Hope dims for PIB as legislators wind down

The promoters of the Petroleum Industry Bill anticipate that it will bring sanity into the oil and gas sector by ensuring transparency and a new fiscal regime but the hope that it will be passed soon is fading fast, ‘FEMI ASU writes

The Petroleum Industry Bill looks set to suffer the same fate that befell it during the 6th National Assembly as the end of the current legislature’s tenure is just a month and few days away.

The latest draft of the PIB, which seeks to overhaul the Nigerian oil and gas industry, was forwarded to the current National Assembly by President Goodluck Jonathan in July 2012.

The bill was first introduced to the 6th National Assembly in 2008 and made some progress, but was not passed into law before the regime expired in 2011.

Two years and nine months after it was sent to the 7th National Assembly, the PIB has scaled second reading in the Senate and House of Representatives, with committee work said to have been concluded on it. But industry experts have expressed doubt that it would be passed in less than two months before the end of the legislative tenure.

An energy expert and Senior Lecturer, Energy Law at the University of Lagos, Dr. Dayo Ayoade, said, “I have read news reports that the National Assembly has been making efforts to finalise the PIB, but I think in many ways, the efforts are futile; too little too late.

“The National Assembly members are aware of their responsibility; they are aware of the importance of the oil and gas industry to the economy. But despite being aware of all these, they played politics with the PIB.”

Ayoade believes it will be better at this stage not to rush into a bill that will damage the industry, saying, “Whether the President will even assent to such a bill remains to be seen. There are a lot of controversial issues about it – the tax aspect and multinationals are still unhappy.”

He said a lot of projects had been stagnant, adding that Liquefied Natural Gas projects such as Brass and Olokola had yet to see final investment decisions on them.

“So, the incoming administration has its work cut out. First is to holistically look at the bill and prune it, if necessary. If we want the bill to work, let us do things that will allow the bill to transform the industry genuinely,” Ayoade added.

An energy law expert and a former Company Secretary and Legal Adviser, Nigerian National Petroleum Corporation, Prof. Yinka Omorogbe, believes that the bill should be passed in order to reverse the dwindling fortunes of the industry, especially in terms of exploration.

She, however, said that with the fall in oil prices, the fiscal terms in the PIB had to change so as to attract investment into the industry, adding that many African countries had now discovered oil and gas resources.

“I will rather have a bill than no bill, and then we can amend it as we go on,” Omorogbe said.

The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said in an emailed response to questions, “As I am not sure of the current state of the bill (i.e. what changes have been made to the issues around ministerial powers, fiscals for deepwater and gas etc.), it is difficult to gauge if it will be passed anytime soon.”

He said the incoming government and the National Assembly should look into the prospect of splitting the bill into two or three bits and pass it in phases as the reviews/amendments were made.

Oni said, “The downstream segments can be passed first, while amendments are made to the upstream fiscals and regulatory framework segments. Then, the last segment can deal with fiscals, upstream operations, gas and deepwater etc.

“Nigeria has lost over $100bn worth of investment in exploration and appraisal spending in the last seven years due to the non-passage of the PIB. This represents funds that would have been spent on exploration mostly offshore where there is strong potential judging by discoveries that have been made by our neighbours from Equatorial Guinea to Sierra Leone.”

An energy analyst and Technical Director, Drilling Services, Template Design Limited, Mr. Bala Zakka, said, “We will be happy but surprised if the PIB is passed into law because a lot of the key actors are not returning to the National Assembly, and also, there is a change in government. So, that psychologically is already having an effect.”

According to him, contending issues that have not been resolved include the 10 per cent host communities’ fund, powers of the minister and frontier exploration.

Zakka, who does not believe the issues will be resolved by the current National Assembly, said, “The new legislature should remove sectional and political sentiments and be nationalistic and objective in the analyses.”

Some of the most contentious areas of the PIB include the potential renegotiation of contracts with International Oil Companies, changes in tax and royalty structures, deregulation of the downstream sector, restructuring of the NNPC, a concentration of oversight authority in the Minister of Petroleum Resources, and a mandatory contribution by the IOCs of 10 per cent of their monthly net profits to the Petroleum Host Communities’ Fund.