5 December 2012

Nigeria: Oil Companies, FG Clash Over PIB

Photo: Vanguard
Nigeria oil report, Petroleum, Legal

International oil companies (IOCs) operating in Nigeria yesterday engaged the federal government in a hot exchange of words over the suitability of the Petroleum Industry Bill (PIB) currently before the National Assembly.

Both parties voiced their positions at the ongoing Nigeria Economic Summit Group (NESG) holding in Abuja.

The Managing Director, Shell Nigeria, Mutiu Sumonu speaking during the ministerial policy dialogue on "The Petroleum Industry Bill and the future of Nigeria's oil Industry", said Nigeria was classified almost as a war zone and that is impacting on the cost of oil and gas production in the country.

This is not factored into the PIB, he complained.

He said: "You cannot legislate on cost. Everyone would benefit from low operating cost but the market should be allowed to resolve itself. We need to address the cycle of insecurity. There are not many EPC contractors in the country today due to security."

Sumonu said it was not true that the IOCs were against the PIB but that "we want an industry well regulated and efficient. We are not fighting PIB but we only want some of the pitfalls to be addressed before making it law.

He said: "I'm worried about gas in the PIB. Gas in the PIB should be looked at if we are going to achieve 16 gig watts (40, 000MW) by 2020 and to achieve that, we need 1.5 billion cubic feet of gas. That translates to $4 billion investment in gas annually. Capital will naturally flow to where it's more competitive."

The Shell Nigeria chief said, "There is a perception out there that government is not making money from deep water, that the multinationals are making a kill from it. Up to 2011, government has made about $46 billion from deep-water.

"The multinationals spent $46 billion because in deep-water, the multinationals put up all the investment and realised about $11 billion, government does not put up any investment but has realised about $46 billion."

But the Nigerian National Petroleum Corporation (NNPC)'s Group Executive Director, Exploration and Production, Dr Abiye Membere dismissed their claims saying they did not mean well for Nigeria even as he said government was open to constructive discussion to improve the bill.

He said the PIB provides five year tax holiday for gas producing companies as well as reducing the royalties from 7.5 percent to 2.5 per cent.

Dr. Abiye who represented the NNPC group Managing Director, Andrew Yakubu said, "I guess that number (provided by shell boss) is grossly misleading. There is no way somebody who takes 80 per cent profit share will get $11 billion out of $46 billion business."

The Shell boss found support from the Managing Director of Seplat Petroleum Development Company, an independent oil producer in Nigeria, Mr. Austin Aturu. He said the provision of the PIB in regards to gas which would be a vital component of the power sector remain uncompetitive.

He said: "The fiscal provision on gas is not good enough to deliver the results. If government insists, let's put it into test in the next three years and see how the market reacts."

In his remarks, Speaker of the House of Representative, Aminu Waziri Tambuwal said the House considers the PIB the most important bill currently before it.

Speaker Tambuwal who was represented by Rep Jones Henry said the bill was being given accelerated hearing contrary to rumours that the lawmakers were sitting on it.

According to him, a public hearing would take place in the first quarter of 2013, just as he said the bill has passed second reading.

"A committee handling it would conduct a public hearing to get the input of the Nigerian public," he said.

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