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Who is really afraid of Nigeria’s Petroleum Industry Bill?

Feature Article by Humphrey Onyeukwu[i]

The Petroleum Industry Bill (PIB) is lauded to be the single most important legislation in Nigeria given our mono-economic set-up,  however ridden with various mutations from the original intervention of the Oil and Gas Implementation Committee (OGIC) inaugurated by the Obasanjo administration in April 2000.

Several versions of the PIB materialized as an outcome and greatly skewed the many efforts in producing a bill that would fundamentally reform an industry lacking significant changes in administration and regulation. Discordant tunes emerged from the various stakeholders, each with self-confessed belief on how the reform agenda would have been carried out. The International Oil Companies, indigenous operators, international independents, regulators and even the minister alike joined in a macabre dance of what a PIB should be and what it should not be.

A sigh of relief may have seemingly arrived with the recent transmission of the bill to the seventh National Assembly. The Special Task Force for Implementation of the PIB, brainchild of the Federal Government’s concerted efforts to deliver on its promise to the nation in aftermath of the subsidy protests, submitted their finished product, a new Petroleum Industry Bill.

The new PIB, without doubt, has agitated the déjà vu trailing previous attempts. Questions answered and unanswered: Is it the much-needed cure to revive an ailing Nigeria’s oil industry? Would this be another stillbirth or is the stage finally set for culmination of the sector reforms. Who is really afraid of the Petroleum Industry Bill?
Continue reading “Who is really afraid of Nigeria’s Petroleum Industry Bill?”

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Downstream Stakeholders Forum – October 2nd

The Committee on Petroleum Resources (Downstream) of the House of Representatives today announced its Downstream Stakeholders Forum. The theme is “The Downstream Regime in the Petroleum Industry Bill: Stakeholder’s Perspective”. This is a by invitation only event and will hold on the 2nd of October. This forum is different from the public hearings that will be held by the committee after the second hearing of the PIB. Details of the forum and the relevant contacts can be found here.

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Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part I

Feature Article by Dr. Ekpen J. Omonbude

Background

After what can be described as a very, very long wait, the Nigerian Government has forwarded the Petroleum Industry Bill (‘PIB’ or ‘the Bill’) to the National Assembly. This follows a series of drafts, disputes and revisions as the Government, the international oil companies (‘IOCs’), and the legislature failed numerous times to agree on previous versions.

The Ministry of Petroleum Resources (‘the Ministry’) describes the PIB as potentially “one of the most important pieces of legislation in the history of the oil industry in Nigeria, changing everything from fiscal terms to the make-up of the state-oil firm”. It is clearly an ambitious document, one which in our assessment could change, fairly significantly, the way in which the oil and gas business is conducted in Nigeria if passed into law as-is.

The industry has greeted the PIB with mixed reactions. For some upstream E&P players, it does not appear that there is satisfaction with the fiscal terms as stated in the Bill. For others, there appears to be a certain degree of confusion as to what would apply when, and how. International organisations appear to have taken a position of quiet optimism for now.

At over 220 pages, the PIB is a daunting read for most non-lawyers. It does however try to simplify what is currently a difficult petroleum legislative and regulatory framework to explain to the untrained eye (lawyer’s paradise, anyone?). Highlights of such attempts at simplicity are the apparent amalgamation of the relevant petroleum sector laws into one piece, and a reduction of the points of fiscal burden to a handful of fiscal instruments. The Bill in fact defines fiscal rent as “the aggregation of royalty, Nigerian Hydrocarbon Tax and Companies Income Tax obligations arising from upstream petroleum operations”[1]. This simplicity may not however translate to reduced fiscal burden. In my view at least three separate pieces of legislation could have been submitted to the National Assembly, rather than one, but this is not the purpose of this particular exercise. Continue reading “Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part I”

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Arbitrary Powers in the Petroleum Industry Bill

One of the significant highlights of the PETROLEUM INDUSTRY BILL 2012 are the arbitrary powers granted under it. In particular, ministerial power has been consolidated and appears to retain the colossal status of ministerial influence under the Petroleum Act 1969. This is in addition to the new absolute discretionary power granted to the President to grant petroleum prospecting licences and petroleum mining leases under the Bill. Our upcoming papers will spell out some of these powers along with other highlights of the PETROLEUM INDUSTRY BILL 2012. In the meantime, Thisday highlights some of the arbitrary powers introduced in the Bill here.

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The Nation on oil companies’ objections to the PIB

Yusuf Alli writes on the perceived objections of the multinational oil companies to the PETROLEUM INDUSTRY BILL 2012. Some of the areas of objections mentioned in the article include increase in taxes and royalties and the grant of vast powers to the Minister of Petroleum. It should be noted that the  PETROLEUM INDUSTRY BILL 2012 does not explicitly increase royalty rates although it grants the minister powers to determine these rates by regulations. The article can be found here.

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Alison-Madueke – Petroleum Industry Bill will boost output by attracting foreign investment

Nigeria’s Petroleum Minister, Mrs Diezani Alison-Madueke is reported by Bloomberg commending the potential benefits of the PIB for investment in the Nigerian oil and gas industry. According to Alison-Madueke, the PIB is designed to create “a fair balance between small and big operators in the same terrain.” The Minister’s comments are likely to refer to the provisions for Production Allowances in Schedule 5 of the PETROLEUM INDUSTRY BILL 2012, which give producers an allowance in accordance with their levels of production. As an example, under those provisions, small oil producers in onshore areas that produce less than 27,300 barrels of oil per day would be entitled to oil production allowances of the lower of US$ 30 per barrel or 30% of the official selling price.