Nigeria is a difficult country to understand. It is a country where leaders' actions are based on greed and personal interest than that of the nation at large. The Petroleum Industry Bill has been in the National Assembly for a while now begging for passage. Legislators are reluctant to pass the bill because most of the oil companies do not favour the legislation as if laws made in the country are to be determined by those who operate in the sector for which the laws are made.
Two weeks ago, BP Plc (BP/), one of the seven sisters oil companies that rule the oil industry agreed to pay more than $12 billion in government and private party settlements over the 2010 Gulf of Mexico oil spill, yet still faces claims seeking billions of dollars more for the catastrophe.
The $4.5 billion agreement resolving federal criminal charges and claims by the Securities and Exchange Commission left the company at risk for as much as $17.6 billion in potential fines from alleged violations of the Clean Water Act, as well as demands by the U.S. and Gulf states for enough money to restore the region's coastline and waters to their condition before the spill.
BP is paying for damages it caused based on existing laws in the US and the Gulf State of Mexico. BP did not make the laws; still, BP was banned by the US government from any government contract until it is able to show that it can do clean business. Here in Nigeria, Shell and others have done worst spill in the Niger-Delta but go around talking tough as if they are the landlords on the land they operate.
Shamefully, Nigeria seems to be begging these oil companies to allow it pass the PIB bill. Funny enough, Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, in Abuja described the fiscal terms proposed in the Petroleum Industry Bill (PIB) as fair. Alison-Madueke said this at a panel discussion on "PIB and the Future of Nigeria's Oil Industry" at the 18th Nigeria Economic Summit. She said that Nigeria still remained one of the most attractive countries in terms of fiscal regime or "government take".
The minister said that the total government share of oil revenues after all taxes and royalties was 73 percent, up from 61 percent in current deals with oil majors. Alison-Madueke said that Nigeria was not alone in the tightening of the fiscal terms. She said the goal was to achieve a "fair balance between government and contractor share to ensure that risks do not outweigh rewards."
Hear what she said "We feel that the fiscal terms are fair but we will continue discussions with our partners, looking for a way in which both sides of the scale can go forward. Also, all cost based incentives have now been replaced with production based incentives, because government revenues come from production and not from cost."
Does the government have to beg for it to pass a law in its own land and resources? If the oil companies are not comfortable with the law which is in line with what is happening globally, they have alternative choice. Many of them have been indulging in subtle threat of divesting from the country. In this day and time when China and India are looking for where to put their money, government should be courageous enough to call there bluff.
Nigeria is in this state today because the country has failed to diversify its economic base. If the economy was diversified and government revenue from other sources were as much as it gets from oil, it will not subject the nation to the current ridicule.
The multinationals are well aware that they have been feeding fat on Nigeria for the mere fact that current deep water terms were negotiated in 1993 when oil prices were just 20 dollars a barrel. Section 16 of the Deep Offshore Act prescribes that changes be made to this particular fiscal regime to restore benefits to the government commensurate with increased oil prices, once oil prices have exceeded 20 dollars per barrel in real terms. The Act also prescribes that changes be made 15 years after the commencement of the Deep Offshore Act.
This, therefore, imposes stricter discipline on cost escalations and de-incentives gold platting. It is exactly 19 years since that negotiation was made. Nigeria must go ahead with the legislation and spell out clearly the term of engagement and total deregulation of the oil sector.