Fuel subsidy: Fears over new petroleum bill

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– Vested interests regroup

– Senate pleads for cooperation



THERE are indications that a new Petroleum Industry Bill (PIB) might be on its way to the National Assembly.  The need for a speedy passage of the bill became necessary after President Goodluck Jonathan caught Nigerians off guard when he decided to increase the price of petrol (premium motor spirit) without taking cognizance of the need for a holistic approach in tackling the myriads of problem plaguing the country’s oil and gas industry.

Assurance of sincerity of the Federal Government inaugurated as regard a fast-track approach was recently demonstrated when the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke announced a task force to oversee the passage of the controversial bill into an Act of the National Assembly, after six years of languish.

The bill is seen as the most critical piece of legislation still waiting to be passed into law by the National Assembly and is aimed at transforming the Nigerian oil industry.

The Federal Government had in 2005 set up the Oil and Gas Industry Committee, which drafted the original PIB.

Since then, there have been reports that different versions of the bill are in circulation.

Alison-Madueke said, “At the end of the 6th Assembly, there was more than one version going around. So, government expects that the committee to put up all the indices in place to redefine the bill look at certain sections and include strategic aspects so that we can get it right.”

But there are fears in the industry of a resurgence of the plots that shot it down in its first advent.

Operators grumble

Stakeholders at last week’s Offshore West African International Conference and Exhibition (OWA 2012) in Abuja believe the PIB is central to Nigeria and in particular to deep-water offshore exploration and production activity.

Operators expressed concern over the declining investment in the upstream sector of the industry, describing the situation as catastrophic.

The level of investment in that sector, according to them, does not guarantee energy for the future and that of oil and gas industry in the country. They noted that it is not in the interest of the country to deplete its oil reserves through continuous use without replenishment.

The Managing Directors of Shell Nigeria Exploration and Production Company Limited (SNEPCo) Chike Onyejekwe and Total Exploration and Production Nigeria (TEPN), Guy Maurice, warned on the danger ahead and advised the government to encourage exploration for more oil to guarantee the future of the industry.

Total chief, who was represented by the company’s Executive Director, Corporate Goesciences and Business, Kingsley Ojoh, said: “It is important to note that we must explore if we want to continue from where we stopped. Exploration is the key to this country’s future, it is important for exploration to be encouraged, because there is need for replenishment.”

He said: “We were doing over 60 wells post-independence, up till 1970 and now there is decline. What is going on is catastrophic. Exploration is going down because those wells you are seeing were based on exploration we have done in the past. If we don’t start aggressive exploration now, and delay putting them on stream, we have a future that may be jeopardised.

“I don’t want to be the last generation that will experience exploration in Nigeria; there is necessity for the authority to take a decision that will harness instant exploration. There is need to promote aggressive exploration because production is cash flow basically, but exploration is the future. Compared to Brazil, Nigeria’s future is not as easy because there has been no reserve replacement.”

In his presentation, Onyejekwe said Shell has done a lot of investment in the industry including pioneering some technologies that have significantly boosted the industry performance, but noted that there is need for a stable operating environment.

Onyejekwe said: “Investors don’t like uncertainties. They want stable terms and conditions. That’s particularly true in energy, where projects lead times are sometimes 10-year long and facilities operate for decades. Investors need the rule of law and respect for contracts, rules that allow investors to compete fairly in the market. They want good incentives and fair balance risks and rewards.

Coveted document

The PIB is articulated to totally reorganise the nation’s petroleum sector in such a manner that will make it transparent and efficient. The initial draft, which is over 300 pages, makes extensive revolutionary provisions for the sector.

The administration of Umaru Musa Yar’Adua, had proposed the bill but it ran into turbulent waters immediately it arrived at the legislature. The vested interests tore the chambers apart and planted the seed of suspicion everywhere. Several copies of the bill with different variations flooded the National Assembly, making it difficult for members to forge a common front on the bill.

The restructuring of the industry as proposed by the PIB would see the establishment of the National Petroleum Commission, which would be run by a board chaired by a federal minister. It will have the overriding responsibility of formulating policies for the administration of the industry. The bill states categorically that the commission under the Act “shall have power to coordinate the activities of the petroleum industry and exercise overall supervisory functions over petroleum operations and all the institutions of the industry.”

The bill also provides for the creation of some agencies out of the present Nigerian National Petroleum Commission, while it would transform into the National Oil Company.

As the bill provides in clause 138(1-2), “There is established by this Act the Nigerian National Petroleum Company Limited (The National Oil Company), which shall be a body corporate with perpetual succession and a common seal. The National Oil Company shall be incorporated as a private limited liability company by the Attorney General of the Federal Government on the instruction of the Federal Executive Council not later than three months after the effective date. Ownership of the National Oil Company shall be vested solely in the Federal Government of Nigeria.”

When the bill becomes effective, the company will be involved in all forms of oil exploration activities, just like any other oil company in the sector. The bill, in this wise, will create a level-playing field for all players in the industry.

While the Directorate of Petroleum Resources in the Ministry of Petroleum Resources will be phased out as well as the Petroleum Inspectorate of the NNPC, a new agency, known as the Nigerian Petroleum Inspectorate will be created. It will have the responsibility of maintaining standards and regulating the operations of the industry. It will be industry’s police, enforcing all the policies, laws, and regulations relating to technical aspects of the industry.

The Petroleum Products Regulatory Authority has also been proposed by the bill as another agency that will promote the implementation of national commercial policies for the downstream petroleum industry as well as regulate commercial activities of the downstream sector.

Another novel creation of the bill is the establishment of the National Petroleum Assets Management Agency, which will have oversight of costing in the upstream petroleum industry so as to maximise the total revenue accruing to the government from the upstream sector.

Other creations of the bill include the Petroleum Technology Development Fund, not different from the PTDF still standing today and the Petroleum Producing Host Communities Fund, which will cater for the yearnings of the host communities by protecting their interest in the entire process of administering the industry.

However, some aspects of the bill are being contested by international oil companies. They include areas that have to do with tax regimes that tend to put more burdens on them and make them more responsible in the way they do business in Nigeria. Captured under the Nigerian Hydrocarbon Tax, operators would be required to pay taxes on gas products separately as against what it is now.

Senate seeks understanding

The Senate has said all interests in the controversial PIB should be articulated in a bid to secure a quick passage of the Bill. Chairman, Senate Joint Committee investigating the management of fuel subsidy regime, Senator Magnus Abe, disclosed this recently.

He said it was expected that a revolutionary piece of legislation like the PIB should naturally attract the kind of resistance it encountered in the last legislature.

He noted that if key actors in the oil industry, the Federal Government, National Assembly and other Nigerians put the interest of the country first, finding a common ground to pass the PIB would not be difficult.

The lawmaker added that the interest of investors in the industry should not be left out, saying that beyond promoting the interest of Nigerians, effort must also be made to ensure that those who participate in the industry get fair returns for their investment.

He said: “Quite frankly, there is no way you would make such a revolutionary reorganisation of the oil industry in this country without going through challenges.

“I think it would be naïve of any Nigerian to think so. I know for a fact that there a lot of interests, economic interests, political interests, social interests that are tied into the oil sector.

“In dealing with a subject like the PIB, which seeks to reshape the industry, re-create it and quite frankly, remake it on a commercial basis and take out a lot of the wastes and a lot of the unnecessary patronage that is  associated with the industry, I don’t think you can achieve that without some level of turbulence.

“I think you would have some of those challenges, but the important thing is that if those key actors in this, namely the Federal Government, the National Assembly, our own people, if we all put the interest of Nigeria first, finding a common ground and passing a law that would actually enable the petroleum industry to develop to the benefit of the Nigerian people would not be too difficult an assignment.

“I know that oil industry players would have their own interests, which they would like to see written into the law but we are Nigerians; the resource belongs to us and it is the interest of our people that we should promote over and beyond anything else.“And you also have to remember that in promoting the interest of our people, you must make sure that those who participate in the industry can get fair returns for their investment because if they don’t get it, then even trying to get something for your own people would be useless.”

Source: National Daily


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