BY Babajide Komolafe
Minister for Petroleum Resources, Mrs Diezani Alison-Madueke, and operators in the petroleum sector, Tuesday, disagreed on the fiscal regime in the Petroleum Industry Bill, PIB.
Speaking during a panel discussion on PIB and the Future of Nigeria’s Oil Industry, at the ongoing Nigeria Economic Summit in Abuja, the minister said the fiscal regime in the PIB was fair and that Nigeria still remained one of the most attractive countries in terms of fiscal regime or “government take.”
Alison-Madueke said: “We feel that the fiscal terms are fair and we will continue discussions with our partners, looking for ways in which both sides of the scale go forward.
“The PIB introduces price-based royalty for crude prices beyond 70 dollars per barrel and prices beyond seven dollars per million BTU.
“Also, all cost based incentives has now been replaced with production-based incentives, because government revenues come from production and not cost. This, therefore, imposes stricter discipline on cost escalations and de-incentives gold platting.”
Not just fiscal
However, Mr. Austin Avuru, Managing Director, Seplat Petroleum Development Company, said the current fiscal regime, as proposed in the draft, was harsh and suggested that government allowed the “fiscal regime to self-adjust.”
Avuru said discussions on PIB should not be limited to fiscal issues such as “tax and royalty” as the cardinal point of the reforms was to make certain institutions more effective in the oil and gas sector.
He said what should be done was to separate issues of taxation and royalties from PIB, while focus should be on factors militating against investment in the country.
On his part, Mr. Mark Ward, Managing Director, Exxon Mobil, said the fiscal issues of taxation, royalties and incentives should be structured to encourage investment and production in the oil sector, rather than increase government’s share of the revenue.
He said the challenge before Nigeria was creating a framework that will make it competitive in attracting foreign capital.
He said such framework should address the problem of long contractual cycle in the country and absence mechanism for dispute resolution.
He noted that Nigeria had one of the longest contractual cycles in the world, which sometimes took up to four years as against months in other countries, adding that this was not good as far as attracting investment was concerned.
On his part, Managing Director, Dubri Oil, Dr. Imo Itsueli, said a major issue that will determine the inflow of investment in the sector under the PIB Bill was the ownership of the proposed National Oil Company.
He said if government had majority sharehol-ding in the company, it would be perceived as government-owned, and would make it difficult to attract investment.
He said if government shareholding was as low as 30 percent and if the management was independent in terms of employment decisions, investors will be willing to put money in it.