BY Clara Nwachukwu & Sebastine Obasi, Houston Texas
… as NASS assures on PIB passage
Nigerian unit of America’s ExxonMobil Corporation said it planned to invest up to $33 billion (N4.9 trillion) in the country’s oil and gas sector over the next five years.
The company said that a large chunk of the money would be invested in Independent Power Plant, IPP, to boost electricity generation in Nigeria that had been bugged down with insufficient power for its citizens for decades.
Chairman/Managing Director, ExxonMobil Upstream Companies in Nigeria, Mr. Mark Ward, made the disclosure at a special panel session organised by the Petroleum Technology Association of Nigeria, PETAN, at the day two of the ongoing Offshore Technology Conference, OTC, in Houston, Texas, USA.
Ward, also the Chair of the Oil Producers Trade Section, OPTS, of the Lagos Chamber of Commerce and Industry, LCCI, expressed the oil majors’ grouse with the fiscal proposals in the Petroleum Industry Bill, PIB, in line with the theme of the session: Post PIB Regime: Prospects and Opportunities for Investment in the Nigerian Oil and Gas Industry.
PIB will encourage new investments
Earlier, Group Managing Director, Nigerian National Petroleum Corporation, NNPC, Mr. Andrew Yakubu, one of the panelists of the discussions on PIB, maintained that the bill would foster greater investments in the nation’s petroleum industry.
The NNPC boss argued that the impact of the bill, when passed into law, could be appreciated from three broad perspectives.
He said there would be increase of new players in the Nigerian oil and gas industry through the proposed new acreage management system involving the release of acreages that have been held without activity due to one constraint or another;
Nigeria’s significant undiscovered oil and gas potential, particularly in the area of gas, which is estimated at about 600 trillion cubic feet, tcf; and the creation of an efficient downstream regulator and deregulation of the sub-sector that will also bring oil and gas pipeline systems under a sound commercial framework, allowing for open access and increased investments.
He said: “It is the lack of open acreage and limited funding in the Joint Ventures, JVs, that is limiting exploration activity. The proposed new acreage management system would release new acreage for exploration.
“The PIB will create a sound framework for private sector participation in the entire value chain of the industry.”
Oil majors disagree
However, oil majors think otherwise. According to Ward, the current bill would jeopardise new investments in the oil and gas sector, which, in turn, will impede on new output targets and put the industry in a state of overhaul.
He described the bill as ambitious, complex, laden with uncertainty and time-consuming in implementation.
He said: “There is enormous investor’s uncertainty with apparent divergent interests. Nigeria’s Joint Venture oil fiscal terms are already amongst the highest in the world, not considering the high risks and cost due to security and bunkering.”
In his opinion, the new PIB in its current form will create one of the harshest Production Sharing Contract, PSC, regimes, adding that the resultant challenges will lead to decline in the production of oil and gas resources.
He added: “The PIB outcome is highly uncertain for the industry. It applies to only existing projects and does not preserve contractual basis on which investments were made.”
Ward insisted that a good PIB should have fiscal terms that create value for the economy and attract investment.
“We want a PIB that will streamline the regulatory environment, separate regulation and commercial functions as well as solve funding issues. We want a stable globally competitive climate that enables all key stakeholders to meet their objectives.”
He warned that if the bill is passed into law without significant changes, the Nigerian Government’s aspirations to grow the business and the industry will not be met.
Furthermore, Ward argued that the new bill could push the government’s take from oil revenue to above 90 per cent of all revenues. “Nigeria is already one of the most onerous fiscal regimes and now the government wants to make it tougher.
He added that hopes of expanding lucrative offshore production would be quashed if the bill is passed as is, particularly “For deepwater, there are no investments that can be supported under the current terms of the PIB.”
Besides, Ward noted that the issues of gas pricing, market and infrastructure were not properly addressed in the bill, and wondered how competitive the Nigerian gas market will be if the issue of pricing is not well taken care of.
NASS assures on PIB passage
Hopes that the new Petroleum Industry Bill, PIB, will be passed soon was rekindled, Tuesday, when some lawmakers also participating in the ongoing Offshore Technology Conference, OTC, taking place in Houston Texas, USA, gave the assurance that the bill will be passed before year end.
To legalise sweeping reforms in the petroleum sector aimed at increasing its take and instituting on a more transparent regime in an industry often described as opaque due to its lack of transparency and accountability, the Nigerian government is proposing an omnibus bill that will not only increase its take, but also correct perceived wrongs in the system.
However, debates on the bill have stretched for over 12 years, while an earlier bill could not survive the 6th legislative session in Nigeria, due to varied issues relating mainly to sectional interests and political interferences.
Against this backdrop, the legislators, Sen. Emmanuel Paulker, Committee Chair on Upstream; and his House of Representatives counterpart, Hon. Samson Osagie, Deputy Committee Chair on PIB, said that unlike its predecessor, the new bill will not suffer from undue political manipulations, but will protect national interest.
Paulker, who denied that the legislators had made a promise that the bill will be passed in two weeks at the same forum last year, said the Senate is buoyed by the bill.
He said: “Before the month runs out, the Senate will issue a publication calling for memoranda on the bill.
“Although we will take all stakeholders views, but we will not compromise national interest.”
Osagie, who was a panellist at a Special Panel Session on PIB, organised by the Petroleum Technology Association of Nigeria, PETAN, at day two of the OTC, maintained that the new PIB will not be plagued with all the inconsistencies associated with the old one, especially as regards the multiplicity of the former bill.
He said: “I will not tell you that this bill will be passed in two weeks. Given the interests that this bill has generated, you will agree with me that a lot needs to be done for us to be able to synchronise the various issues around the PIB.
“What I am very sure of right now is that we do not have different versions of the PIB as we had during the 6th National Assembly.
“Recall that at the twilight of the 6th National Assembly, the bill had to be withdrawn from further consideration only for the fact that it was adulterated and over six or seven versions were in the public domain.
“Of course it is an executive bill. It was adulterated and to an extent that even the executive that brought the bill was no longer sure of what was to be passed.”
I think that was the major flaw as at that time. So as at now, we have one PIB before the NA and it is made with security marks and we have not been told since last year that it came to the NA that there are different versions lying over the places. And I can assure you too that what the NA and the executive will do as authors of this bill are quite verse to ensure that this bill is passed. And I don’t think there is any reason why it should not be passed; even the industry operators want it passed because I have asked a few of them.
“So I want to say definitely that the legislative process is not subject to mathematical position, I cannot tell you that in two months it will be done, we are going for the last public hearing at the House of Representatives, and there after, we shall go into retracting certain areas we feel need to be reworked and then we will pass it at the House and then send it to the Senate for concurrence.”
Osagie admitted that the National Assembly has been bombarded with all sorts of complaints relating to specific proposals in the bill, adding that all of these will be taken into consideration in the eventual passage.
He, however, spoke glowingly about the bill, saying that while it is intended to institute greater transparency in the system and maximise government’s revenues, the lawmakers will ensure that the fiscal regime will not be too harsh as to drive away existing or prospective investors.
Expectations from new bill
Outlining what lawmakers’ expectations from the new bill, Osagie said that proposals would be considered in line with Section 14 of the Nigerian Constitution that demands that government should be run in such a way that it protects the well being of the people.
Accordingly, parts of the expectations include:
*Maximisation of government revenues from oil and gas to enhance economic growth and social development
*Industry is run in a more accountable and transparent manner in accordance with the law
*Reducing executive interference in divested companies by diluting government’s equity
*Shore up local participation especially in offshore operations
*Ensure the overhaul of the nation’s refineries to reduce reliance on products importation
*Expunge discretionary powers in the allocation of acreages except under very strict conditions
*Encourage employment generation and diversification of investments in the downstream sector of the country’s oil and gas sector.