3 February 2013

Nigeria: PIB - 'Ending Controversy Is the Answer'

Chief Robert Clarke, a Senior Advocate of Nigeria, has said that the argument being canvassed by critics of the Petroleum Industry Bill (PIB) does not relate to the contents of the Bill.

He stated this in Abuja last week while speaking with our correspondent on the PIB which is still before the National Assembly.

"The argument is not to enhance the operational aspects of the Bill and it depends on which side of the divide you are.

"The overall objectives of PIB are to open up the Nigerian oil industry, privatization; optimise domestic gas supplies for power projects, industrial and residential use and deregulate/liberalise downstream sector.

"The PIB Bill has become necessary, because for a very long time Nigeria was not getting its right share in the oil revenue and the little that it received was mismanaged.

"The Bill intends to achieve these aims by harmonising 16 separate legislations governing the oil and gas sector; institute transparency and eliminate corruption in the industry.

"Specifically, the Bill clearly spells out the operational guidelines, institutional framework and regulatory bodies for the oil and gas sector, how to attract new investments into oil and gas sector, and enhance energy security," Clarke explained.

According to him, it also establishes a new fiscal framework based on commercially-oriented and profit making national oil and gas companies that can attract investments and boost revenue flows to government.

Addressing the question of environmental devastation of oil producing areas through provisions to ensure remediation, compensation to communities and safeguards against unsafe operations, Clarke said nobody can say that the community must not benefit from the oil in whatever manner that is necessary.

International oil companies are concerned that fiscal terms in PIB draft are uncompetitive.

Other critics point to the ministerial powers which are considered excessive, offering too much room for discretion, because the PIB does not insist that oil license awards be based on transparent auctions and due process. Strong executive leadership from minister requires driving reforms and policy that discretion has to be constrained.

Clarke noted that right from the onset, many powers have been granted to the minister under the old petroleum Act.

"The minister has power under the old law, power to make regulations and that is her discretion.

"Former president, Chief Obasanjo, when he was the minister of petroleum 2005 passed the regulation reducing the amount of oil blocks held by Nigerians from 60 percent to 10 percent.

"The idea was that indigenous owners of blocs after having been given the blocks, now reduced their holdings from 60 percent.

"He did this as a minister of petroleum, so every petroleum minister has the power to make discretion; it is not a new thing," Clarke said.

Stakeholders in the industry say that major features of the bill include fiscal provisions to increase the share of revenues accruing to government relative to the oil companies.

This, according to them, is necessary as oil is a strategic commodity, but the ratio of improvement is limited by the need to offer competitive terms to the oil companies who have alternative markets for their investments.

The bill also provides for the unbundling NNPC with successor companies to be commercially and profit oriented.

Ten percent of the net profit of every oil operator is to be remitted into the Petroleum Host Communities Fund to be used for the development of infrastructure in oil-producing communities.

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