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Alarm over multiple versions of Petroleum Bill

By Hector Igbikiowubo & Yemie Adeoye
LAGOS — IN what appears to be growing misgivings about the Petroleum Industry Bill before the National Assembly, oil industry stakeholders who gathered in Lagos yesterday, noted that there were different versions making the rounds and called for clarifications, while identifying other concerns.

Stakeholders who included international oil companies, bankers, marginal field operators, service companies, indigenous oil companies, downstream operators, gas operators, among many others also decried the multiplicity of taxes contained in the new bill.

Stakeholders who met at the Petroleum Club in Ikoyi disclosed that since the beginning of the year, they had seen about four different versions of the bill, adding that the one presented by Dr. Rilwanu Lukman, the Minister of Petroleum Resources in Abuja at a stakeholders’ forum, was markedly different from that which was in the public domain.

While answering questions and addressing observations, Senator Lee Maeba, Chairman of the Senate Committee on Petroleum (Upstream) disclosed that the original copy of the bill before the Senate can be obtained from his website: senatorleemaeba.com, noting that all that was required to make input to the bill was to do a memorandum, submit it before the public hearing commences and attend the hearing session.

He assured that the national assembly would do justice to the bill and decried oil industry stakeholders’ attitude of sitting back to complain.

“I am disappointed that an industry as sophisticated as this has failed to sponsor any amendment to the bill as it affects their taxes. Why haven’t you people lobbied me so that I too can lobby my colleagues? Please lobby, but don’t bribe us,” he admonished.

Maeba disclosed that there was no fixed position before the Senate regarding the bill, adding that even during the 1st and 2nd readings of the bill, Senators noted that it would be suicidal to pass a bill that fails to address the welfare of communities.

In a joint presentation, the international oil companies disclosed that the new Petroleum Industry Bill will make all new production sharing contracts (PSC) uneconomic, with returns on investment dropping below 8 per cent whereas pre-bill return stood at over 15 per cent.

The IOCs noted that the new Petroleum bill would result in unattractive returns on wet gas investments leaving 65 per cent of new gas production at risk.

They explained that currently, given a gas price of $1 per mmbtu, investors can bank on a 10 per cent return on investment. However, after passage of the bill into law, indications are that return on investment could drop to -2 per cent.

Similarly, even at a given gas price of $2 per mmbtu, current return on investment is put at 18 per cent. However, after passage of the bill into law, indications are that it could drop to 5 per cent.

The IOCs also said the new petroleum bill will make already onerous JV oil fiscal terms even worse with the introduction of a multiplicity of taxes, while cash flows into the Nigerian economy through capex (capital expenditure) and opex (operating expenditure)  investments and taxes and royalties would drop drastically.

The stakeholders proposed to provide detailed input into the new petroleum bill, adding that they appreciate the potential reform benefits in the new bill.

“New PSC investments must generate acceptable economic return – high technical complexity and smaller field sizes to challenge project viability. Progressive PSC fiscal terms will provide sustainable investment environment for low prices, and increased government stake in a high price scenario.”

Also speaking on behalf of independent operators, Chief Ebi Omatsola, the Managing Director of Conoil Producing enumerated the multiplicity of taxes likely to come into effect when the bill is passed into law, adding that “we need to make laws that can be economically tested”.

Representatives of marginal field operators, financiers and service companies also spoke in similar vein, urging government to take more input from industry.

President of the Club, Uduimo Itsueli, also noted that it would be wrong to go back and change the laws without taking into cognisance the existing circumstances under which they were contrived in the first place.

He also assured that industry operators under the aegis of the Club would be submitting a memorandum to the national assembly on the new petroleum bill.


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