Author: Adeoye Adefulu

Reported by the Newspapers yesterday (here and here) is the commencement of the much anticipated second reading of the Petroleum Industry Bill (PIB) by the Senate on Tuesday, March 5, 2013 following a failed attempt to commence deliberations in December 2012.

Initiating the debate, Senate leader, Senator Victor Ndoma-Egba stated that the PIB was one of the most significant pieces of legislation to be considered by the Senate, whilst lauding the various benefits to be derived from the passage of the Bill which he stated included increased domestic gas supply for the power industry, a flexible and stable fiscal framework that is competitively attractive, the creation of a two-tier royalty and tax regime which captures the upside of crude oil and gas prices and the creation of a more commercially viable national oil company through the corporate restructuring of the Nigerian National Petroleum Corporation (NNPC) amongst others.

The crux of the Bill’s second reading centered around three contentious issues:

1. The 10% remittance of profits from petroleum operators to host communities in form of the Petroleum Host Community Fund (PHCF);
2. The inadequacy of the Petroleum Technical Bureau; and
3. The excessive powers of the Minister.

Senators Abdukadir Jajere (Yobe South) and Ali Ndume (Borno South) led by Senator Ahmed Lawan (Yobe North) opposed the 10% remittance provision in the bill for the Host Community Fund. Senator Lawan stated that oil producing states had over the past decade received revenue adding up to 11 trillion Naira from the 13 per cent derivation fund; the Niger Delta Development Commission (NDDC); the Ministry of Niger Delta, the Amnesty Programme; and the Special Presidential Initiative Fund but had little or nothing to show for it as its leaders had mismanaged these funds thus failing to carry out significant development in the region.

It was further argued that the Petroleum Technical Bureau should be an independent organisation detached from the Ministry of Petroleum Resources which must concern itself with developing frontier acreages and should not be mixed with the abolishment of the Petroleum Equalistaion Fund.

Jajere further pointed out that the PIB provides the Minister of Petroleum Resources with excessive power, noting that if the bill is passed in its current form, the Minister would become too “powerful and uncontrollable”.

Senator Bukola Saraki (Kwara Central) in his own contribution called for caution as he believed the Senate was spending too much time arguing on the 10% PHCF derivation. He insisted that there was need to address issues of transparency in the Bill as its lack thereof has bedevilled the Nigerian petroleum industry.

Senators Isa Galaudu (Kebbi North) and Ibrahim Gobir (Sokoto East) on the other hand, opposed the bill in totality, saying it should not be passed at all.

Senators Ifeanyi Okowa (Delta North) and Benedict Eyade (Cross River North) urged their colleagues to rise above emotions and sentiments so that the bill could pass the second reading. Okowa said that it was important to realise that Bills emanating from the Executive may have its flaws but what is most crucial is the Executive’s good intentions.

The Senators’ differing stances we believe to a great extent provide a glimpse into what cross sections of Nigerians think on these issues and it would be interesting to see the outcome of the debate.

The 13^th National Oil and Gas Strategic  Conference & Exhibition held between the 18^th and 21^st  of February 2013 at the International Conference Centre, Abuja featured the participation of several  key individuals and exhibiting companies in the Nigerian Oil and Gas sector.

The four day conference kicked off with a cultural  evening and a welcome dinner hosted by Chevron, Nigerian National Petroleum  Corporation and Shell.

The next day, Tuesday February 19, marked the first day of the conference as several sessions including topics on “Nigeria’s Oil &  Gas Strategy in the Next Five Years – A New Dawn to Boost Investment &  Production?” and “Gas,  Power & Renewables – What has Been Achieved & Where are we Heading?” were deliberated upon.

Discussions on the third day of the conference centred on “Focus on Independents: How Are Indigenous Companies Transforming the  Nigerian Oil & Gas Industry?” and “Focus on the Petroleum Industry Bill– Is This A New Dawn for Nigeria?” with the latter session being chaired by the Energy  Practice Partner of Odujinrin & Adefulu, Dr. Adeoye Adefulu. Speaking at the event,  Dr. Adefulu expressed his optimism on the Bill being passed into law and stated that the uncertainty surrounding the passage of the Bill did not favour  anyone (industry players, communities and the general public alike) as there has  been wide spread clamour for the Bill to become  operational.

The conference rounded up with a Nigerian Content  Seminar which highlighted the opportunities afforded by the Nigerian Content  Development Act as well as its challenges and  accomplishments.

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.