•Stakeholders mount opposition, set to cut cost to $10 per barrel
•As COVID-19, low oil prices bite harder
By Udeme Akpan
THERE are strong indications that Nigerian Oil and Gas Industry Content Development Act (Amendment) Bill might fail, as stakeholders, currently working to cut the cost of producing oil from $30 to $10 per barrel, have started mounting pressure against it.
Unlike the Petroleum Industry Bill, PIB, which focuses on the restructuring and management of the entire oil and gas industry, the Nigerian Oil and Gas Industry Content Development Act (Amendment) Bill, sponsored by the Chairman, House Committee on Local Content, Legor Idagbo, seeks to increase the contribution of oil companies to Nigeria Content Development Fund from one per cent to two per cent.
The bill, which also seeks an additional 0.5 per cent of oil firms’ gross revenues for Research and Development, has already scaled through its second reading in the House of Representatives and set for public hearing.
Nevertheless, investigation by Vanguard, yesterday, showed that many stakeholders, including the Federal Ministry of Petroleum Resources, Nigerian National Petroleum Corporation, NNPC, International Oil Companies, IOCs, indigenous oil and gas producers and services providers, are opposed to the bill, especially now that the price of oil remains relatively low at less than $40 per barrel.
They are also opposed to it as they feel that the one per cent provided for in the current Act is adequate in assisting to expand and deepen Local Content issues in the oil and gas industry.
Count us out—NCDMB
In an email to Vanguard, Executive Secretary, Nigerian Content Development Monitoring Board, NCDMB, Mr. Simbi Wabote, stated: “NCDMB under my leadership is completely opposed to any increase in the contribution from one per cent to two per cent, including the 0.5 per cent for R and D as we see no reason for such increase. We see such increase as a diservice to the oil and gas industry as such increase is not justified and will only increase the cost of doing business in the oil and gas industry.
“The one per cent currently being paid is more than adequate to run the operations of NCDMB now and beyond. Again, we are vehemently opposed to any increase. In addition, we have made our position known to the National Assembly and NNPC.”
We will communicate to Assembly—NNPC
Similarly, Group General Manager, Group Public Affairs Division, NNPC, Dr. Kennie Obateru, said: “NNPC would communicate her position to the National Assembly.”
Bill will lead to higher cost
Also commenting on the development, an Energy analyst, Dr. Bala Mohammed Liman said it should be opposed as it would culminate in higher cost of operations for operators, currently desirous to cut cost.
He said: “An increase in funding to the Nigeria Content Development Fund and the proposal for companies to provide an additional 0.5 per cent of their gross revenues for Research and Development is a positive development that should help provide funding required for developing the local operators in the sector.
“However, it can be argued that the sector will be dependent on this source and this could restrict its R&D efforts. Also, by pushing for all penalties to be exclusively shouldered by the operators could end up being counter-productive, increasing the costs of these operators and keeping production costs high. This will affect the NNPC’s moves to reduce costs to $10 per barrel as targeted.
Industry over-burdened by levies, taxes, etc
Similarly, another analyst, who pleaded anonymity said: “I feel that the oil industry, currently haunted by Coronavirus pandemic has been exposed to a lot expenses in recent times. Proponents of this bill should consider the negative impact, which the proposed contributions to the Nigeria Content Development Fund, NCDF, by 100 per cent and the additional requirement for companies to provide annually a minimum of 0.5 per cent of their respective gross revenues for Research & Development activities in Nigeria, among other changes would make on the oil and gas companies.”