, 2019 (PSC Amendment Bill).
The revised Act introduced a price-based royalty payment system, which adds between 0 per cent and 10 per cent, depending on the prevailing oil price in the market and makes oil firms executing deep offshore projects in Nigeria pay varying percentages based on the prevailing price of a barrel of oil at the time.
In a telephone interview with Daily Sun, Chairman, Major Oil Marketers Association of Nigeria (MOMAN), Mr Oyetunji Oyebanji, said the delay in the passage of the PIB has eroded investors’ confidence.
Oyebanji noted that investors have since moved their funds to other climes where the operating environment is more favourable and their laws clearly spelt out.
He noted that of all countries in the world, Nigeria is the most desirous of Foreign Direct Investment (FDI) but that the country’s posture on FDI suggests that of a country that is self sufficient in every aspect.
He lamented that the PIB has become more of a political legislation, which he said was one of the major reasons for its delay.
“I am still at a crossroads as to why it will take forever to pass a legislation that I consider one the most crucial laws for this country because it is one law that would bring about transformation, job creation and infrastructural development for the country,” he said.
Oyebanji warned that one major threat of investment is the uncertainty in the operating environment, which, he noted, is one of the things the PIB seeks to achieve.
He said the PIB would help the downstream sector take its destiny into its hands so as to enable marketers fix the price of petroleum product so that when investments are made, nobody comes to change the price of the product.
Oil and gas consultant and partner, Bloomfield Law Practice, Mr Ayodele Oni, told Daily Sun that the fact that prospective investors know that there is a legislation (PIB) being considered signals uncertainty, saying one cardinal issue for investors is certainty.
Oni added that it is better to jettison the idea altogether or pass a few pieces of legislation to ease the uncertainty, warning that otherwise there wouldn’t be substantially serious and long term new upstream investments at the rate at which Nigeria needs same.
He added that the issues delaying the passage are mostly the fiscal terms.
“It is not surprising because of the far-reaching changes it seeks to make. It would, however, appear that there may now not be a single legislation making all these changes but various pieces of legislation dealing with fiscal issues, governance, community issues, acreage issues, among others.
The Executive Secretary of Nigerian Extractive Industry Transparency Initiative (NEITI), Mr Waziri Adio, warned that the delay in passing the PIB might have cost the country over $200 billion loss.
A worried NEITI scribe explained that the inability of the country to have a new petroleum sector law in place has led to lack of clarity and inadequate transparency mechanisms leading to the more than $200 billion loss in eight years.
He explained that Nigeria is increasingly in competition for oil and gas investments with many other African countries, beside other oil jurisdictions.
“Now that we are hopefully close to the end of this circuitous journey, it is important for us to focus on the next tasks in a way that will proactively and strategically ensure the intention of the proposed laws are fully realised, to ensure that we have not undertaken the long journey in vain,” he said.
Stakeholders at a recent NAPE workshop identified five critical oil and gas projects awaiting Final Investment Decision (FID) consequent upon the passage of the PIB. These include Bonga South-West and Aparo project (225,000bpd); Bonga North (100,000bpd); Bosi (140,000bpd); Bosi Satellite Field Development Phase 2 (80,000bpd); Ude project (110,000bpd); Zabazaba-Etan project (120,000bpd); and Nsiko project (100,000bpd).
They argued that if these projects were sanctioned, Nigeria’s crude production would rise above three million (bpd) and also enhance its competitiveness during the low oil price regime.
Principal and Executive Director, Kaptepia Capital, Mr Tosan Omatsola, explained that Nigeria could change its tax regime in the PIB to make it investor-friendly just as in other economies including the United States of America.
“Investors are not charity organisations. They are all out to maximise profit. They want to operate where they can get good return on equity or investment. If they invest one dollar, they are looking at making $10. Even if your tax structure is good but ROl is not, they won’t invest.”
Omatshola disclosed that a lot of fresh investments by some IOCs, including Exxonmobil and others, are taking place in Guyana, because of the safe and friendly investment haven in the areas of ROl, taxes and low country risk, being a country of 149,000 people.
He noted that the identified five projects were capable of spurring the economy and generating employment for Nigeria’s teeming youths.
Omatsola urged the Federal Government and regulatory agencies to address drawbacks to the growth of investments in the country and also unveil incentives to encourage investors to the sector. He lamented that the $100 billion investment in the five projects would fetch the country about $1.5 billion yearly in revenue.
‘‘At a time the country is yearning for revenue, we allowed these projects to be idling away for about 20 years. This should not have been the case.”
Okon added: “Nigeria is obsessed with rent collection. We must now move to production venture, just as we moved from the era of cement armada (ships carrying cement lining our shores to offload) to cement export now.
“Nigeria should be an oil and gas-processing centre. The market will take care, so we should not be worried by price of crude oil because in processing, there are different prices for different products of same crude oil.”
He insisted that Nigeria must now use her oil for economic development through massive processing instead of as economic rent.
But Lawan assured that Nigeria’s legislature has begun consulting with the president to draft, from the scratch, a bill overhauling the nation’s petroleum sector and will aim to pass it by the end of 2020.
The Senate President noted that the ninth National Assembly would likely break the jinx this time around and pass the long-awaited Petroleum Industry Bill (PIB), which has not been assented to for more than a decade.