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IOCs, NNPC still at odds over PIB

International oil companies operating in Nigeria, notably Shell Petroleum Development Company (SPDC) and Chevron Nigeria Limited last week seized the platform provided by the annual Nigeria Oil and Gas international conference and exhibition to underscore the deep schism that still exists between the multinationals exploration and production companies and the state-run Nigeria National Petroleum Corporation (NNPC) over aspects of the Petroleum Industry Bill (PIB) currently before the National Assembly.

Engineers at drilling rig

Things came to a head on Tuesday at the strategic session of the Nigeria Oil and Gas Conference in Abuja, where representatives of the IOCs gave a frank overview of the proposed petroleum industry reform bill championed by NNPC and the Ministry of Petroleum Resources.

The out-going Regional Executive Vice-President of Shell Exploration and Production, Africa, Mrs. Ann Pickard dealt the most devastating blow to perceived collaboration between stakeholders in the industry over the PIB, when she disclosed that despite claims by her friend, Dr. Mohammed Sanusi Barkindo, the Group Managing Director of the NNPC, if provisions of the PIB is passed in its current form, it would make further investments in Nigeria’s deepwater uneconomic and result in loss of $50 billion in investment.

However, in a statement put out following Pickard’s pronouncements which were echoed by Andrew Fawthrop, the Managing Director of Chevron Nigeria Limited during his presentation, the NNPC urged the National Assembly to fast track passage of the PIB noting that the country is losing additional revenue of US$ 287m in accruals to government from the three PSCs every month that goes by without its passage.

Shell’s Ann Pickard:
She noted that the PIB lacks insight into the very basics of the oil and gas industry, adding that until lately, the IOCs had not been consulted, adding that it threatens to make the present situation in the nation’s oil and gas industry worse.

“In the form currently proposed, the bill will make the Nigeria PSC regime among the harshest in the world, despite the high risk environment. The OPTS believes the bill will effectively end investment into Nigeria’s deepwater.

“Their analysis suggests that  no matter which version of the bill you look at  all or almost all proposed deepwater projects between now and 2020 will become uneconomic, and approximately $50 billion won’t be invested as planned.”

Pickard further noted that both the government and the international investors had failed to take responsibility for the proper repositioning of the oil and gas industry over the decades, resulting in the decline in the sector.

She lamented that the nation’s oil and gas production over the last decade has declined seriously and has been eclipsed by countries like Angola, even as investment in the industry has stalled.

“If passed in the form currently proposed its mistakes will take years to correct. Nigerians will have to wait longer for the electricity they need to light their homes at night. They will have to wait longer for the jobs they need to put food on the family table.

“The government will have to face difficult choices to balance the budget with less money available for the social services that the people need,” she stated.

Pickard explained that Shell and other companies  both international and Nigerian  have extensively shared their thoughts and knowledge with government over the proposed industry reform bill.

“Nigeria’s oil and gas production has not only failed to grow, it has fallen every year since 2005. Its share of global oil production is shrinking with it, falling just over 30 per cent since 2005.”

She said, “Our collective failing is that there has been a distinct inability to translate all of these positives into coherent policies and actions; to focus on speed and simplicity. It is a failure to seek win-win solutions as opposed to win-lose.

“There has been a failure to recognise that we all benefit from taking a fair share of a growing industry rather than an excessive share of a declining one; an unwillingness by some to stand up and take decisions. A failure to work with partners rather than see them as adversaries to be held at arm’s length.”

She stresses that Nigeria was too rich to be poor, noting that even as she leaves Nigeria after five years she felt a particular sadness over her inability to hand over a buoyant. portfolio to her successor.

Speaking right after Pickard, Mr. Fawthrop urged the NNPC and the Ministry of Petroleum Resources to engage stakeholders in the review of contentious portions of the PIB noting that this had become imperative if the industry was to make progress.

Dr. Rilwanu Lukman:
While delivering a keynote address at the opening session, Dr. Lukman said that since the PIB was submitted to the National Assembly, the executive arm of government has undertaken a comprehensive review and engaged all oil companies and other stakeholders in the areas of fiscal terms and upstream institutional arrangements.

“Altogether, 56 changes were made in line with presentations from the OPTS, 36 changes were made in response to the Federal Inland Revenue and 66 other changes based on presentations from other stakeholders.

We are confident that the final product of the bill when passed, will usher in a new era in the Nigerian oil and gas industry,” he pointed out.
Dr. Mohammed Barkindo:

Making his own submission, the Group Managing Director of the NNPC, Dr. Mohammed Barkindo described the PIB as the single most important legislation that seeks to introduce transparency and accountability in the petroleum industry in Nigeria in consonance with international best practices.

“This is the first time in Nigeria that we will have an all encompassing law that would govern the industry in the most transparent manner that will meet the expectations of the international community as well,” he said.

Although Pickard had claimed that the IOCs were not consulted until lately, Dr. Barkindo had earlier explained that “many nations like, UK, Alaska (US), Venezuela, Algeria, Russia, Alberta, Angola, etc had changed fiscal system to respond to operational and economic realities without recourse to foreign interest or IOCs. Yet, it is an open secret that both Houses of the National Assembly conducted a robust public hearing to accommodate the ventilation of opinions and comments from all stakeholders”.

Nigeria loses over US$287m monthly
In its reaction to Ann Pickard’s submissions at the NOG, the NNPC canvassed strong arguments in favour of the accelerated passage of the PIB.

In a statement, Dr. Levi Ajuonuma, the Group General Manager, Group Public Affairs of the Corporation tried to dispel insinuations made by Pickard.

The statement noted that while delivering a paper titled: Nigeria’s Position as a Key Player in Global Oil and Gas Markets at the 2010 Nigeria Oil and Gas, Pickard described the proposed oil industry reform legislation as “a cumbersome document that lacks insight into the very basics of our industry.”

The NNPC also noted that Pickard painted a bleak future on the oil and gas industry post-PIB and also criticized the fiscal provisions of the proposed law which she described as the “harshest in the world”.

The NNPC described the anti- PIB comments as misplaced and totally different from the realities of modern fiscal system.
“What Shell wants us to do is to keep subsidizing the production of gas which they end up exporting to their home countries to guarantee their national energy security. As I speak, Nigeria is still subsidizing gas for export because the cost of producing gas is recovered from oil revenue. There is no country in the world that does not get value for its natural resources. But we are getting negative value from gas in Nigeria.

The big question is if Nigerians are willing to forego subsidy from petroleum products which they consume, why should Shell or any other international oil company operating in this country expect Nigeria to keep subsidizing the gas that they export to other countries? That and many more abnormalities are what the PIB seeks to correct,” Ajuonuma noted.

On the argument that the proposed bill will make the Nigerian PSCs the harshest in the world, despite the so-called high risk environment, the NNPC remarked that such statement is 360 degrees different from verifiable empirical evidence.

“Currently, Nigeria has one of the lowest government take in the world for PSC which stands at 42 per cent whereas the international average worldwide is 75 per cent. In Angola it is 78 per cent, in Norway it is 76 per cent and even Ghana which has not even started is proposing about 80 per cent. What is even being proposed under the PIB is 70 per cent which is still less than what Angola is getting today. So how can that be harsh? For 10 years we allowed them to operate the Liquefied Natural Gas, LNG, in Bonny without paying a kobo as tax to the government because of a tax holiday all to encourage investment. Now, Nigeria wants to maximize its gas potentials to the fullest,” Ajuonuma explained.

He stated that the PIB is seeking to ensure that Nigeria and Nigerians reap the full benefits of their God-given resources. “Research shows that 80 per cent out of every one US dollar invested in the oil industry, goes offshore. That is why PIB is talking about local content. Under PIB, no oil company can import cooks and stewards from their country to work in Nigeria as expatriates.”


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