Category: News

Reports from Businessday indicate that the Federal Government intends to stall the award and renewal of Oil Licenses pending the passage of the Petroleum Industry Bill (PIB) submitted to the House of Assembly in July 2012.

The last licensing round was conducted in May 2007 by the administration of former President Olusegun Obasanjo. Plans were made to hold bid rounds in 2010 and 2011 but had to be shelved due to the non-passage of previous PIB drafts. The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, had fixed December 2012 and January 2013 as possible dates for the new bid rounds but the National Assembly’s inability to pass the current draft put a halt on the move.

Likewise, the government has since discontinued renewals of existing Oil Licenses. Shell, Chevron as well as other operators have since 2009 been unsuccessful at lobbying the government to renew their Licenses.

There are speculations that this delay is so as to have the new fiscal and regulatory terms apply to all licenses granted henceforth.

The fiscal provisions in PIB seek to increase governments take in oil revenue from 61 percent to 73 per cent, a scenario oil majors criticize and reckon will make investments unprofitable.

There are indications that the Federal Government has commenced negotiations with International Oil Companies (IOCs) and indigenous operators on the proposed fiscal regime contained in the Petroleum Industry Bill (PIB) with a view to amending some of the fiscal terms. Reports from The Guardian indicates that government is wiling to compromise in order to meet the IOCs midway on some of the fiscal issues particularly in relation to the proposed royalty regime.

 

 

Businessday highlights one of the major problems associated with the continued delay of the passage of the PIB – the deferral of investment decision making for gas development projects. In addition, the article suggests that the proposed fiscal terms for gas will not incentivise oil producing companies to develop gas projects.

A list of the PIB committee members may be found in the Leadership.

The Petroleum Industry Bill successfully passed through the second reading phase in the House of Representatives. As reported by Channels, there was no dissenting voice when the vote was called. The House has constituted a 23 man Special Ad hoc Committee led by Ishaka Bawa, the Chief Whip of the House to review the Bill in detail. We shall provide you with a list of the other members of the Ad hoc Committee as we receive them.

Nigeria’s house of representatives commenced debates on the General Principles of the PIB yesterday. The Bill’s second reading, which is usually a perfunctory stage in the legislative process, has been characterised by very robust debates on certain key terms of the Bill. Some of the issues raised related to the establishment of the Petroleum Host Communities Fund and the discretionary powers of the Minister. The debate continues in the House of Representatives today. See the reports in the Tribune and AfriqueJet.

The effective restructuring of the Nigerian National Petroleum Corporation (NNPC) is one of the major objectives of the PIB. In an indept analysis of the provisions of the current PIB on this issue, the Revenue Watch Institute explains why the current PIB has fallen short of achieving this goal.

 

A recent article by The Economist expresses concerns about the state of the Nigerian oil and gas industry highlighting issues such as oil theft, regulatory uncertainties, moribund refineries, environmental degradation, pervading corruption and lack of transparency of the national oil company, the Nigerian National Petroleum Corporation (NNPC), as some of the problems plaguing Africa’s biggest oil industry. The article expresses doubtful hope that the current administration can make a difference under the PIB.

The renowned Professor of Economics, Paul Collier writes in Businessday on what the PIB gets right. The focus of the short article is on the balance between taxes and royalties under the PIB, with Collier suggesting that the greater emphasis on royalties is better as it provides fewer opportunities for companies to disguise taxable profits. It should be noted that the current draft of the PIB does not indicate the royalty regime at all, but leaves it for the Minister to determine by regulations. Prof. Collier’s comments are likely to be based on the last exposure drafts of the proposed royalty regime. Nevertheless the article is worth reading for an understanding of the dynamics surrounding the royalty/tax debates in Nigeria’s petroleum fiscal reform initiatives.

Mr. Pedro Van Meurs, an experienced consultant on petroleum matters has just released his commentary to the PIB 2012 which may be found here. Mr. Van Meurs was a consultant to the Inter-Agency Team which worked on a previous draft of the PIB between 2008-2010.