Leadership (Abuja)

Nigeria: PIB - North, NNPC, IOCs, Niger Delta Intensify Lobby

As the Petroleum Industry Bill (PIB) moves to committee level for further legislative vetting at the House of Representatives, there has been intense lobbying by stakeholders wishing to influence several aspects of the touchy 223-page legislation that seeks to redirect Nigeria's oil sector.

Already, a strategic meeting between top officials of the Ministry for Petroleum Resources and the 23-member House special panel recently inaugurated to handle the PIB at committee level is planned for the Cross River State capital, Calabar, at a yet-to-be-disclosed date.

On Thursday, House speaker Aminu Waziri Tambuwal announced a 23-member special ad-hoc panel to carry out further legislative action on the PIB. The bill scaled a second reading after two days' extensive and wide-ranging debate by federal lawmakers and was subsequently referred to the ad-hoc panel headed by chief whip Ishaka Bawa for further legislative action. Minority whip Samson Osagie was named deputy chairman of the panel.

The agenda of the retreat, LEADERSHIP learnt, is to protect key sections in the PIB bordering on the federal government's joint venture (JV) and production sharing contracts (PSCs) with international oil companies (IOCs)

Also, the new tax regime for IOCs and the Petroleum Host Communities Fund contained in the PIB tops agenda for the lobby meeting. Oil companies will pay tax on a percentage of the chargeable profits as follows: 50 per cent for onshore and shallow water areas; 25 per cent for frontier acreage and deep water areas. Oil companies will contribute into the fund for Niger Delta communities, 10 per cent of net profits less royalties, deductions and allowances, hydrocarbon tax and income tax. The host fund will cover the cost of repairs to any oil facilities damaged by vandalism, sabotage and civil unrest.

Governors of the 19 northern states have already signaled their intention to meet, discuss and come up with a unified position on the PIB, Kano State governor Rabiu Kwankwaso confirmed. The creation of the National New Frontier Exploration Agency - touted as a largely northern-driven bargain - is expected to form the backdrop of the governor's position.

The new bill to establish the exploration agency which was consolidated with the PIB will effectively pursue exploration and production of oil and gas in the frontier of Chad Basin, Dahomey Basin, Imo Basin, Benue Trough and Sokoto Basin.

Meanwhile, the chairman, House ad-hoc committee on PIB and house chief whip, Ishaka Bawa, has said the bill will not be "rubber-stamped" as necessary inputs, amendments and alteration will be effected on the Bill. Bawa, in a chat with newsmen, said the bill will be subject to the overriding interest of Nigerians

He said: "The bill (PIB) we have today which came from President Goodluck Jonathan is not sacrosanct; that is why we said let us legislate on it. Otherwise, we will say let us rubber-stamp it and then pass it; but we said it must go through the process of lawmaking.

"It has never happened that we sent back a bill the way the executive brought it, and it will never happen. Subject to overriding interest of Nigerians, the bill will be subjected to Nigerians' scrutiny. In the course of our work as a committee, opportunity will be given to everybody to present their memos and make inputs, amendments, alteration and expunge any section.

"So if there is anybody who feels that another version of the bill is much better, then ,you can bring it because we will call for memorandum.

Meanwhile, there were indications yesterday that the current PIB before the National Assembly may be headed for a still-birth going by the alleged ferocious threats from IOCs.

The bill, investigations have revealed, is seriously threatened as the IOCs are said to be against plans by the federal government to increase its revenue generation from JVs and PSCs as proposed in the bill.

The threat, sources revealed, is a follow-up to new conditions attached to both JVs and PSCs that enable the government to raise its share to rates at par with what obtains in other oil producing countries as well as introduces royalties that will allow marginal field producers to grow and compete in line with the Nigerian Content Act that was signed into law by President Jonathan on April 22, 2010.

So far, the IOCs are said to be engaging lawmakers in a high-profile lobbying to abandon the bill or adjust the terms to suit their interests.

According to a source within the corridors of government, the methods deployed by the IOCs to lobby government officials is such that they have resorted to capitalizing on the efforts of the federal government to attract foreign investment with threats that the bill, if passed, will result in massive divestment by IOCs to other oil producing countries in the region.

"With the absence of an enabling law that sets out guidelines for operations in the oil and gas sector, the Nigerian government has continued to lose billions of dollars in tax due to unfavourable PSC terms approved in 1993, which is no longer valid for current economic and business realities," he lamented.

The source explained: "But the PSC is designed such that the first five years where the huge capital is invested, the IOCs take a large chunk of revenue estimate of 70 per cent of the profit compared with 30 per cent for the government."

He argued that the current arrangement is bad because royalty is set currently at zero in the 1993 PSC. So, what the PSC designed for us is that the juicy part is where the IOCs enjoy. It is when the oil well is getting old that the government begins to receive higher profit of 60:40 ratio.

He said: "But that was at that time because we do not understand the PSCs; we wanted to give people incentives to go into the oil sector."

He added that the PSCs were signed when the price of crude oil was pegged at $20 per barrel. In this case, it implies, if the oil price goes above $20, government should take more from the windfall: "But since the PSC started in 1993, oil price has always been above $20 per barrel, but government did not invoke the clause. The contract also said the contract will be due for review after 15 years which expired in 2008. It was not done because the oil companies threatened to relocate and government, out of fear that time, allowed it to linger.

"Having identified revenue loopholes being utilised by IOCs, the experts of the federal government had drawn up provisions in the bill that will raise her revenue per barrel from 86 to 87 per cent for PSC blocks and introduction of flexible royalty arrangement that will enable the government to earn higher revenue as the price of crude oil rises above $100 per barrel in JV fields.

"Our lawmakers should protect the resource base or the mainstay of the Nigerian economy by rejecting offers and pressure of the IOCs. If the IOCs came to a government official and he refused to yield, they would send his brother to him. If the official refused the offer by his brother, they would send somebody to his wife; if that did not work, they would talk to his father or even report the official to his village chief."

The IOCs are desperate to ensure the amendment of the PIB to sustain the current revenue leakages despite the five years' tax waivers for investors in gas projects dedicated for domestic gas supply for power generation.

He added that the IOCs led by Shell are divesting not because of the fiscal terms in the PIB but because the PSC fields are more profitable to operate than the JV fields. For instance, at the current production level of 2.4 million barrels per day (mbpd) of crude oil, he explained, the PSC fields are generating $7.8 billion annually from daily production of 900,000bpd compared with the contribution of $32 billion by the JV fields for 1.5mbpd. Under the current 1993 PSC terms, he noted, the federal government is also receiving about 15 per cent representing 180,000bpd from the production of 900,000bpd while the IOCs take 720,000bpd.

"This cannot continue," he said.

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.