The Transmission Company of Nigeria (TCN) has suspended its Eligible Customer policy.
The policy allows the Generation Companies (GenCos) to sell power directly to consumers without going through the Distribution Companies (DisCos).
The Nigeria Electricity Regulatory Commission (NERC) had directed the TCN to suspend eligible customer transactions, a directive the TCN heeded.
According to a document made available to The Nation yesterday, the TCN, on August 3, 2021, had written to communicate the compliance to the affected customers.
Its Market Operator, E.A. Eje, notified the commission in a letter entitled: “NERC’s Directive to Suspend Eligible Customer Transactions Without the Commission’s Approval”, with reference no: TCN/MO/003/071/002/2021.
The letter reads in part: “Following a letter from the Nigerian Electricity Regulatory Commission (NERC) dated 7th July, 2021, the commission ordered the suspension of all eligible customers transactions without its approval.
“In a subsequent meeting with the commission on 30th of July, the commission further directed the suspension of all eligible customer transactions without its approval.
“In the letter NERC directed TCN to forthwith stop all eligible customer transactions pending the conclusion of the review and approval of the respective applications for eligible status by the commission.
“In this regards, we write to formally notify you that the MO/TCN is abiding by this directive and will credit all affected eligible customers associated energy to their host DisCo, we advise that all eligible customers follow up their licence application with the commission.”
Responding to the directive, the Nigeria Consumer Protection Network, Kunle Kola Olubiyo, a lawyer, noted that the only window available for competition in the market for bulk users of electricity is the eligible customer transactions and framework.
He claimed that before the Sun Flower NIPP/TCNeligiblecustomer framework made its debut, the bulk users in the Sun Flower/NIPP/TCN eligible customer business model were paying for darkness and poor, epileptic and erratic power supply from the national power grid.
“Not until they decommissioned their source of power supply from the host DisCo and migrated to the NIPP/NDPHC sourced eligible customer national power grid supply loop.
“This is the case with lots of industries in Nigeria who are bulk users of electricity and who qualify for eligible customer transactions.
“The original ideals of eligible customer transactional framework in the power sector was designed to give end users of electricity the right to choices or options in a near 100 per cent monopolistic electricity market.
“The beauty of the market is in the competition but this is not the case here as there seems to be a carefully and well-orchestrated institutionaliserd synergy between the regulatory institutions and market participants/markets operators to stifle market competition in ways and manners that is inimical to the collective national economic interests,” he added.
The Nigerian National Petroleum Corporation (NNPC) has announced that its downstream subsidiary, the Petroleum Products Marketing Company (PPMC), recorded N234.63 billion revenue from the sale of white products in March 2021, representing a 24.7 percent increase from the N188.15billion sales recorded in the previous month of February 2021.
This is contained in the March 2021 edition of the NNPC Monthly Financial and Operations Report (MFOR).
The report indicated that total revenue generated from the sales of white products for March, last year to March, this year stood at N2.129trillion, where petrol contributed about 99.24 percent of the total sales of N2.113trllion.
In terms of volume, the above value translates to 1.782billion litres of white products sold and distributed by PPMC in March 2021 compared to 1.75billion litres in February 2021.
This volume is made up of 1.782billion litres of Premium Motor Spirit (PMS) and 0.45million litres of Automotive Gas Oil (AGO). Total sale of white products for the period of March 2020 to March 2021 stood at 1.782 billion litres and PMS accounted for 1.75billion litres or 99.37 percent.
The NNPC said it continues to monitor the daily stock of PMS to achieve uninterrupted supply, effective distribution and zero fuel queue across Nigeria.
In the gas sector, a total of 222.74billion cubic feet (bcf) of natural gas were produced in March 2021 translating to an average daily production of 7,183.33million standard cubic feet per day (mmscfd).
From March, last year to March, this year, a total of 2,911.62bcf of gas was produced, representing an average daily production of 7,409.60mmscfd during the period.
Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and NPDC contributed about 63.23 percent, 19.78 percent and 63.99 percent to the total national gas production.
In terms of natural gas off-take, commercialisation and utilisation, out of the 210.55bcf supplied in March 2021, a total of 138.38bcf was commercialised, consisting of 45.42bcf and 92.96bcf for the domestic and export market respectively.
This translates to a total supply of 1,465.42mmscfd of gas to the domestic market and 2,998.26mmscfd of gas supplied to the export market for the month.
This implies that 63.18 percent of the average daily gas produced was commercialised while the balance of 36.82 percent was re-injected, used as upstream fuel gas or flared.
Gas flare rate was 9.50 percent for the month under review (i.e. 671.13mmscfd) compared to average gas flare rate of 7.25 percent (i.e. 532.37mmscfd) for the period of March 2020 to March 2021.
On domestic gas supply to the power sector, a total of 844mmscfd was delivered to gas-fired power plants in the month of March 2021 to generate about 3,530mega watts (mw) compared with February 2021 where 825mmscfd was supplied to generate 3,580mw.
The report also informed that the corporation recorded 70 vandalised points across its pipeline network in the period under review, representing 29.63 percent increase from the 54 points recorded in the previous month.
While the Port Harcourt area accounted for 63 percent of the vandalised points, the Mosimi area accounted for 21 per cent and the Gombe area accounted for the balance.
NNPC is, however, working with the communities and other stakeholders to monitor the pipelines to reduce and eventually eliminate the menace of pipeline vandalism.
The March 2021 MFOR is the 68th report, published monthly to keep the public with information on the operations of the corporation in line with the management’s guiding philosophy of Transparency, Accountability and Performance Excellence (TAPE).
The Movement for the Survival of Ogoni People (MOSOP) has expressed concerns over two key areas in the recently passed Petroleum Industry Bill (PIB) – the three percent allocation to the Community Trust Fund and the new definition of host communities that include communities pipeline traverse.
Consequently, the Group described the National Assembly’s definition of host community in the (PIB) as “false”. It claims it was a trick of creating more controversy and chaos in the Niger Delta region as well as trying to weaken the host communities. MOSOP warned that by so doing, the government is regenerating restiveness in the region.
A former Secretary of MOSOP, Bari-ara Kpalap, in a telephone chat with The Nation disagreed with the “new” definition of host communities given by the Upper House. According to him, including communities where pipelines traverse translates to a call to create more chaos and also trying to weaken the host communities, which he noted can lead to recreating restiveness in the region.
Rather, Kpalap contended, definition of “host community” should be limited to those communities that are oil bearing; communities that house the oil facilities, well-head, pipelines crisscrossing their communities, flow stations and several other things that relate to oil production in their communities.
“That you have pipelines merely transporting oil from oil bearing community down to the export terminal does not make that community an oil bearing community; therefore you cannot define such community as a host community. It’s very unfair because it does not make them host communities, pipeline traversing your community does not make you oil bearing community and as such you are not a host community,” he explained.
He however said MOSOP had made their position known to the National Assembly, “and we have also contacted relevant institutions to make our protest”. He said the Senators representing the region had not much to do anyway adding they are weakened by what he described as inconsequential numerical strength. “In a situation where you have 190senators and you have only one representing you in your zone is that not inconsequential”, he asked.
Similarly, the Paramount Ruler, Kaani Community, Khana Local Government Area of River State and President of MOSOP, Prince Biira, also expressed disappointment over the new definition given to host community. He described the proposed three percent allocation as a neglect to the oil producing communities. “It’s not enough for the development of the host community, the host community is a fundamental basis for any form of development”, he stated.
He therefore called on the government to review the percentage, as well as giving a proper definition to the term “host community, warning that if the PIB is accented to without giving a proper stand or definition of who the “host communities” are, then the Ogoni people would see it as a call to anarchy.
Also, a former Managing Director, Treasure Energy Resources, a Rivers State-owned oil and gas company, Eddie Wikina, noted that there were issues with management and control of the Community Trust Fund. According to him, a structure that gives full control to each host community, just like with the Shell GMOUs, but with some oversight of the state government is recommended. According to him, once the PIB is accented to, it should be left to the operating company in the environment and host community to define their best operational relationships, and federal government stay out completely.
On the 30 per cent allocation for frontier fields’ development, he said it needed to be clear where the source of the funds would come from. “If from federal sources funded by proceeds from oil production in the Niger Delta, the section in the bill should be rejected and scrapped. If, however, to be funded by the new NNPC Limited operating as an independent commercial entity, they are free to spend their money as their board allows and approves. In other words, NNPC Limited will invest and make profits like any other independent or international oil companies, Wikina added.
He is of the opinion NNPC Limited would not continue with the funding mechanism of present NNPC, where they do little work and collect money from operations carried out by other companies. Consequently, the new NNPC Limited could allocate what they wanted to frontier fields in any part of the country. But they cannot use funds generated in the Niger Delta basin to waste on wild exploration in dry regions known not to bear any hydrocarbon deposits.
On the general fiscal side, he believed the context of the bill met the yearnings of operators, as the clauses offer clarity on areas that had been contentious for long. This therefore will allow them operate more openly and indeed encourage inflow of needed foreign investment into the sector.
Shell Nigeria Exploration and Production Company (SNEPCO), operator of the Bonga Northwest oil field, has displayed a new technology known as ‘digital twin’ at SAIPEC 2021, which enables the company to operate safely on the Bonga Floating production storage and offloading (FPSO) vessel located offshore Nigeria.
Bonga is the first deep water project for the SNEPCO and for Nigeria, which lies at a water depth of more than 1,000 metres (3,300 feet). The project helped create the first generation of oil and gas engineers with deep water experience and stimulated the growth of major industries.
SNEPCO’s Managing Director, Bayo Ojulari, made this known on the sidelines of the Sub-Saharan African International Petroleum Exhibition and Conference (SAIPEC) held this year.
According to Ojulari, who is General Manager Deepwater projects, the Digital Twin is a new technology that can be used to identify critical areas for prioritised inspection, maintenance and repairs, reducing the need and frequency on safety exposures on physical inspections.
In his words, “Our digital twin is the headline at SAIPEC 2021. There is a quick win to get a Nigerian company to do another digital twin for SNEPCo, to open opportunities. It is key if we support a company to build capabilities around digital twin.
“I have been part of SAIPEC since inception with the NC team and you would see my contribution through the years. I was also among the team that inspired PETAN to start this event.
“At the first SAIPEC, SNEPCo was the only IOC to sponsor it. We believed in its impact.‘’
Culled from Ogrepublic
So, glad to see that our foresight is confirmed.”
The project, which began producing oil and gas in 2005, was Nigeria’s first deep-water development project. A project that increased Nigeria’s oil capacity by 10 per cent when output began in 2005. Oil from the Bonga Northwest sub-sea facilities is transported by a new undersea pipeline to the Bonga floating production, storage and offloading (FPSO) export facility.
The Bonga project is operated by SNEPCo, which holds a 55 per cent stake. The other project partners are Esso Exploration & Production Nigeria (Deepwater) Limited (20 per cent), Total E&P Nigeria Limited (12.5per cent) and Nigerian Agip Exploration Limited (12.5per cent) under a Production Sharing Contract with the Nigerian National Petroleum Corporation. Presently, nearly one-third of Nigeria’s deep-water production comes from the Bonga and Erha fields.
The Board of Directors of Nigeria LNG Limited (NLNG) has approved the appointment of Dr. Philip Mshelbila as the gas giant’s Managing Director/Chief Executive Officer. He succeeds Mr. Tony Attah.
Attah will return to his parent company, Shell, on August 30, 2021 at the expiration of his five-year tenure. Attah was appointed Chief Executive Officer by the NLNG Board in July 2016.
Mshelbila, who is rounding up his tenure as Chief Executive Officer, Atlantic LNG Company of Trinidad & Tobago, will be taking over from Attah on August 31, 2021.
NLNG is an incorporated Joint-Venture owned by four shareholders – the Federal Government, represented by Nigerian National Petroleum Corporation (49per cent), Shell Gas B.V. (25.6 per cent), Total Gaz Electricite Holdings France (15per cent), and Eni International N.A. N.V. S.àr.l (10.4 per cent).
Attah has over 25 years’ experience in the oil and gas industry. Prior to his appointment as Managing Director , he was the Managing Director and Chairman of Shell Nigeria E&P Company (SNEPCo), Vice President for HSE and Corporate Affairs and Vice President, Human Resources (HR) in Shell E&P Africa.
During his successful career, which span Europe, Russia and Africa, he has led various multi-disciplinary teams across diverse cultures. He is renowned for his strong strategic and commercial mind set which is underpinned by a solid technical background and excellent leadership capabilities.
His goal in NLNG remains to sustain the company’s historical excellent performance while working to raise the company to the next level and continuing to make NLNG an inspiration to Nigeria as part of NLNG’s vision of helping to build a better Nigeria.
Attah holds a Bachelor’s in Mechanical Engineering from the University of Ibadan and a Masters of Business Administration from the University of Benin. He is a Fellow of the Nigerian Society of Engineers (FNSE), member of Council for the Regulation of Engineering in Nigeria (COREN), and member of Society of Petroleum Engineers (SPE).
The domestic oil sector has been embroiled in an argument following the cancellation of oil licences to some firms. But, is the Department of Petroleum Resources (DPR) justified to have revoked unused oil field licences issued to potential operators over a decade ago? Yes, says industry experts and economists, who insist that national interest and survival of the country supersede other interest, MUYIWA LUCAS reports.
For a long time, the precarious state of the country’s revenue has remained a source of concern to stakeholders. Given the government’s ambition of spending billions of dollars on the country’s rail network in coming years, and other key infrastructure, the need for improved revenue cannot be overemphasised.
Already, about $5 billion worth of projects has been kicked off this year alone by the Federal Government, especially in the transportation sector.
Interestingly, with an infrastructural deficit requiring over N10 trillion to fix, the country has had to rely on external loans to finance these projects. One of the high end project is the $2.8 billion Abuja-Kaduna-Kano (AKK) gasline project. The project, a 614-km infrastructure, being financed by Chinese lenders, however, experienced a jolt last week as the major financiers failed to disburse the needed funds as quickly as expected to continue work.
This has pushed the government to begin a $1 billion search to prevent work stoppage on the project. This is why experts agree that the country can no longer continue to allow revenue generating resources waste away, especially in the face of the country’s dwindling economic fortunes.
And as tempers are yet to simmer over the revocation of some oil field licences, the inactivity on some of the money-spinning oilfields is believed to be taking a toll on the economy. Stakeholders have argued that it is unacceptable that such a development continue when there is a dire need for money to execute major projects.This position is further buoyed with the diminishing financing Asia, especially China, is giving to African countries.
A Baker McKenzie report in April pointed out that Chinese bank lending to African infrastructure projects has fallen across the continent, from $11 billion in 2017 to $3.3 billion last year.
Oil field revenue to the rescue?
Stakeholders are worried that succor could have come from the revenue that could have been generated from abandoned oil fields left unproductive for over a decade had they been put to use. For instance, from the signature bonuses expected from the 57 licences issued recently, $500 million is expected to accrue into government coffers. This amount is outside royalties and taxes that would be paid once the fields become operational.
Timipre Sylva
This is why experts are convinced that the recent revocation of oil field licences of operators that have left their fields unexplored for over a decade is a welcome development. To the DPR, these fields could be made productive and earn the country revenue in terms of royalty and taxes payable to government from operations on the fields. This will also serve as a bail out to the government against its shrinking revenue when they are revoked and re-awarded to a more competent company.
“If the oil blocs lie fallow and people are not producing from them, we are losing revenue from the field, we are losing job creation opportunity from the field; we are losing what should be the contribution to the GDP as well as field development fee. What is the essence of having something you cannot use? Is it not better you drop it for other companies with capacity to explore?” Mr. Ademola Adigun, an expert asked rhetorically.
According to Adigun, the first attempt to indigenise the sector was in 1990 when the General Ibrahim Babangida administrtaion awarded oil blocs to some Nigerians who were thought to have financial capabilities to make the investments. He said of the award, only about four oil fields have been mined- Famfa, Conoil and others.
He regrets that while a lot of people get these licences or win these bids, they, ultimately, sell it off to those who lack capacity, thereby stalling the exploration of the field and, by extension, depriving the country of revenue accruals. “We have two problems in the sector right now; we have declining take from the barrel and we have declining returns from crude. Now, we are limited to 1.45 million barrels a day by OPEC quota and unable to ramp up 2.1 million barrels per day,” Adigun argued.
DPR justified
Yet, the outcry over the DPR’s action has been loud. Some operators have queried the reasons for this, arguing that the industry regulator acted wrongly. However, the immediate past Chairman, Society of Petroleum Engineers (SPE), Joe Nwakwe, said there is a distinction between regulation and governance. He argued that the Petroleum Act gives the power to award and revoke oil blocks to the Minister of Petroleum Resources and that power has been delegated to the DPR.
A petroleum engineer, Adebayo Alamutu, corroborated Nwakwe’s position. “The minister has delegated the power to award and revoke oil block to the DPR, which is the regulator. The DPR, on the other hand, has said that it revoked the licences over lack of competence and needless rendering of national assets unproductive for many years. Now it has, in the best interest of the country, awarded the oilfield to a company it considers competent to make the field viable by generating revenues for Nigeria,” he said.
Test for PIB
For Adigun, the situation is a test case for the newly passed but yet to be signed into law Petroleum Industry Bill (PIB). He is also happy that the PIB has addressed what should be done to marginal oil fields awardees who fail to get the blocs into production with a timeframe specified by the regulator. ”One of the greatest things that have happened, which is in the PIB, is the idea of ‘Drill or Drop. The ‘Drill or Drop’ provision in the law (PIB) will prevent process abuse and usurpation of regulatory responsibilities or powers,” he said. He decried a situation whereby oil firms sit on mining leases for years without getting them into production capacity. He described such scenario as ‘wasteful and unproductive’ for a country that is facing severe revenue challenges.
Adigun urged politicians and others to put national interests above personal and sectional interests and allow the PIB to be signed into law after almost 20 years of the country’s struggle to get a more progressive law that addresses the problems facing the industry.
Global shipbuilding giant, Samsung Heavy Industries Nigeria (SHIN) Limited has again written Nigeria’s name in the global business and technology map with its recognition with award of ‘Excellence in Floating Production Storage Offloading (FPSO) Services’ under the utility/energy category of the 2021 Global Business Outlook (GBO) Awards.
The London-based publication recognises innovations, achievements, and strategies within the global business community, covering sectors on banking, finance, insurance, brokerage, technology, and leadership, among others.
The award, which is designed to facilitate the outstanding work of businesses and business leaders across industries, seeks to recognise and reward excellence in businesses around the world.
This recognition also extends to the private and public sector.
GBO award’s expansive focus on businesses of all sizes, in both broad and niche sectors makes it particularly outstanding.
According to the London-based publication, the process for selecting the winners for the Global Business Outlook Awards is carried out in an efficient manner.
While the jury considers all applicants during the first two weeks of the month, the winner applicants are personally informed within six weeks.
Samsung Heavy Industries Nigeria Limited is the only institution from Nigeria, which won in this year’s GBO Awards.
In accepting the Award for Excellence in FPSO services, Managing Director of Samsung Heavy Industries Nigeria, Mr. Jejin Jeon expressed his gratitude for receiving such an honorable award.
Citing the importance of local investment and capacity development, Jeon said, “Our 300million dollars investment in Nigeria through our fabrication and integration yard and welding training school has catapult Nigeria into the world stage”.
While the Water Engineering (WE) of Egypt won the award for ‘Best Use of Technology in Water Treatment,’ the award for the ‘Most Socially Responsible Steel Company’ went to Magnitogorsk Iron and Steel Works (MMK) of Russia.
Also the award for the ‘Best Waste Management Company’ went to Averda Waste Management Company of Saudi Arabia.
The Siraj Power of the United Arab Emirate (UAE) won the award of ‘Excellence in Commercial Rooftop Project Development (SirajPower-DP World partnership)’ SHIN’s parent company had also been honored with the ‘Best Shipbuilding Yard Award,’ presented by Lloyds List Maritime Asia Magazine at the ‘Best Company of the Year’ ceremony held at Sheraton Hotel, Malaysia.
SHIN broke the record in Nigerian Content development when it locally fabricated and integrated the Egina FPSO, which currently contributes 10 per cent of Nigeria’s daily crude oil production.
The company’s massive investment in the SHI-MCI yard in Lagos has also positioned Nigeria as the hub of FPSO fabrication and integration in sub-saharan Africa.
GBO award is not the first time SHIN would write Nigeria’s name in the global business map as it had received similar accolades and honours in the past.
SHIN, the leading operator of the SHI-MCI fabrication and integration yard, had won Breakthrough Deal of the Year 2018 and African Project of the Year at the prestigious Africa Assembly held in Paris in July 2019.
In addition such achievements, SHIN had also won a highly commended award for the contribution to the development of regional maritime Cluster at the prestigious Sea trade Maritime Awards Middle East, Indian Subcontinent & Africa held in Dubai in September 2019.
SHIN has committed to empowering the African oil and gas industry through local content leadership.
Prior to the construction of the company’s fabrication and integration yard in Lagos, customers in the regional oil and gas industry had to work outside of Africa.
In order to complete the Egina FPSO project, SHIN made significant investment to develop a local workforce and facilities.
SHIN has retained its global leadership position in shipbuilding, offshore technology and world-class marine construction capability.
The Sea trade Maritime Awards are recognised internationally as the most influential in the industry with a very robust selection process led by independent judging panels consisting of CEOs from maritime companies around the world.
An impressive list of nominees was shortlisted, from over 120 entries across 20 countries, made it to 2019’s shortlist.
SHIN has also been recognised by the Nigerian Oil and Gas Opportunity Fair (NOGOF) for most impactful contribution to local content development since 2017 to date at the NOGOF 2019 awards ceremony held in Yenagoa, Bayelsa State in April 2019.
Jeon said the collaboration with Koreans and Nigerians working together at the SHI-MCI Yard in Lagos is seamless and efficient, adding that they are geared up for more FPSOs’ in the near future with multiple new projects in the pipeline.
Stakeholders in the oil and gas sector have gathered at the Petroleum Club’s Annual Business Dinner to deliberate on the performance petroleum industry.
The event, sponsored by AA Holdings, an investment firm, also stressed the global drive for energy transition.
In a paper entitled, “A discussion on the future of the Nigerian petroleum industry” the Director-General, Department of Petroleum Resources (DPR), Sarki Auwalu, highlighted some of the key challenges affecting growth.
Auwalu, who was the guest speaker, listed strategies from reservoir optimisation to improved collaboration between stakeholders that should lead to growth.
The director stated that Africa’s demand for energy would continue to grow and that Nigeria would have a significant role to play by unlocking its resources.
The Chairman, Petroleum Club, Dr. Layi Fatona, said: “The oil and gas industry in Nigeria in relation to the emerging energy transition must be addressed in a way that enables the sector to maximise its potential. This is necessary to ensure the development and transformation of the society.”
Also, Executive Chairman, AA Holdings, Austin Avuru said: “The Petroleum Club remains a vital platform for the enhancement of the oil and gas industry in Nigeria.
As a proprietary investment company, AA Holdings understands this value and impact and is proud to sponsor the Petroleum Club 2021 Business Dinner. We believe that the discussions held will be effective in driving growth for the industry as well as foster economic development.”
Experts in the oil and gas industry have expressed concern over the controversy trailing the revocation of some marginal oil fields’ licences by the Department of Petroleum Resources (DPR), especially on the petition to the House of Representatives Committee on Public Petition by Eurafric Energy Limited- one of the affected lease operators.
An oil expert, Mr. Ademola Adigun, said the issue had become a test case why the Petroleum Industry Bill (PIB) must be signed into law because the ‘Drill or Drop’ provision in the law would prevent abuse and usurpation of regulatory responsibilities or powers.
He decried a situation whereby oil companies sit on mining leases for years without getting them into production capacity as ‘wasteful and unproductive’ for a country that is facing severe revenue challenges.
“One of the greatest things that has happened, which is in the PIB, is the idea of ‘Drill or Drop’. We have had a history. I think the first attempt to Nigerianise the oil and gas sector was in 1990 when the Babangida government awarded oil blocs to some Nigerians who were thought to have financial capabilities to make the necessary investments. Of the award, only about three or four have been mined, that is Famfa, Conoil and some other two. Now, a lot of people get these licences or win these bids, then go sell it off. They sell it off to those who lack capacity and the whole thing stalls and we suffer as a country. We have two problems in the sector right; we have declining take from the barrel and we have declining returns from crude. Now, we are limited to 1.45 million barrels a day by OPEC quota and unable to ramp up 2.1 million barrels per day,” Adigun argued.
He explained that as long as the oil blocs lie fallow and people, the country will continue to lose revenue, job creation opportunity from the field, as well as losing out on contributions to the gross domestic product (GDP) including loss on field development fee. He is however happy that the PIB has addressed what should be done to marginal fields awardees who fail to get the blocs into production with a timeframe specified by the regulator.
On the propriety of the reported call by the House of Representatives for the reversal of the revocation of unproductive marginal fields’ following a petition to the Committee on Public Petition by Eurafric Energy Limited, Adigun noted that Nigeria must be a country that respects law and its institution while noting that the Public Petition Committee of the House has no power to force that demand of DPR.
Similarly, the immediate past Chairman, Society of Petroleum Engineers, Engineer Joe Nwakwe, said that there is a clear distinction between regulation and governance. He therefore called for caution so as not to send a wrong signal to investors. “I have not seen the comment by the House of Reps, what I suspect is that they may be pointing the DPR attention to the Court case over the matter. But it is clear that the Petroleum Act gives the power to award and revoke oil blocks to the Minister of Petroleum Resources and that power has been delegated to the DPR in this matter,” he said.
His view was corroborated by Adebayo Alamutu who maintained that the House of Representatives Committee on Petition may be doing more harm to the nation’s economy and reputation before the investors with its usurpation of power that does not belong to it.
“First, there is no controversy in this matter. The minister has delegated the power to award and revoke oil block to the DPR, which is the regulator. The DPR on the other hand has said that it revoked the Dawes oilfields from Eurafric, Tako and Petralon 54 JV over lack of competence and needless rendering of national assets unproductive for many years. Now it has, in the best interest of the country, awarded the oilfield to a company, it considered competent to make the field viable by generating revenues for Nigeria, and the House of Representatives will now reverse this? It is not only against the dictates of the petroleum act, it is against development. It is so dangerous to what we preach as a country on division of power. It will be so scary for the investors,” he said.
Amid unending controversies that have continue to trail the Petroleum Industry Bill (PIB) passed earlier this month by the National Assembly, experts in leading consultancy firms have x-rayed the Bill, noting important changes and what it offers the country. The PIB 2020 awaits harmonisation by the legislature, MUYIWA LUCAS reports.
The efforts at passing the Petroleum Industry Bill (PIB) cannot be forgotten. This is, because, on three occasions, at the National Assembly, under various leaderships, it failed to see the light of day. This is why stakeholders insist that efforts of the Upper House leadership in passing the Bill is commendable.
But, since its July 1, passage, discordant tunes have continued to trail the document, as various interests groups have either criticised or rejected certain provisions in the Bill.
Experts and other stakeholders that have taken a critical look at the document are convinced that while the PIB 2020 may appear set to address all industry issues to the extent possible, it is imperative to ensure that the country does not just pass any law but one that is competitive, balanced, fair, reasonable and realistic.
For instance, a Partner & Head, Tax-Energy & Natural Resources and Managed Services, KPMG, in Nigeria, Adewale Ajayi, writing in his firm’s journal, noted that for the past 20 years, there have been various attempts at reforming the industry. However, none of the efforts, he contended, yielded result until the introduction of the PIB 2020.
“The PIB started as an omnibus bill and was later divided into four separate bills before emerging in 2020 as a consolidated bill. It is a fact that previous attempts at passing the PIB in 2009, 2012 and 2018 failed because of factors such as lack of ownership, misalignment of interests between the National Assembly and the Executive, perceived erosion of ministerial powers, stiff opposition by the petroleum host communities and push back by investors on the perceived uncompetitive provisions in those versions of the bill,” Ajayi wrote in the publication.
Can the PIB 2020 achieve these objectives?
For Ajayi, one thing is clear – the government has tried to strike a balance between immediate revenue demands and the need to attract long-term investment for the industry. This, he noted, has become extremely crucial when it is considered that only four per cent of the $70 billion investments made in Africa’s oil and gas industry between 2015 and 2019 was for Nigeria, though it is the biggest producer and has the largest reserves on the continent. Besides, the National Bureau of Statistics (NBS) reports that only $53.5 million or 0.55 per cent of total investment of $9.680 billion in the country last year was made in the industry.
AJAYI
Ajayi, therefore, maintains that if the country is to achieve her ambition of 40 billion barrels of oil in reserves and four million barrels of oil daily, there is the need to attract new investments into the sector.
“The oil in the ground is of no use to the country if it cannot monetise it. Therefore, the PIB must lead to a massive transformation of the industry and succeed in attracting the desired investment required to reposition the industry. Hopefully, the provisions of the PIB will be enough to stimulate the desired investment though it has not addressed the issue of energy transition from fossil fuel to clean energy,” Ajayi submitted.
What has changed?
Dissecting the PIB 2020, PriceWaterhouse Coopers (PWC), an accounting, tax and audit consultancy firm, broke it down to providing legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry and development of host communities.
The PIB, it further noted, contains five chapters, 319 sections and eight schedules dealing with Rights of Preemption; Incorporated Joint Ventures; Domestic Base Price and Pricing Framework; Pricing Formula for Gas Price for the Gas Based Industries; Capital Allowances; Production Allowances and Cost Price Ratio Limit; Petroleum Fees, Rents and Royalty and Creation of the Ministry of Petroleum Incorporated.
In comparing notes from the previous efforts, PWC established 20 key changes to the PIB 2020, thus:
Chapter 1 – Governance and Institutions
The key objective is ensuring good governance and accountability, creation of a commercially oriented national petroleum company, and fostering a conducive business environment for petroleum operations.
Creation of the Nigerian Upstream Regulatory Commission responsible for the technical and commercial regulation of the upstream petroleum operations; and the Nigerian Midstream and Downstream Petroleum Regulatory Authority responsible for the technical and commercial regulation of the midstream and downstream operations in Nigeria. The Commission and Authority are exempted from the provisions of any enactment relating to the taxation of companies or Trust Funds
Imposition of up to one percent levy on the wholesale price of petroleum products sold in the country (0.5 percent each for the Authority Fund and Midstream Gas Infrastructure Fund)
Incorporation of a commercial and profit focused NNPC Limited under CAMA within six months from commencement of the new law with ownership vested in the Ministry of Finance Incorporated (and Ministry of Petroleum Incorporated) on behalf of the Federation to take over assets, interests and liabilities of NNPC. This structure is expected to pave the way for eventual sale of shares to Nigerians.
Any assets, interest and liabilities not transferred to NNPC Limited will remain with NNPC until extinguished or transferred to the government after which NNPC shall cease to exist. Transfer and sale of the shares are subject to approval by the government and endorsement by the National Economic Council.
NNPC Limited will earn 10 per cent of proceeds of the sale of profit oil and profit gas as management fee while 30 per cent will be remitted to Frontier Exploration Fund for the development of frontier acreages in addition to 10 per cent of rents on petroleum prospecting licences and mining leases.
Chapter 2 – Administration
The main objective is to promote the exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people and promote sustainable development of the industry, ensure safe, efficient transportation and distribution infrastructure, and transparency and accountability in the administration of petroleum resources in Nigeria.
Avoid economic distortions and ensure a competitive market for the sale and distribution of petroleum products and natural gas in Nigeria; and avoid cross-subsidies among different categories of consumers.
The Commission is required to develop a model licence and model lease to include a carried interest provision giving NNPC Limited the right to participate up to 60 per cent in a contract.
Chapter 3 – Host communities development
The main objective is to foster sustainable prosperity within host communities, provide direct social and economic benefits and enhance harmonious co-existence.
Any company granted an oil prospecting licence or mining lease or an operating company on behalf of joint venture partners (settlor) is required to contribute three – five per cent (upstream Companies) and two percent (other companies) of its actual operating expenditure in the immediately preceding calendar year to the host communities development trust fund. This is in addition to the existing contribution of three percent to the NDDC. The Fund is tax exempt and any contributions by a settlor is tax deductible.
Board of trustees and executive members of the management committee may include persons of high integrity and professional standing who may not necessarily come from any of the host communities.
Available funds are to be allocated 75 per cent for capital projects, 20 per cent as reserve and five per cent for administrative expenses. However, a community will forfeit the cost of repairs in the event of vandalism, sabotage and other civil unrest causing damage to petroleum facilities or disruption of production activities.
Chapter 4 – Fiscal framework
The key objective is to establish a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, provides clarity, enhances revenue for the government while ensuring a fair return for investors.
FIRS to collect Hydrocarbon Tax of 15percent – 30 percent on profits from crude oil production, CIT at 30 per cent and Education Tax at two per cent, which will no longer be tax deductible. The Commission will collect rents, royalties, and production shares as applicable while the Authority will collect gas flare penalty from midstream operations. Late filing of tax returns will attract N10million on the first day and N2million for each subsequent day the failure continues. A N20 million fine is applicable to an offense where no penalty is prescribed.
Generally, expenses must be wholly, reasonably, exclusively and necessarily incurred to be tax deductible. However, a cost price ratio limit of 65% of gross revenue is imposed for hydrocarbon tax deduction purposes, any excess cost incurred may be carried forward.
No tax deduction for head office costs while tax deduction of interest on monies borrowed is subject to the satisfaction of the commission that the fund was employed for upstream operations and the interest rates reflect market conditions.
Royalties are payable at the rates of 15 percent for onshore areas, 12.5 percent for shallow water, and 7.5 percent for deep offshore and frontier basins, 2.5 percent – 5 percent for natural gas. In addition, a price-based royalty ranging from zero to 10 percent is payable to be credited to the Nigerian Sovereign Investment Authority.
Gas utilisation incentive will apply to midstream petroleum operations and large-scale gas utilisation industries. An additional five-year tax holiday will be granted to investors in gas pipelines.
Chapter 5 – Miscellaneous provisions
The PIB repeals about 10 laws including the Associated Gas Reinjection Act; Hydrocarbon Oil Refineries Act; Motor Spirit Act; NNPC (Projects) Act; NNPC Act (when NNPC ceases to exist); PPPRA Act; Petroleum Equalisation Fund Act; PPTA; and Deep Offshore and Inland Basin PSC Act. It amends the Pre-Shipment Inspection of Oil Exports Act while the provisions of certain laws are saved until termination or expiration of the relevant oil prospecting licenses and mining leases including the Petroleum Act, PPTA, Oil Pipelines Act, Deep Offshore and Inland Basin PSC Act.
