Nigeria’s inability to attract fresh investment in the oil and gas sector or expand existing ones has left the country in a precarious situation. So far, there are strong medications that the loss for Nigeria has also become the gain of other countries, including, Ghana, Gabon and Angola, which have become new frontiers for oil exploration in Africa.
The PIGB, alongside Petroleum Industry Administration Bill, Petroleum Industry Fiscal and Petroleum Bill and Petroleum Industry Host Community Bill , is an offshoot of the omnibus Petroleum Industry Bill which is awaiting presidential assent. Today, investors, especially those operating in the nation’s upstream segment have found new haven in other countries. The investment loss for the country is occasioned by the lack of clear cut policy direction for the oil and gas industry as policies, including fiscals and legal regulatory framework, are not clear enough and in some cases shrouded in secrecy.
Industry experts and operators at a symposium on the Petroleum Industry Governance Bill (PIGB) organised by the Nigerian Extractive Industry Transparency Initiative (NEITI) in Abuja last week, believe that despite developments in the global oil industry, the responsibility for giving direction to the Nigerian oil and gas sector rests on the government. Its actions or inactions will ultimately determine how well the industry fares.
Effect of non-passage of PIB
The Nigerian Extractive Industry Transparency Initiative (NEITI) had last week during a symposium on ‘‘ Next Steps for PIB’’ raised the alarm that Nigeria was losing about $200 billion as a result of its failure to pass the Petroleum Industry Bill (PIB) as an enabling law for the oil and gas industry.
NEITI, in its policy brief entitled, “The urgency of a new petroleum sector law”, said some of the losses were projected investments due to regulatory uncertainty, which experts had put at $120 billion since the commencement of the process for the passage of the bill or about $15 billion annually. The policy brief stated that clear, unambiguous rules, predictable policy-making and efficient regulations have been lacking in Nigeria’s petroleum sector since the process of enacting a law for the industry commenced. It said governance deficiencies had been equally prolific and that its 2013 audit of the oil and gas sector revealed that $10.4 billion and N378.7 billion were lost as a result of under-remittance, underpayments, inefficiencies, theft or absence of clear fiscal regime in the industry.
According to energy experts, there is an urgent need for government to resolve with speed and finality, lingering issues that have slowed down investment in the sector.
Despite being a major revenue source for the country, the sector, according to experts, is being driven by outdated laws and regulations that needed to be overhauled. For the oil and gas sector to become attractive and profitable to investors, its antiquated framework has to be updated to address current industry realities. “The current law and regulatory framework is not responsive enough. The sector is being governed by outdated legal and regulatory framework. We have to re-examine the continued relevance of existing framework,” said an energy analyst. Expressing support for the need for urgent reforms in the sector, another expert and Chairman Africa, Schlumberger, Mr. Sola Oyinlola, had said the present government should put in place and implement policies that would spur growth in the industry.
“The Buhari administration has its work cut out for it and the industry awaits with bated breath any new policy directions, but we are all optimistic that challenges would be tackled expeditiously to provide a new dynamic investment destination.”
NNPC allays fear of job losses
For his part, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, at the NEITI symposium disclosed that the NNPC has started to prepare for the implementation of the Petroleum Industry Governance Bill (PIGB) when it is finally signed into a law and its operations reformed, adding that the transformation process will lead to the right-sizing of its personnel but not job losses.
Baru, who was represented at the symposium by the Group General Manager, Corporate Planning of the corporation, Mr. Bala Wunti, explained that the NNPC has initiated a new policy that involves reforming its people, processes, procedures, productivity and profit drive to fit into the demands of the post-PIGB era when it will be expected to transform into a commercial entity with key performance indicators given to it by its shareholders.
According to the GMD, NNPC would right-size its workforce to fit into the various businesses it would be involved in across the entire value chain of the industry, instead of downsizing and firing them.
He said the corporation has recognised that it would need to survive in the post-PIGB era without government subventions, hence the need to ensure that all its staff are productively engaged in the various aspects of its operations.
PIGB to grow oil reserves
The current threat to the depletion of the crude oil reserves is becoming a major source of worry to stakeholders. The long- held aspiration of the Nigeria’s upstream sector is to grow crude oil reserves to 40 billion barrels and production to four million barrels per day (bpd).
But, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, at the symposium assured that the PIGB when passed will grow nation’s oil reserves.
Represented by one of his Senior Technical Advisers, Mr. Johnson Awoyemi, the minister explained that the existing laws governing operations in Nigeria’s oil and gas industry were archaic and needed to be overhauled. He lauded the National Assembly for taking its time to legislate on the Bill, adding that it would provide a standard governance framework for the industry.
Kachikwu urged the legislators to consider other aspects of the PIB, especially the fiscal terms, to quickly restore viability to the country’s oil sector.
The NEITI, IAEE Challenge
The Executive Secretary of NEITI, Mr. Waziri Adio, explained that Nigerians have reached a consensus that the country’s oil sector is poorly governed and needs to be reformed for optimum benefit.
He added that the process of getting the industry reformed through new laws has taken too long and that the PIGB is the closest the country has come to passing a new reform law for the sector.
Adio called on stakeholders to stay focused on getting the PIGB and other bills passed into law in the country, as well as making them work for the country.
In the same vein, the International Association for Energy Economics (IAEE), while supporting reforms in the sector, warned that the rationale for such reforms should be to enhance the sustainability of petroleum wealth that would impact all stakeholders.
In a paper entitled, “An Appraisal of Oil and Gas Industry Reform and Institutional Restructuring in Nigeria”, the association said, “the rationale for restructuring the oil and gas sector in a petroleum dependent economy like Nigeria should be to enhance the sustainability of petroleum wealth and its impact on all stakeholders. Undergoing such reforms presupposes that the current state of the industry is inefficient in service deliveries and ineffective at promoting society’s welfare objectives.”