PIB: Legacy legislation begging for passage

on   /   in Sweet Crude 10:00 am   /   Comments

CLARA NWACHUKWU

Last year’s admission by Senator Magnus Abe that the continued delay in passing the Petroleum Industry Bill, PIB, is on account of extraneous factors beyond the control of Nigeria’s upper legislative chamber, gave many Nigerians quite a scare.

Abe told journalists at a conference in Lagos that “the Senate experienced some delays in dealing with the bill because of events outside the control of the lawmakers.” This sounded more like echoes of what happened to the PIB during the sixth legislative session, and ended up not being passed.

Since its advent, the bill has generated a lot of interests both locally and internationally, because the PIB, largely regarded as a piece of legacy legislation, is one that has been carefully formulated to bring about radical changes in the nation’s petroleum sector.

senateBut change, no matter how desirable or beneficial is often resisted, mostly because of the uncertainties in the future. The crux of the matter with regard to the anticipated change is whose interest is being protected by these changes – Nigerians or multinational operators.

PIB date line
The journey of the PIB 2012, actually started during the sixth legislative session, when on April 24, the former President Olusegun Obasanjo’s administration inaugurated the Oil and Gas Sector Reform Implementation Committee, OGIC.

The Committee’s Report formed the basis of the PIB 2008, which was submitted to the National Assembly. But the bill was never passed into law mainly because of these same extraneous factors, which led to the production of multiple versions of the bill.

The bill took off again on another journey in January 2012, in the aftermath of the crises over fuel price hike, and subsequent revelations on the management of the Petroleum Subsidy Fund, PSF.
The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, thereafter, set up a Technical Committee, headed by the then Director, Department of Petroleum Resources, DPR, Mr. Osten Olorunsola, to harmonise the various versions of the draft bill.

Below is a progression of the new bill:

  •  July 18, 2012 – President Goodluck Jonathan presents new version of the bill, PIB 2012 to the Seventh Session of the National.
  • Dec 14, 2012 – House of Reps commences debate on PIB.
  • Dec 16, 2012 – PIB passes second reading in the House of Reps. House constitutes 23-member Special Ad-hoc Committee for further legislative work on the Bill.
  • Mar 5 – 2013 – Senate commences second reading of the PIB.
  • Mar 6, 2013 – PIB passes second reading in the Senate, and hands over to joint committees on Petroleum, Gas, Judiciary, Human Rights and Legal matters on a six-week mandate.
  • Mar 13, 2013 – House of Reps inaugurates PIB Ad-hoc Committee, although Committee was set up in November 2012.
  • May 22/23, 2013 – Public Hearings begin on the PIB by House of Reps.
  • July 9/10, 2013 – House of Reps to hold final public hearing on PIB. But failed to hold, and no reasons given.
  • July 16/17, 2013 – Senate fixes dates for public hearings. Stakeholders were to submit memoranda on or before the 11th, but were postponed to the 18/19th.
  • July 18/19, 2013 – Senate holds PIB public hearing.
  • Oct 9, 2013 – Senate to hold another round of hearing based on allegations of exclusion of some key stakeholders in previous deliberations by the senate, but postponed because of the Hajj.

From the chronology above, one would have expected that all that was needed to be said regarding the bill must have been said. All the arguments for and against, submissions by various stakeholders, government, operators, and labour were heard.

PIB objectives
All through the proceedings, the objectives of the bill were reinforced over and over again, the essence of which is, to fast track the socio-economic development of Nigeria. By so doing, putting more money in the hands of government and Nigerians as well as paving the way for more Nigerians to participate in the industry dominated by foreigners.

For the benefit of emphasis, other objectives, as contained in the bill include:

  • Creation of a conducive business environment for petroleum operations;
  • Establishment of a progressive fiscal framework that encourages further investment in the petroleum industry while optimising revenues accruing to the Government;
  • Creation of efficient and effective regulatory agencies; and;
  • Promotion of transparency and openness in the administration of the petroleum resources of Nigeria.

And while Abe’s admission may have sound ominous, he still gave reasons for hope that the PIB will be passed in the near future, when he said, “Our commitment to the passage of the PIB is unshakeable.”
The hope was reinforced by his lower chamber colleague, Hon. Dakuku Peterside, who revealed that in view of how critical the bill is to the Nigerian economy, it went through the first and second reading in the House of Representatives “without any dissenting voice from any member of the House.”

What then is holding back the passing of the bill into law?
The PIB is an amalgam of the over 80 existing laws and ordinances in the country, aimed at making the petroleum industry more transparent, accountable, and competitive, in line with international best practices.
Every aspect of the industry was tweaked in terms of policy, regulations, supervision and operational bottlenecks to enhance efficiency and eliminate duplications. Even the Nigerian National Petroleum Corporation, NNPC, presently seen as the “sacred cow” was not spared, as it is being proposed to run a profitable venture like its peers in other oil producing countries.

Below is a proposal to divest up to 30 per cent of government’s stake in NNPC:
In view of all the salutary points identified above, expectations are that national interest would super cede personal or sectional interest for the benefit of all.
It became apparent that at almost every turn, other extraneous interests would be raised above the national interest so much that at the end of the public hearing, Alison-Madueke pleaded that issues should not be politicised or personalised in order to move forward.

Citing one of the knotty areas in the bill with regard to the powers of the minister, she argued that the bill, first and foremost will outlive the current administration.
Furthermore, she noted that the powers vested on the Minister in the Bill are not different from those vested on other ministers in the petroleum laws of countries like the United kingdom, Malaysia and Norway, and should not take away the essence of the bill.

Mrs Deziani Alison-Madueke

Mrs Deziani Alison-Madueke

According to Alison-Madueke, the PIB seeks to establish a legal, fiscal and regulatory framework that will revolutionise the nation’s Petroleum industry.
She said this is because the bill intends to create a standard business practice, protect health, safety and environment in the course of petroleum exploration and enhance exploration and exploitation of petroleum in Nigeria.

But, as one of the dailies commentary noted, “the bill may not be perfect as it is but one thing is already certain: it offends the vested interests of many powerful operators, notably the multinational oil companies and their home governments. These powerful interests have poke-nosed overtly and covertly into every step and process of the bill all along the way.

“With a combination of threats, cajoles and inducements they have succeeded thus far in halting the bill in its tracks after many years’ effort to get it passed.”
Benefits of PIB
Against this backdrop, various government representatives, and in particular the PIB Lead Team, have taken turns to explain the benefits of the PIB, saying it’s a win-win for all – government, Nigerians and operators.

In one of such fora, the Lead Team, Engineer Abiye Membere, reiterated that with the new PIB, “there is no victor and no vanquished,” even in the most contentious provisions of the bill, such as the fiscal terms.
He listed some of the benefits of the bill to include:
•Creating a robust economic environment to attract investments.
•Growth of revenue beyond the short term.
•Create strong and independent regulators to develop and enforce open, fair and transparent rules in the oil and gas sector.
•Liberalise and regulate the downstream and midstream sub sectors of the oil and gas industry.
•Create a commercially-oriented national oil company that will compete effectively with its peers.
•Foster progress on government transformation agenda especially in the areas of growth, employment creation, power and industrial development.
•Sustain the gains of Nigerian content development and in-country capacity and capability.
Membere, who is also the Group Executive Director, Exploration and Production, NNPC, also argued that the PIB represents the largest overhaul of the government petroleum revenue system in the last four decades.

According to him, the reform is meant to simplify the collection of revenues and cream off windfall profits in case of high oil prices.
But not all stakeholders, particularly the International Oil Companies, IOCs, are convinced about these benefits. They have continued to speak against the fiscal provisions at every given opportunity.
In their opinion, the fiscal terms will stifle future investments, leading to decline in oil and gas production and reserves addition.

A game of numbers
The Chairman, Oil Producers Trade Section, OPTS of the Lagos Chamber of Commerce and Industry, LCCI, Mr. Mark Ward, predicted a sharp decline in current oil and gas production from 63 percent to about 25 percent.
Ward, also the Managing Director, Mobil Producing Nigeria Unlimited, said current fiscal proposals in the PIB could translate to loss of investments of about $185 billion in new projects.

He also argued that the PIB will create one of the world’s harshest production sharing contract, PSC regime, as Nigerian government’s take (royalties, taxes and NOC profit oil) at 96 percent, is the highest in the world.
He cited other oil producing countries where government take is lower, such as Trinidad and Tobago (58 percent), Angola (62 percent), Nigeria, pre-PIB (70 percent), Equatorial Guinea (75 percent), Egypt (79 percent), Malaysia (85 percent), and Indonesia (89 percent).

From the foregoing, one is easily tempted to believe the PIB is a game of numbers rather than a piece of legislation that seeks to streamline all the figures that are being bandied about by different stakeholders.
But when the IOCs figures are countered with government’s it becomes obvious that the operators merely want to retain their huge profits at the expence of the larger Nigerians, which is why government is proposing a higher take in the PIB.

Also, to bring home the truth about the numbers government tried to show what was at stake in one of the production regions. From the example of the deep water take, the Federal Government would have earned lower profit, lower tax, but higher royalties from oil and gas production based on the 2012 Budget, if the PIB had been passed as projected, as shown below:

Pro-PIB views
Despite widespread criticisms against the bill by the IOCs, the bill remains beautiful not just because government said so; other independent parties have also expressed their opinions on the bill.
The IOCs called for an independent valuation of the fiscal terms by the World Bank, and this was re-echoed by the two oil workers unions, NUPENG and PENGASSAN. The unions called for independent fiscal experts to review the fiscal regimes to determine its competitiveness.

It was therefore, quite a huge shock, when the investment arm of the Bank, the International Monetary Fund, IMF, gave the PIB a clean bill.
In the IMF’s estimation, “The Bill is one of Nigeria’s most important pieces of legislation, because it proposes massive industry reform. Right now, it is at risk of being picked apart by opponents. For the critics and the supporters of the IMF, this statement is important.”

The Fund went further to state that it “looked forward to an early passage of the Petroleum Industry Bill which would boost investment, government revenue, and fiscal transparency.”

Apart from the IMF, an industry expert, Dr. Pedro van Meurs, in his report for international consultants, Ernst and Young, argued that the transparency provisions in the PIB, “are now among the most advanced in the world, and will make Nigeria a leader in Africa in this respect.” van Meurs, who also criticised the high rate of gas flaring endorsed provisions designed to reduce wasteful gas flaring – Nigeria in 2011 wasted through flaring nearly one-third of what is used.

Back in Nigeria, President of LCCI, Mr Goodie Ibru, while expressing concern on the possibility of sudden shock on government finances on account of the vagaries of the international oil market said called for the  quick passage of the PIB.
According to him, “While we note that the passage and implementation of the PIB will not entirely eliminate the problem, it would expand investment in the sector. Curbing corruption and other forms of fiscal leakages would further stabilise the economy.”

*Oil rig

*Oil rig

Major highlights
Despite all that have been said and done on the PIB, analysts argue that certain highlights should be kept in view while the debates on the bill progress in this new year. These are:

  • That the 223-page document has taken into account years of research about the problems in and around the petroleum industry.

 

  • The IOCs were instrumental in writing previous legislations are not too happy to have them all re-written, as this will translate to loss of control of the industry.
  • This, notwithstanding, the PIB seeks a fair deal for all, while also increasing the amount of oil revenue given to communities
  • The bill seeks greater transparency measures – publishing the Government’s contracts with oil companies, making data about production for public scrutiny.
  • The drill or drop policy seeks to make the industry more competitive by releasing dormant acreages to new entrants, thereby creating space for smaller Nigerian companies.
  • The environment has suffered the most in oil and gas activities, as such the bill seek to have cleaner and friendlier environment by enforcing more responsible operations that will reduce oil spills and gas flaring.
  • Bill is not meant to drive away present partners, but to make them thrive and prosper based on fair partnership, mutual respect and social responsibility.
  • The Petroleum Host Community Fund will institute fairness in revenue distribution between coastal and inland states, while for the first time giving both local upstream and downstream communities a decent share of the revenues.
  • To guarantee the future of Nigeria’s hydrocarbon supply, the bill also establishes a Frontier Exploration Service to search for and analyse Nigeria’s extensive deposits whether in the North or South for even national development.
  • The privatisation of the power sector makes natural gas a very important commodity, and the PIB makes a powerful and justified effort to persuade oil companies to domesticate some of the gas as opposed to exporting all.
  • Above all, the PIB also recognises the importance of deregulating some areas, particularly the downstream sector to make it more competitive to attract further investments.

Against this backdrop, Nigerians expect that the PIB will no longer be unduly delayed, as the advantages far outweigh the disadvantages, and since government is a continuum, disagreements on provisions can be resolved in the future.

President Jonathan and Petroleum Minister, Diezani

President Jonathan and Petroleum Minister, Diezani

This is why some analysts disagree with the Deputy Chairman of the Senate Joint Committees, Senator Kabiru Marafa, when he attributed the delay in the passage of the bill to the need to do a good job of ensuring transparency in oil and gas exploration and all related activities.

According to the lawmaker, “… we want to come up with a document that will make everybody happy. We want to accommodate everybody in this bill and the delay in passing the bill is to ensure that a good work is done.”
But analysts insist that no one legislation can solve all the problems, saying, “Policies are made on a need basis, and this will become obvious during the process of implementation. Whatever is not working will be reviewed because in a democracy, no decision is cast on stone.”

The passage of the PIB is long overdue before we start to loose the benefits. Nigerians deserve a better life through a fair share of our natural resources, and the time to make it happen is now.
Therefore, the National Assembly should stop toying with the the development and improvement of our citizenry under the guise of politics. As it were, speedy audit of far less issues affecting the country is taken more seriously than the PIB, which is a game changer for Nigerian people.

Enough is Enough. Other jurisdictions have passed their laws long time ago. The legislators should wake up to their responsibility, as they owe Nigerians this single activity that will significantly impact their lives you don’t have any excuse not to do it.
Nigerians expectation is for the PIB to be passed in first quarter of 2014.

 

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