Belaboured Petroleum Industry Bill
BY CLARA NWACHUKWU AND YEMIE ADEOYE
MAY 29 Presidential inauguration came and went, and the 6th session of the National Assembly also ended, but the long awaited Petroleum Industry Bill, PIB, never got the approval of the legislators or President Goodluck Ebele Jonathan’s accent, as promised.
The non-passage of the bill goes with more half a billion naira down the drain. The disappointment that followed is immeasurable, especially as there were so many expectations from the bill.
The PIB was meant to resolve a plethora of controversial issues in Nigeria’s oil and gas sector relating to revenues and investments, operations, regulations, structure and management that have weighed down the industry over the ages.
Indeed, given the dilly-dallying that trailed the bill, and the attendant controversies, industry analysts were sceptical about the ability of the former legislators to pass the bill on a clear conscience in view of the allegations of corruption and compromise occasioned by intensive lobbying to alter the original provisions of the bill.
No explanations given
Ironically, no explanations have been offered by the leadership of the 6th Assembly session with regard to the non-passage of the PIB, even as it is expected to be given a speedy hearing in the 7th National Assembly that was inaugurated yesterday.
A member of the former upper chamber of the assembly, Senator Lee Maeba, who was the Chairman Upstream Committee, in a text message response to Sweetcrude’s inquiries on why the PIB was not passed as anticipated, simply wrote, “Ask the Senate president” without giving more details, after refusing to pick his calls repeatedly.
Other legislators we tried to contact simply switched off their phones and refused to respond to text messages, while civil society groups cry foul, and condemned the colossal waste in terms of revenues and human resources that went into the bill.
This is because the bill had generated so many debates over the years, while it remained at the Assembly, resulting to its balkanization and numerous amendments, such that it became so watered down, so much that the original bill has almost lost its intended relevance.
The former Chairman, House of Representatives Committee on Petroleum, Bassey Otu, told a foreign media, “The PIB is alive and will be continued by the next National Assembly,”
Otu, now a senator, added, “The Senate has amended its rules to allow bills to be continued by another session of the Senate.”
Surviving the 7th Assembly session
In the past, the new legislators simply refused to inherit bills that were not passed by their predecessors. Such bills are thrown back into the basket to be reconsidered on fresh terms.
But with the amendment of that clause, bills are now expected to progress from where they stopped in the last legislative session.
This clause, was what gave the former Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, the hope for early passage in the new dispensation, because according to her even if they didn’t, it will be passed very shortly afterwards because it is going through the final hearing in both sides of the National Assembly as we speak.”
She had defended that the PIB needed to have stayed as much as it did under legislative scrutiny because “some of the terms were bound to be very stringent”, as such, the need to sort out all the contentious issues in the original bill for the interest of the investors, the economy and Nigerians.
However, notwithstanding the optimism for speedy passage, it is yet uncertain how the new legislators will react to bill, especially as they also need to understand the fundamental basis behind the bill. They need to understand the intrigues and the interests that will be served.
Already it has been observed that passage of the bill, without Nigerians having the inkling into what the final contents are, could be quite injurious to them and the economy.
Besides, it has been criticized that some of the amendments to the bill are not actually in the interest of the people, especially with regard to:
?Equity for oil and gas communities, which has now been monetized under a Community Development Fund.
?The environment, oil companies were said to have been freed from the responsibility of damages caused by pollution and other operational hazards.
?Measurement of oil and gas production levels, one of the biggest avenues for corruption in the sector remains unresolved, and a host of many other issues, which analysts believe were not properly treated.
?Casualisation in the industry, which labour continues to criticise Indigenous operators react
Many of the operators who spoke to before the end of the last legislative session on the conditions of anonymity, expressed fears for the future of the industry due to non-passage of the bill, even while not having any confidence in the law makers passing the bill as expected.
One of them was concerned that the National Assembly members, many of whom are not returning to the floor, had become lackadaisical in their approach to burning national issues, and would prefer their successors to deal with the knotty issues, which they could not resolve satisfactorily in the PIB.
Assessing the implications of the non-passage of the bill, many predicted more job losses in the industry, due to the continued freeze on new investments, as no company will invest any fund into the sector before the passage.
“We’ve been operating under a non-PIB regime, although if it were to be passed there would be a deluge of jobs and if it is not passed, it would delay major industry investments, And in furtherance to that not a few service companies might lay off staff if the situation stays as it is, because some of them will have to shut down as the investment climate would remain uncertain and there may be no jobs for them to execute and as such they would be unable to service overheads and staff salaries,” they argued.
One of them further noted, “Both the IOC’s and service companies as well as other indigenous players all agreed that the oil industry begs for a sound regulation as well as the National Oil Company which currently needs to shed its regulatory role and play a more active and competitive role in the sector.
“It is also imperative that the sector gets a transparent and hitch-free contractual procedure as well as the fiscal terms which needs to be looked into as that is an aspect of the bill that is still causing ripples between stakeholders because while the country is trying to boost its stake from the sector, the IOC’s are also pushing back on this as it would not be so profitable for them.”
Like the civil society groups, the operators are equally concerned about the huge financial and human resource losses, saying, “The importance to the growth of the sector has been over-emphasised, seminars and workshops have been held to enlighten all involved, monies have been spent, all to ensure a speedy and realistic passage of the bill. But all we have gotten so far have been failed dates and of course, rhetoric.”
Besides, they added, the non-passage of the bill would not only have a negative chain-reaction for the sector and the economy, since the sector is the bedrock of the economy, but will also weaken the implementation of the recently passed, Nigerian Content Development Act, which was expected to be given additional boost in the PIB.
Multinationals views
For the Country Chair, Shell Companies in Nigeria, Mr. Mutiu Sumonu, the failure to pass the PIB would simply mean little or no further investment in the upstream sector of the petroleum industry. “And that could result in huge losses for the federal government as well as local companies, which could have benefited from such investment.”
The saddest aspect of the current developments is the fact that Madueke had emphatically re-assured the international investing community of the passage of the bill at the recently concluded Offshore Technology Conference which held in Houston, Texas, United States.
She expressed joy that the President Goodluck Ebele Jonathan’s aspiration for the industry is already bearing fruits with the strong showing of some Nigerian companies taking full advantage of the provisions of the Nigerian Content law to showcase their own indigenous technology
“I have gone round the exhibition stands and I am happy to note that some indigenous Nigerian companies are now displaying technology and rendering hi-tech services. This is good for the industry in Nigeria, we have grown through the years from being mere observers to active participants offering technical services that can compete globally.
“We expect to see the complete fallout of the various reforms that we have been implementing over the course of the last 12 months. Not just the fallout of the Nigerian Content law, but also the full implementation of the Petroleum Industry Bill, which we hope would be passed before the end of this administration,’’ she asserted.
Deizani on PIB
A week before the inauguration of the new administration, the former Minister of Petroleum Resources, sought to explain to journalists in Lagos, on May 19, to be precise some of the gray areas leading to the numerous amendments of the PIB; a development that led to it prolonged stay at the National Assembly. Excerpts:
Process
I must say that we have worked aggressively on this bill alongside the National Assembly, the NASS as you know, is at this time basically in charge of the bill from the time it went into first hearing, which was legally out.
But that of course does not mean that we were not very closely working for it or working with them. There were a number of issues with the bill that we saw and we set up a very high powered committee made up of some top quality people within the sector and without. Both within the oil and gas sector, the private and public as well as in administration and management consultancy – a wide range of people to look at it again at the major areas of the bill that were of concern – the fiscal terms particularly the deep offshore PSC, which were of major concern to multinationals and impact on indigenous operators because some of the terms were bound to be very stringent.
Commercialization of the NNPC
Ensuring that in the final analysis it has been taken to the extremes that it needed to be taken to, to allow it to stand because the first going over of the bill did not go into it with the sort of depth that would make it seriously implementable at the end of the day. So we had to look at that very carefully
Also, the commercialization of the NNPC, the reforms and a whole lot of other issues came up – revenues, where are they derived from and where do they go to and in what format etc. so we look at all those as well.
Commercialization of NNPC is a very important issue and one of the areas we had to look at with a fine tooth comb. We had to look at the issues that were originally handled in the original run over of the PIB, particularly because the new NNPC is supposed to run along private sector commercial lines. And if it is to do so, the entire make up of the company and the way it handles its business will obviously have to change. Because of that we had to go in-depth, because they had just skimmed the surface and that we felt was not good enough. I asked for a working document on how a commercialized NNPC will actually run, coming from a private sector. Like I said, it is not just the actual activity of the company that will change, but also the revenue streams accruing to government and the way they will now accrue to government, as opposed to everything going to the Federation Account. We will now be deriving revenues as government from a commercialized body and pay taxes and dividends and royalty, while some portions will still obviously go to the Federation account. These are all issues, which had to be looked at very carefully and worked out to a certain extent and then be taken forward when the PIB is promulgated into law.
Nigerian Petroleum Development Company
Let me say for the record, since we started 11 months ago, Mr. President has given a lot of support in our efforts to also ensure that NPDC as well, which is another critical arm, if we are truly to become a national oil of standing, which is engaged in hydrocarbon activities not just in Nigeria, but also in other countries in the world, such as Petrobraz and Aramco are doing.
NPDC also, has to be supported to stand effectively, and so we have begun systematically to begin to give blocks that they are capable of handling at this moment to them in phases, whilst ensuring that the technical partnerships that they need to carry or handle these blocks are also being put in place.
Truly, up till about 12 months ago, when I came in I was a little appalled at the standing of NPDC. At the time that I changed the headship of NPDC, I felt it was necessary to have a go-getter, who will actually begin to think how to take that company to where it is supposed to be. These things will not happen overnight, but we are already ensuring that we have to put our money where our mouth is as a country. You have to be able to stand up to some of the multinationals and say, these acreages will have to go to the national oil company so to speak, and we are supporting them as a government to ensure that they begin to stand, because it is a process and it takes a number of years to get to where we want to. Already, they are beginning to make little waves and we hope that in three to four years, we may even have begun to expand slightly outside the shores of this country, even if it is regionally.
There were some issues that you might consider more managerial, the role of the minister, was one of them etc, so we looked at those other issues around the major issues as well.
At the end of the day, I think the committees, did a very good job, we were very pleased with what they came up with. Issues such as the fiscal terms surrounding domestic gas, we had to look at again in depth because the way it looked, we won’t have been able to fulfill the nation’s requirement for domestic gas unless we went over it again with a fine tooth comb and that has now been done.
So those amendments are with both sides of the house of the NASS, even though the original bill had already been placed before the senate, and they also have the amendments along with that and they are looking at everything side by side.
Even yesterday, because we have been on this bill because it is critical to us as a ministry, just as it is critical for the country as well, so even yesterday, I spoke with the chairman upstream committee of the House of Reps, because it was laid before the house of reps yesterday (Wednesday), I believe it is being laid again today, they are giving us assurances that it will be through, and it will be in front of Mr. President next week.
I can only say that we have those assurances, we are praying that it actually goes through and presented before him next week. Mr. President himself is expecting it to be laid before him for his signature next week so that it is concluded in this 6th sitting of the NASS, so that is the intention.
There would still be a few knotty issues, which will be worked out in addendums as we go forward. This is the first time we had a bill of this magnitude in any case, but we have done a lot of work over the last few months to actually get it to the stage that it is in now, in terms of the amendments that were made outside the original bill.
I think that for a bill that was over 50 years in the making, it was actually necessary to spend this sort of time looking at it because frankly, we needed a bill that will stand the test of time and I think that if the amendments are taken into consideration, what we will have at the end of the day will be a very strong, robust strategic framework on which the oil and gas sector can stand and operate for years to come.
I am excitedly looking forward to next week and hoping that as the administration rounds up, we will be celebrating that PIB has been signed into law by Mr. President.
Gas Master Plan
In terms of the GMP, again, as you know, we had pulled out certain aspects it, ahead of the PIB, because we needed to set the base fundamental, I think ground work for it well ahead for it, particularly as the PIB has taken this long to come into law. It was because of this that we started months ago with the various cost pricing regimes for gas – Gas-to-power, and the Gas-to-industries, to begin to set the scene for the actual master plan because these things were supposed to be inherent in the master plan that is actually within the PIB itself.
On top of that, we moved ahead again, when we did the gas industrialization, as we call it our gas revolution, to begin to implement major tenets that would actually have normally happened after the PIB would have been promulgated into law, ensuring that CPFs, LPG plants, methanol plants, and all of which would have been pumped out after the PIB, the petro-chemical plants, the two fertilizer plants, the five fertilizer blending plants, they were all articulated to ensure that we have a gas sector that is already beginning to work, even though it is still in the conceptual stage, so to speak.
But those agreements were binding agreements; they were not the usual MoUs that we handled. Both ourselves, on the government side and Zenol of Saudi Arabia, Madajuana of India, were so pumped up by the possibilities in what we were doing that they actually went into binding agreements to ensure that neither of us reneged on the deal, which happened quite a lot. MoUs are not binding, so at the end of the day, either party can wriggle out for one reason or the other. But in this case, it is not so, and we structured it in such a way that over the next four to five years, what we have put together, I think, will really create a critical mass in terms of the industrialization for the Nigerian economy in all senses.
Most importantly, to bring it down to real pragmatic terms, in terms of job creation and employment generation. In fact, the cost of this gas industrialization in the cabinet now, we are beginning to require that when you put forward your projects or major infrastructural memorandums, going forward, you will need to as a minister, also tell us how many jobs these projects or these contracts would generate for Nigerians. This is critical for us as an economy, going forward.
It has generated a lot of interests and I must say that we have actually begun to get a number of interesting enquiries from other countries both in the same area – Saudi Arabia and in other parts of the world, who are now looking at ways and means to come into our gas sector and set up similar partnerships. So we are looking at all those at this point in time.
What we have really done is shown the industrial world, in terms of international gas sector that we are serious, and opened up the door to allow for the explosion in our gas sector that we expected to happen after the PIB had been promulgated into law. We simply brought it forward so that PIB or not, in terms of the GMP, we are already on the road and the PIB would simply serve to cement what we are already doing and what we’re already starting.
In terms of gas, as the possibilities are vast now, both in terms of the upstream gas sector, the mid-stream and the actual downstream service part of the gas sector. This ties into the Nigerian Content Act, which was promulgated early this year and the various things that we are doing there as well.
Greenfield refineries
In terms of the Greenfield refineries, we have actually had several meetings with the Chinese consortium that signed the MoUs with us, in as much as it wasn’t binding. The MoUs were signed sometime ago, and it became very clear that the deadlines, which were set that expired a few days ago, was not feasible because the feasibility studies which both sides agreed on and entered into will take another two months to complete at least. So it was agreed upon in the last meeting, which held about five or six weeks ago with them, that we would defer the final expiration date till after the feasibility studies were concluded because without the feasibility studies, we actually do not have a strong basis on which to handle our negotiations or anything regarding the refineries. So that has been done. The Chinese had written us a couple of days ago, commending us and the fact that they had agreed to this deferment. So that is still on course, pending of course the negotiations and with the hope that when the feasibility studies are done, the negotiations would actually turn out the way we are hoping they will.
The way it is going at this point in time, the refineries will be built one way or another, and that is the truth. There is a lot of interests in the refineries and we hope that our talks with the Chinese will be productive and that we can move forward from there, but there is a lot of interests in the refineries and it is an area that is of optimum importance to the government, in view of the fact that we need to scale down on the importation products over the next two to three years. So we will have to concentrate on that.
You know that we have put a lot of efforts into kicking off a major turnaround maintenance once again, to try and bring our traditional refineries up to a higher percentage of capacity utilization than we have had so far. We’ve kicked into Phase 1 and over the next 24 months, all three refineries should have undergone intensive TAM as well, whilst the Greenfield refineries are being built.
Oil for equity/monetization
Let me say in general that the benefits to the communities are not isolated or are not solely tied to the monetization of the equities that have been spelt out in the PIB. There are so many other ways that the PIB, just like the Nigerian Content Act will impact on the communities all across the country, particularly in the Niger Delta, where exploration and production for the most part takes place. Iif you go through the bill, it will be pretty clear the various ways that it will impact the communities.
Just in terms of the Gas Master Plan alone, if you look at the petrochemical plants, fertilizer plants, etc, because of the proximity to the source of gas, the petrochemical plant, the fertilizer plant will obviously be located nearer to the western delta areas, where we have the largest reserves of gas in general. It can be piped to other locations as well.
The moment mobilization starts for any of these projects, major impact will begin to b felt in the communities around where these entities are. And these are well skinned entities, entities that will produce 1.43 million tonnes per annum in terms of polyethylene, about 400,000/yr polypropylene. We are talking of about 1.43 tonnes/yr of fertilizer in each of the fertilizer plants.
The number of jobs, the impact on the communities and far beyond the communities is immeasurable at this time and starts from mobilization, because all sorts of services, across companies and sectors begin to grow up around these sites and built upon themselves.
So the quantum of impact is not just in the final entity, it never happens like that, the impact begins from mobilization and lasts for years to come and those are things we cannot begin to put in figures and words, because it cuts across the entire Delta and all parts of the country. We are building blending plants, LPG plants, methanol plants etc. So like I said, the PIB will impact on every Nigeria, irrespective of where they come from.
