*Says PIA’ll transform sector, create jobs

By Victor Ahiuma-Young

Petroleum Industry Act, PIA, recently signed into law by President Muhammadu Buhari, has continued to elicit divergent reaction from Nigerians and groups. In this interview, President of Petroleum and Natural Gas Senior Staff Association, PENGASSAN, Festus Osifo, sees it as a milestone that will transform the Oil and Gas sector. Excerpts

PIA, a new narrative

The Petroleum Industry Bill, PIB that was before the National Assembly for several  years created a lot of confusion in the industry because nobody knew what the rule of engagement would  be.

Most of the International Oil Companies, IOCs, held back their investments. When the delay seemed unending, they moved their investments to other parts of Africa. Because of the uncertainty in the Nigerian environment, Nigeria was not attracting investments.

With the signing of the bill, the most fundamental advantage is that it has stopped the uncertainty in the industry. The uncertainty of what would the law be, if I invest a particular amount; how much am I going to get, how much am I going to pay as tax, as royalty, as capital gain tax?

 Another important provision is the environmental remediation fund and environmental remediation plan. It states that as you are getting your license for oil prospecting, you will submit to either the commission or authority your environmental remediation plan.

READ ALSO: Issa Aemu describes controversies over PIA as healthy

You will also set funds aside on a yearly basis into the fund. Should there be a spill, this fund will now be used in cleaning it unlike before, where there was no fund  when there was a spill. To eliminate the issue and  ensure that  in Niger Delta, the pollution that we have does not increase, that fund that is set aside overtime will be used in doing remediation work.

Another good provision in the bill is also about development of gas. Before now our old laws, the Petroleum Act of 1959 did not make any provision relating to gas. But in the current PIA, we have a provision, about 50 sections of the PIA, dedicated to gas.

How you develop gas, gas infrastructure,  gas storage system and distribution, among others. This is because gas will remain for a very long time as oil will not remain. Over time, Nigeria as a country will move more into gas.

Before now, what we  had about gas was the regulation and policies, but there was no concrete law that backed gas development but we have addressed that now. 

Also in the PIA is issue of gas flaring. Before now, we had no concrete laws apart from regulations on gas flaring but today there is. One salient point that is good is that the penalty on gas flaring will be paid by the company and used by the host community.

The community will be the direct beneficiary of the fund if you flare gas in a community. Another milestone is the provision of Incorporated Joint Venture, IJV. Before now we had a provision for joint operating agreement between the IOCs and NNPC not backed by laws.

What the Act did, though optional, is to ensure companies incorporate the JV into Corporate Affairs Commission under the Companies and Allied Matters Act (CAMA law), which tends to reduce or eliminate the cash call that today, most companies are finding it difficult to live with.

Refineries in PIA era

Before now, the unions, both PENGASSAN and NUPENG were not really at the centre stage on refineries rehabilitation. Despite funds put in into turn-around maintenance, TAM,  the refineries were still in the state of comatose. But today, when government started the rehabilitation,  the unions insisted that we want to be in the steering committee of the rehabitation, which was granted.

When we started the process, there were some pushes that we did. For instance, for the Port Harcourt refineries, Nigeria is borrowing $1billion from Afreximbank. We advised that Nigeria should not collect this money and pay into federation account or the CBN that the politicians will have access to.

We advised that the best way to go was to open an escrow account. While the bank pays into the escrow account; the bank, NNPC and contractors will be signatories. At the end of the day, you will release money to the contractors on progress.

If you have committed 10 per cent of the work breakdown structure, that is the amount that will be released so that the money would be utilised for  its purpose. That was what was approved.

On privatising the refineries, this is a national asset. Over the years, it has not worked because of lots of issues. One of them is the lack of will from the government. If government decides to sell the refineries,  Nigeria will be short-changed because many things have been damaged. It will not be in our national interest.

We advocated that we should fix the refineries that once they start working, government should divest. They should give 51 per cent shares to private investors and retain 49 per cent, just as it is with the Nigerian Liquefied Natural Gas, NLNG. This will help because when the refineries are working and we are trying to privatise, Nigeria will make excess money from it.

Then on the amount of money spent for TAM is the amount on the scope of work. The scope of work is massive. We don’t think that the amount being put into it is wasted with the scope of work, more so because the money will not be made available to the politicians.

Extent of refineries repairs

For the Port Harcourt refinery sanctioned in May, presently, the contractors are mobilising to site and carrying out 3D laser scanning on the facility. That is the first thing in the  scope of work before you commence the rehabilitation process.

Activities are going on there. For the Kaduna and Warri refineries sanctioned about three weeks ago, paper works are going on. The phase five on the older refinery will come on stream less than two years from when the contract was signed. We are expecting the phase five to come on stream by 2023.

 Economic diversification, PIA

Today, oil contributes 10 per cent of our GDP  while it contributes to over 90 per cent of our foreign exchange earnings. It is a misnomer. This is because Nigeria is not developing the value chain. If the country had developed the value chain of crude oil, it would have brought more developments as the value chain is enormous.

The way we can develop other sectors is with the money from oil. Our advocacy is that government should put plans in place so that between now and say five to 10 years, let us start producing up to three million barrels of crude oil per day.

The money that you get from the extra one million barrels per day, you can set it aside to do two things. One, invest in renewables as we are moving into energy transition and develop other sectors like agrobusiness, which is the key that will unlock our development.

If we develop our mid and downstream in agric, it is a pointer to develop our economy. For effective agrobusiness, Nigeria needs a deliberate policy that will do backward integration and develop the value chain.

That is the fastest way to grow the economy. Our take is that we must generate enough money from oil to develop other sectors and the fastest sector to develop is the agribusiness sector, which contributes largest to our GDP. If we develop that sector, it is going to create a lot of jobs. We need to develop the value chain around the agric sector.

Security, development

Currently, insecurity in Nigeria is a huge challenge and it is doing a lot of harm to the economy. We are advocating and urging government to up the game. Today, in an average offshore installation site, we have between five to 10 security vessels manning the installation round the clock, with 100 to 200 personnel working there.

The cost of manning each security vessel is not less than $5,000 per day. With about five security vessels, we have $25,000 daily. We will pay the naval officials, buy AGO and by the time you add all these costs, it could be $30,000 per day. That adds to your cost of operation.

As an investor, you will  prefer to go to neighbouring countries that is relatively secured instead of investing in Nigeria. In the PIB, we advocated that government must look at the peculiarities.

If you want to increase royalties as other countries, you must create the enabling environment to attract investment. 

We have challenges securing the pipelines, securing the offshore and onshore installations. If you go to an offshore installation, it is like you have a battalion of army that is guarding most of the onshore installations, which ought not to be like that.

That is why the National Executive Council, NEC, of PENGASSAN recently resolved that beyond mere pronouncement, we do a security awareness campaign across all our zones to advocate and also reward some police officers that are exemplary.

We distributed N2 million with about N250, 000 each to eight police officers across the zones to encourage and identify with them. We did an open letter to President  Buhari for us to draw his attention that we are facing challenges in the oil and gas industry regarding security.

The security awareness campaign will be constant. Our members are being kidnapped. In fact one of our members spent about 44 days in captivity and just got released recently. We are exposed to insecurity.

However, as a union we are trying to partner security agencies and give them all the maximum support they require.

Vanguard News Nigeria