Leadership (Abuja)

12 November 2012

Nigeria: Why We Are Against PIB - Shell, ExxonMobil

International oil companies (IOCs) have said that there is a disconnect between the private sector operators in the oil and gas industry and the plans by the federal government to use the Petroleum Industry Bill (PIB) that is before the National Assembly as a legislative framework to attract $108 billion investment to the industry between 2012 and 2025. According to them, there is need to fine-tune the bill currently before the legislature.

Ubaka Emelumadu, vice president, gas, Sub-Saharan Africa, Shell Upstream International, noted that the current PIB under consideration in the National Assembly would no doubt play a vital role in the survival and growth of the oil and gas industry in Nigeria if well fine-tuned.

However, he said, there are some disparities between the position of the IOCs and that of government in some key areas.

The IOCs are particular about stable legal, regulatory and fiscal framework.

"In terms of fiscals, what we have seen and know of this PIB requires improvement to attract the required level of investment to match Nigeria's expectations now and in the future," he said.

According to him, the royalties and rents are high: "For instance, with gas tax increasing from 30 per cent to 80 per cent, royalty increasing from 7 per cent to 12.5 per cent for big producers, and minimal tax allowances for investment incentives on gas cannot simply work."

Also, the managing director of ExxonMobil, Mr Mark Ward, said that, as a representative of the IOCs operating in Nigeria, he knew that the current PIB before the National Assembly if signed into an act will tremendously stifle every planned investment of the IOCs. "There is an expected 64 per cent increase in crude oil production between now and the year 2025," he said.

The ExxonMobil boss said from the discussions they had with the Nigerian National Petroleum Corporation (NNPC), the government is also expecting the IOCs to invest as much as $30 billion in the gas industry in the next 13 years.

Ward pointed out that this ambitious investment will not be possible if the PIB does not address very well three key areas in the gas industry. According to him, the bill as it is with the National Assembly has not properly addressed the issue of gas pricing, market and infrastructure. He wondered how competitive the Nigerian gas market will be if the issue of pricing is not well taken care of. He noted that with the current PIB, if it became law, would take the hand of the clock back for the IOCs. This, he said, will not only slow down investment but will also put the entire industry into a state of total re-planning.

Speaking also on the impact the PIB will have on the Nigerian oil and gas industry, a former consultant to the Ministry of Petroleum Resources, Dr Pedro Meurs, said with the PIB there is need to re-define the upstream and the downstream sectors of the oil and gas industry.

According to him, significant pipeline transportation, tank farms and terminals would be included in "upstream". "Does this, in turn, mean that upstream pipelines would be subject to hydrocarbon tax?" he asked. "Upstream pipelines would not be regulated and would not have pipeline tariffs under the PIB. This in turn makes it difficult for small companies to enter the pipeline systems. With respect to royalties the lack of measurement at the measurement point in the field facilitates the stealing of oil."

Ward said that the operators of the industry support FGN aspirations and have contributed to these objectives, but the PIB will not meet government aspirations "as the cumulative effect leads to an unattractive economic environment".

According to him, government has the right to change law, but the changes should honour existing contracts and recognise past investments. "Onshore and shallow water oil cannot bear any additional fiscal burden as, already, it is one of the most onerous tax regimes globally. Proposed PSC terms do not take into account factors that challenge viability like high technical costs and reduced field sizes. Massive investment in gas infrastructure is required across the entire value chain; however, gas is severely challenged by new fiscal terms. The PIB needs to balance interests of all stakeholders," he said.

Meanwhile, the chairman of Petroleum and National Gas Senior Association of Nigeria (PENGASSAN), Camrade Folorunso Ogginni, has told LEADERSHIP that the workers are also piqued that a different bill is being smuggled into the National Assembly to take care of refineries in Nigeria. This, he said, is a plan by the authority to sell off the refineries under the guise of privatisation "We are mobilising our members to ensure that we are part of the public hearing on the PIB," he said.

According to him, the workers can only support the commercialisation of the refineries instead of the selling them outright to a few individuals in the name of privatisation. "We want government to have at least 40 per cent of the holdings in these refineries while the other 60 per cent should go to the private sector in order to retain government presence in the refineries, but not the present overbearing influence of the government in the refineries. For instance, see the NNPC: within a short period, the corporation has had over six group managing director s, which is not healthy for an organisation like NNPC," he said.

Reps opposition meet today

Federal lawmakers are presently split over plans for the complete removal of the federal government's fuel subsidy regime, a key fallout of the proposed full deregulation of the oil sector captured in the 2012 Petroleum Industry Bill (PIB) scheduled this week for debate by the House of Representatives.

LEADERSHIP investigations report that the development follows pressure from many state governors who have expressed their preference to the federal lawmakers from their respective states for putting a stop to the subsidy regime and, by implication, freeing up cash for the states.

Nigeria attempted to remove fuel subsidies in January, prompting more than a week of strikes and public protests after the price of petrol more than doubled. President Goodluck Jonathan then partially reinstated subsidies.

Meanwhile, a meeting has been scheduled today in Abuja by the House of Representatives minority leader/ leader of opposition, Femi Gbajabiamila, for all opposition parties reportedly to reach a unified understanding and position on the PIB.

The meeting, which comes in the lead-up to debates on the controversial PIB, signals a stormy session as opposition parties will be working to present a unified position to check the House from being controlled by the ruling Peoples Democratic Party's agenda.

House Speaker Aminu Waziri Tambuwal at last Tuesday's plenary directed members wishing to contribute to the debate to submit their names to the chief whip or deputy whip preparatory for this week's deliberation.

The 360-member House of Representatives is made up of 163 opposition members; the PDP accounts for the rest. They are: Accord Party (5), Action Congress of Nigeria, ACN (71), All Nigeria Peoples Party, ANPP (27), All Progressives Grand Alliance, APGA (7), Congress for Progressive Change, CPC (40), Democratic Peoples Party, DPP (2) and Labour Party (11).

LEADERSHIP can also report that the lawmakers were being lobbied by fellow representatives of northern extraction for support for the creation of the National New Frontier Exploration Agency touted as a largely north-driven bargain as part of ongoing ethnic/political positioning on the PIB.

The new bill, which federal lawmakers have agreed to merge with the PIB in part, will pursue exploration and production of oil and gas in the frontiers of Chad Basin, Dahomey Basin, Imo Basin, Benue Trough and Sokoto Basin.

The lawmakers are also making moves to whittle down the perceived unlimited powers conferred on the minister of petroleum resources, Mrs. Diezani Alison-Madueke, by the PIB, in view of her oversight of the proposed unbundling and deregulation of the oil sector.

Going by provisions of the ambitious 223-page PIB, the oil minister will supervise all the oil institutions, including the regulator that used to be independent. Also, any person or company who fails to comply with an order made by or on behalf of the minister is liable to a fine or jail sentence - provisions the lawmakers are uncomfortable with.

Another contentious area borders on taxes. The PIB provides that oil companies will contribute 10 per cent of net profits from their Nigerian operations to the proposed Petroleum Host Communities Fund for Niger Delta communities, less royalties, deductions and allowances, hydrocarbon tax and income tax - an arrangement that strikes at the heart of the touchy onshore-offshore oil dichotomy debate.

However, there is little clarity on how the money will be paid or whether the communities will receive it directly or via the government, which opens the possibility of political interference.

For the second time, the House last Tuesday resolved to stay debates on the general principle of the PIB till this week to enable its leadership receive briefing from Alison-Madueke on the contentious bill.

Last week, Alison-Madueke said interests angling for her sack were doing so because she had refused to continue the "business as usual" tradition driven by age-long cartels in the petroleum sector.

"Those fighting the government in the media are doing so because we have been able to frustrate their efforts in strangulating the economy through their devilish black market and questionable profiteering at the expense of the Nigerian people. What is hurting them is that we have put policies in place where they can no longer cheat the government and cause untold hardship for millions of Nigerians," the minister told State House correspondents at the presidential villa.

Ads by Google

Copyright © 2012 Leadership. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.