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Tag: PIB

  • NASS seeks new PIB

    NASS seeks new PIB

    The National Assembly on Monday asked President Muhammadu Buhari to quickly transmit a new Petroleum Industry Bill (PIB) to the parliament for consideration and passage into law.

    The lawmakers described the PIB as one of the most important pieces of legislation that should be quickly considered and passed in the interest of the country.

    Speaker, House of Representatives, Hon. Yakubu Dogara, made the call at the Tuesday opening ceremony of the National Assembly Dialogue on Economy, Security and Development in Abuja.

    The forum was organized by the National Institute for Legislative Studies (NILS).

    Dogara, who insisted that investment decisions in the petroleum sector could no longer wait, said government cannot ignore efforts to rearrange  the sector in a manner that would benefit the nation.

    The Speaker noted that it was important for President Buhari, as Minister of Petroleum, to transmit a new PIB to the National Assembly for consideration and passage into law.

    He said the immediate transmission of a new PIB to the National Assembly had become even more compelling because oil and gas still accounts for over 70 per cent of the country’s foreign exchange earnings despite the rapid drop in oil prices.

  • Environmentalists seek review of PIB

    Environmentalists seek review of PIB

    The Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN) has urged President Muhammadu Buhari to re-present the Petroleum Industry Bill (PIB) to the National Assembly. The draft bill, the civil rights group said, must be amended by the President before it is sent to the legislature for ratification.

    The group said the present bill would not solve the crisis in the petroleum industry and the agitation of oil communities, stressing that the bill would not adequately address the environmental degradation and spillage if sent back to the National Assembly without amendment.

    Speaking at a news conference yesterday, Executive Director, ERA/FoEN Dr. Godwin Uyi Ojo said debate on the bill was politicised by members of the Seventh National Assembly, led by former Senate President David Mark. He said the lawmakers became the mouthpiece of oil companies, which threatened to pull out of the country if the bill was ratified.

    He described last-minute efforts of the Seventh National Assembly members to speedily pass the PIB as hypocritical and a mockery of the legislative process, stressing that the censorship of the bill by lawmakers was a grand collusion to water down its vital provisions in favour of the oil companies.

    Ojo said: “We do not want a bill that will be referred to as ‘Minister’s PIB’, because this will defeat the key objective of the bill in providing a level-playing field for all actors, while creating efficient and effective regulatory agencies. We demand that the power of minister in Section 6 of the bill be properly scrutinised and that Section 6 (k) be expunged.”

    He said the provision, which gives exclusive right to the President to award oil blocks should be reviewed, noting that the bill should be made to build strong institutions rather than individuals.

  • Operators decry losses from non-passage of PIB

    Operators decry losses from non-passage of PIB

    Operators of the Nigerian oil and gas industry are counting their losses arising from the non-passage of the Petroleum Industry Bill (PIB), which has been before the National Assembly for over a decade.

    The non-passage and its consequences, according to them, include uncertainties over investment in exploration and production, which boosts oil output and reserves as well as funding of operations.

    The bill has been undergoing changes from one legislative assembly to another as a result of disagreements between stakeholders over fiscal and structural provisions in the bill. The development led to abandonment of decisions in taking risks to make new discoveries, developing existing acreages and injecting new technologies, therefore, activities have been very low in the industry over the years.

    The lingering bill has created uncertainty that has continued to hang on the business environment, compelling foreign and local investors to cancel or delay business decisions that would have kept activities in the industry alive and growing.

    The Managing Director of Seplat Petroleum Development Company, Mr. Austin Avuru said: “There are too many contending issues that are lumped into one piece of legislation including issues that were never in dispute; including issues that we didn’t need to revisit. And in the process they have thrown the industry into an impasse; you can’t move forward because everybody, especially the multinationals operating in the deep offshore and who have to make multibillion dollar investments, are in an uncertain business climate. Clearly they have pulled back their pen and they are not taking final investment decision (FID).

    “What is stopping the industry from moving forward is the uncertainty created by the possibility of a new legislation that is not clearly understood. And, therefore, you can’t take the risk of making heavy investments because you can’t be certain until that piece of legislation becomes law. And so, as long as there is suspense, there will be a lull. The entire industry is in suspense. Every month, you hear about dwindling revenues in the federation account. Yes, it will continue,” he pointed out.

    On the whole, he said: “our survey of oil industry challenges in the wake of the oil price fall exposed crippling challenges that are eroding profitability.”

    Avuru also said: “Across the industry, cost has gone up 10 fold from where we were 25 years ago. As a young well-site geologist in the 1980s, and if you recall those terms of the 1985 and 1987 memoranda of understanding (MoUs) nominal technical cost was pegged at $3.50 per barrel. It was expected that average technical cost (operating expenditure and capital expenditure) was $3.50 per barrel. That means you have to be operating below $3.50 to be efficient. If you are doing above $3.50 you are considered expensive.

    “Today, that cost has gone up to $30.50 per barrel. So, in the past 30 years, we have allowed a lot of things to creep in. There is the crisis in the Niger Delta; increase in the security apparatus to do the business, there is an increase in everything. All the costs have piled up onto the cost of production.

    “And one of the biggest issues, why there appears to be a disagreement between government and operators over the PIB is because government believes that the fiscal regime cannot be predicated on $35 per barrel. And you can understand their frustration. They were there when the cost was $3.50 per barrel.

    “But the industry is saying the cost is the cost. If it is $35 per barrel then it is $35 per barrel.  People don’t realise that this is where the disagreement resides. The debate is on the cost parameters used to model the fiscal regime.  So, the industry has undergone a huge escalation in cost. Unfortunately, nobody has tried to stem that tide because it has escalated beyond control.”

    However, beyond the arguments is the fact that the domestic operating environment appears to be losing the necessary conditions required for commercial investments to make appreciable returns and deliver profits to shareholders.

  • NNPC seeks one more year for PIB’s review

    NNPC seeks one more year for PIB’s review

    The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu has said a lot of engagement is required to address all the issues in the Petroleum Industry Bill (PIB), following the changes in the oil and gas environment.

    According to him, the state-run oil firm would need at least one year to review the legislation before getting it back on track.

    He said: “PIB is a serious affair, it is an essential piece of legislation but as we all know, a lot of engagement is required to address all the issues because the oil and gas environment has changed. “There are issues of cost, with oil going down to $40 per barrel, the PIB cannot be the same.”

    The bill has been pending in the National Assembly over the last seven years.

    Its Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, in a  statement explained the GMD spoke while chairing a special session on the proposed law at the ongoing 55th Annual General Conference of the Nigerian Bar Association in Abuja.

    The session had Legal and regulatory framework of the petroleum industry in Nigeria: Review of existing Laws and the Petroleum Industry Bill (PIB) as its theme.

    He described the bill as an essential legislation which must be approached with all seriousness and thoroughness.

    On what the Federal Government intends to do with the draft legislation, Dr. Kachikwu said the PIB has come to stay, though it would require some time to perfect the draft.

  • NNPC to review PIB

    NNPC to review PIB

    The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, has said a lot  is required to address issues in the Petroleum Industry Bill following changes in the oil and gas environment.

    Kachikwu said: “PIB is a serious affair, it is an essential piece of legislation but as we all know a lot of engagement is required to address all the issues because the oil and gas environment has changed. There are issues of cost, with oil going down to $40 per barrel, the PIB cannot be the same.”

    The bill has been pending in the National Assembly for seven years.

    A statement issued by NNPC Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, made this disclosure on Tuesday.

    According to the statement, Kachikwu spoke while chairing a special session on the proposed law at the ongoing 55th Annual General Conference of the Nigerian Bar Association in Abuja titled: Legal and Regulatory Framework of the Petroleum Industry in Nigeria: Review of existing Laws and the Petroleum Industry Bill (PIB).

    He described the bill as an essential legislation which must be approached with all the seriousness and thoroughness it deserves.

    Commenting on what the Federal Government intends to do with the draft legislation, Kachikwu said the PIB has come to stay though it would take a bit of time to perfect the draft.

     

  • ‘Non-passage of PIB shouldn’t stop NNPC clean up’

    ‘Non-passage of PIB shouldn’t stop NNPC clean up’

    Dr. Fabian Ajogwu (SAN) has over two decades’ experience in litigation and arbitration. He is also an expert in Foreign Direct Investments (FDI) and corporate restructuring in the financial services, among others. In this interview with Assistant Editor BOLA OLAJUWON, Ajogwu, an author, speaks on the new appointments at the Nigerian National Petroleum Corporation (NNPC), the need for efficient and effective reforms in oil and gas industry, the non-passage of the Petroleum Industry Bill (PIB) and the controversial oil subsidy.  

    What is your position on the appointments made so far in the oil and gas sector by the President, specifically in the Nigerian National Petroleum Corporation (NNPC)?

    First of all, I must say that President Muhammadu Buhari has made a well-thought-out appointment in the person of Dr. Emmanuel Ibe Kachikwu, and I say this for so many reasons. The President has made a promise to the people of this country that he would be embarking on reforms within the oil and gas industry. It is important to note that these are qualitative reforms that will need to cover more than 80 per cent of the revenue base of the country. So, it is a crucial sector, and it means that whoever would drive the reform has to be first and foremost, somebody who has integrity, is competent, has the wherewithal, good understanding and experience of how that industry works productively; not just how it works but how it works productively. He must also be somebody who is business-minded. There couldn’t have been a better person that comes to mind than Dr. Kachikwu.

    Now, it is important to highlight that Dr. Kachikwu comes with him with a good degree of pedigree. He is a first class graduate from a university in Nigeria, and he held that record for more than 20 years, there was no other first class. He also graduated with LLM with Distinction from Harvard and a PhD, which he completed in record time from Harvard University. And what was his specialty? Petroleum and Investment Law strategies. And this is critical to what the NNPC ought to be in bracket, which it was doing and which it now need to start doing immediately. Petroleum and investment; that is what is needed. And these were his specialties. He hasn’t just bagged those academic degrees, he has also worked the talk in terms of industrial experience, having worked for Texaco Nigeria and Texaco Overseas for over 10 years, having worked for Exxon Mobil Group, risen to the point where he was not just a general counsel or being on the board, but also overseeing Mobil activities all across Africa. So that is a great deal of stamp of approval and from Mobil, who are partners with the Federal Government. There is so much trust invested in this man and I think it is a good decision to allow him come in and assist the President with the reforms that are needed in that sector.

     

    What do you think of Dr Kachikwu?

    I must mention that Dr. Kachikwu himself is somebody who has run something successfully: publishing as entrepreneur streaks in his blood, he is full of new ideas and has a good understanding of the contractual regimes of the NNPC. Now, it is important, because I know many would say, he is a lawyer, comes from a legal background. We must understand that the critical thing NNPC does is actually managing a lot of those contracts with its partners and getting the best for the country. Here is a man who has fingertip experience on those arrangements: production sharing; joint ventures and how they all work, having been on the other side of the partnership. He knows what the multinationals seek to do, he knows what their interests are, he knows what is good for Nigeria on the long-term, as well as the medium term and it is good that he brings all these experiences of over three decades, to bear on what the NNPC does.

    I think that at this point, what we need to anticipate is a clean out of non-essentials from the NNPC; it needs to run not like the big elephant, sluggish elephant that it used to be. But it needs to move limbs, needs to be efficient and productive. The NNPC needs to impact on the lives of its shareholders who are really the people of this country. It needs to deliver on the reasons for which it was established in 1977. If you have set up something for more than 38 years and it turns like the NNPC, it needs to be born anew. This is what I think and have a lot of confidence that Dr. Kachikwu will do, with the able support of President Buhari, to ensure that there are no distractions or contrary policies that may impede the business focus of the NNPC.

     

    What are the specific legal areas you will want a reform in the NNPC?

    It is important to understand that NNPC was reorganised years ago, starting from 1988 in strategic business units, covering the entire spectrum of the oil industry operations, exploration and production, gas development, refining, distribution, petrochemicals, engineering and other commercial investments. One of the things we need to see is a streamlining of all of these different units, to bring them to more manageable sub-divisions. Each one having what we call a “profit and loss” centre, where they need to be run efficiently and transparently. That is the first thing, to streamline the operations of the NNPC and you see that he has already started taking steps in that direction. The next thing is to improve the earnings of NNPC by the kind of contracts the corporation enters; they should be profitable and advantageous contract, not lopsided contracts in which the NNPC comes out with a shorter end of the stick, because that means Nigerians comes out with a shorter end of the stick. We need a better arrangement with the partners. The third thing that we do need to expect would be transparency and corporate governance. No organisation can be successful, if there is lack of governance structures. It would just drift away.

     

    How do you think NNPC should be managed?

    An organisation like the NNPC should have all the ingredients of good corporate governance for which Dr. Kachikwu already draws from his three decades of working for multinationals, who are particular about corporate governance, and also himself being a fellow and director of the Society for Corporate Governance in Nigeria. It is an organisation dedicated purely to the development of corporate governance. We expect him to bring these to bear in NNPC, in terms of instilling proper corporate governance and that includes frequency of board meetings and accountability. The board of NNPC over the past two years barely met, and you cannot deliver governance, if you don’t come together to sit and consider reports – management reports; financial statements; activities; operational activities and strategic direction of that enterprise, especially at the board level, which of course will then distill downwards of the whole organisation. We also expect that he would look at issues of revenues and revenues that end up where section 162 of the constitution says it should end up: consolidated revenue accounts.

    The NNPC needs not run as though it was owned by the managers. It is owned by the country, not the managers of the corporation. It is a commonwealth and so we expect to see accountability to that commonwealth. In terms of overall culture change, we don’t want that iconic structure with its towers being referred to as towers of corruption. We want to see them as towers of wealth of the nation – that is what they represent. They should be towers of excellence, where the wealth of the nation is grown and preserved, not where it is dissipated. We expect to see and know that Dr. Kachikwu will make this a reality. I don’t think that it is a dream that is going to take forever. There would be difficulties as with all other things driving change. There would be resistance; as we don’t expect good things to come easy.

    But in all, from what I know and have read, I do believe that he is up to the task and would come with a fresh mindset, not the one bug down by bureaucracy and red tapes, but one that comes from results, being himself a result-driven person and an achiever. I see that he would want to continue with that same culture and not take anything less. That is what we expect to see, and I am confidence that should be achieved for the NNPC. In the end, it would not just be the NNPC itself, but its workers, its board and the people – the collective owners – that would benefit from it. Then it would be a positive one for President Buhari and the people would see that he is matching his words with actions.

     

    The Seventh National Assembly could not pass the PIB into law. Don’t you think that the NNPC will carry out its responsibilities at variance with what we have already in the PIB?

    We need to look at this from a very practical perspective. It was in 2000 that the Nigerian government established the Oil and Gas Sector Reform Implementation Committee in order to bring about comprehensive industry reform. The committee’s members were charged to make recommendations for establishing a new regulatory and institutional framework within the oil and gas sector in Nigeria. That essentially led to trying to implement one of those recommendations, which is to harmonise the entire regulatory laws into a Petroleum Industry Bill (PIB). I am giving this background to enable us see the journey of PIB. We are now 15 years into that effort and the first draft of the PIB came out in 2008. Seven years after the first draft, there have been several changes, modifications and all sorts. In 2012, the latest version was sent to the National Assembly by former President, Goodluck Jonathan. It stayed there for about three years, until on June 4, 2015, the House of Representatives passed the PIB.  I must underline that it is yet to be passed by the Senate and, of course, yet to get the accent of the President.

     

    Do you foresee the PIB being signed into law soon?

    Fifteen years of waiting, seven years of waiting for the first draft, and I cannot predict how much longer it will take for the PIB to come out. People who want to achieve results don’t get bug down by this kind of lengthy processes, the PIB has taken this long because, as I previously said, it is like a big elephant, which is trying to fly because it is difficult to take off. It includes so many things, and I am sure you would see that there are issues in the version passed by the House of Representatives on June 4, 2015, with definition of what is an oil producing community and so many other things. I think that in seeking to bring everything into one bill, it became too complicated and too many stakeholders disagreeing over too many things. Also keep in mind that while this delay is happening, the NNPC needs to carry on, revenues needs to be earned for the country to continue and so, it doesn’t wait for this PIB, and I don’t expect that the activities or clean-up at the NNPC should wait for the PIB. In any case, I don’t that is the plan of those who want to clean up the place. I expect that within the existing legal framework, and it should be kept in mind, we are not operating in vacuum. The NNPC is a creation of Statute, it’s an Act; it defines how things should be done. The problem hasn’t really been that the legal framework itself is defective; it’s implementation and sanctioning of breaches of the existing framework that has led to the journey-to-nowhere. What I expect from Dr. Kachikwu, which I have a lot of hope and confidence, is that working within the existing framework, he would bring transparency, decency, efficiency and proper governance to bear on NNPC, as it is. If and when the PIB is passed, and becomes the Petroleum Industry Act, the NNPC can work it.

    I have no doubt in my mind that the activities of the NNPC will be aligned in compliance with that law when it becomes law. I do disagree with those who suggest that we should hold on until the legal framework being proposed becomes law. I would be a realist in this regard to say let us go with the reality on ground and make the NNPC a better corporation, rather than suspend the reforms and wait till the PIB is passed. Those would be my humble views.

     

    How can the reform in the NNPC tackle illicit financial flows? And is there any need to seek for assistance from the international community to tackle it?

    This is a very crucial question; when you look at the quantum, it’s because oil largely accounts for more than 80 per cent of our revenues and rarely qualitative activities, in terms of export and earnings. Whenever there is lack of transparency, questionable payment and oil theft, the money gets somewhere else other than where it ought to go. It highlights itself  by the percentage of total; it becomes 80 per cent of all. It then seems as if that is a dominant place where illicit transactions do occur; it is simply because of the relevance. Oil theft goes with receipt of the money for the stolen crude and you will find that this kind of money will go in funny directions. Oil theft is one of the largest destinations of pipelines for illicit flows, and the minute we can tackle the corruption within our sector, we would drastically have reduced those kinds of funds. Would the NNPC led by Dr Kachikwu achieve that alone? I don’t think so. I think the corporation does need the cooperation of other institutions, like the Central Bank of Nigeria, which has already began plugging loopholes in the system and trying to make us compliant with money laundering regulations that are more or less global practices, if we want to be part of that system.

    We must also realise that law always move slower than crime and mischief. So, if mischief happens today, you will need an amendment to block that loophole, and then the mischief-makers look for another loophole and when they find it, they will use it for a while until the regulation blocks it. I must commend the Central Bank of Nigeria for responding without fear as they observe loopholes and gaps for illicit funds flow. The NNPC needs institutions like CBN, the organised private sectors, businesses, the Economic and Financial Crimes Commission  and global partners to deal with this. I expect that with a man like Dr Kachikwu, who knows how to work in collaboration and partnership with people, we would be able to harness those synergies among those institutions to work together to tackle the common problem.

     

    What is your view on fuel subsidy?

    Fuel subsidy continues to be an issue, not because anyone wants to particularly punish consumers of fuel, but because of the quantum that every N4.3 trillion of our budgets, about N1.5 billion – more than 25 per cent – goes into funding fuel subsidy. This figure exceeds what we spend for education, health and other component parts, all put together. This is really a practical question that we must answer: do we want to continue on this? Or do we want to stop and take the hard and painful decision? I think that when we look at the strain it puts on our foreign exchange, external reserves, government revenues, we must understand that the role of government is to allocate resources to the areas where they are needed in an optimum manner, respecting the basic laws of economy, which is that there would always be an infiniteness of needs and demand, and indefiniteness of supply.

     

     

     

  • Refineries: How price regulation, PIB clip investors’ wings

    Refineries: How price regulation, PIB clip investors’ wings

    The Federal Government’s regulation of the downstream sector of the oil & gas industry and non-passage of the Petroleum Industry Bill (PIB) are scaring investors from grabbing the mouth-watering incentives introduced to attract investment in modular refineries. Assistant Editor CHIKODI OKEREOCHA reports that the battle for deregulation, which is now gathering momentum, will encourage investors to build refineries and sell products at competitive market prices.

    If assurances from the Nigerian National Petroleum Corporation (NNPC) are anything to go by, the Port Harcourt refinery will resume operation next month. The Corporation, through its former Group Managing Director (GMD), Joseph Dawha, said the four refineries will operate up to 80 per cent of their installed capacities, translating to five million litres of petrol per day.

    Based on the revised Turn Around Maintenance (TAM) strategy for the refineries, Dahwa also said that Warri and Kaduna refineries will be revamped and become operational within the next 18 months.

    With all plants producing at nameplate capacities, a significant improvement is expected on domestic refining and a drastic reduction  on importation of refined products.

    But, if Dahwa felt his assurances would gladden the hearts of Nigerians and restore their confidence in NNPC’s  management of the nation’s oil and gas resources, particularly the refineries, he got it all wrong.

    President Muhammadu Buhari, who has not hidden his administration’s resolve to beam a searchlight on the operations of the NNPC, sacked  the corporation’s 10-member board last weekend.

    The NNPC has been under attacks  over perceived sharp practices in the running of refineries and the management of revenues from crude oil sales and swaps.

    Not a few Nigerians, including industry operators, experts and stakeholders, saw the NNPC’s sudden assurances as medicine after death. And they have every reason for such skepticism.

    For instance, none of the four state-owned refineries has witnessed significant improvement in capacity utilisation despite the several billions of the tax payers’ money spent on yearly Turn Around Maintenance (TAM).

    Even, the five million litres daily production expected from the Port Harcourt refinery from next month, will be a drop in the ocean. On the average, Nigerians consume about 40 million litres of petrol daily. So, if all the four refineries – Port Harcourt (two), Kaduna and Warri- produce 80 per cent of their nameplate capacities, it will translate to five million litres from each of the refineries. All four will produce 15 million litres, leaving a shortfall of 25 million litres and a far-cry for local consumption demands.

    Impliedly, the much-needed succour may not come for Nigerians, who have been battling with acute fuel shortage since the beginning of the year. Yet, the problem is not limited to petrol alone. In all, the two refineries in Port Harcourt have a combined refining capacity of 210,000 barrels per day (bpd). The other two in Kaduna and Warri have installed capacities of 110,000 bpd and 125,000 bpd respectively.

    All added, the four refineries have a refining capacity of 445,000 bpd. But the Organisation of Petroleum Exporting Countries (OPEC) says that Nigeria has capacity to produce 30,400 barrels per of gasoline, 15,800 bpd of kerosene, 18,400 bpd of distillates and 20,700 bpd of residuals.

    The oil cartel put the country’s output of petroleum products by country at 89,000 bpd, which is a far-cry from 445,000 bpd.

    Experts blame the embarrassing scenario on mismanagement of the refineries.

     

    Modular refineries to the rescue

    The stakeholders and the authorities in the oil and gas industry have proposed the establishment of modular refineries as the quickest way to halt declining efficiency and productivity of the existing refineries. They believe such facilities will   boost local refining capacity.

    Modular refineries are crude processing facilities with narrow product line, limited to kerosene, diesel and low pour fuel oil (LFPO) with a production capacity of between one to 30,000 barrels per day or bigger. They have a completion period of between 18 – 24 months.

    Promoters of modular refineries believe the option will address the recurrent and embarrassing fuel scarcity within a short time and at rock-bottom costs.

    Looking at it from the investment angle, experts agree that investing  in, and construction of refineries is capital intensive, and that mini/modular refineries are cheaper and easier to build.

    According to the Department of Petroleum Resources (DPR), Nigeria’s oil and gas industry regulator, an investor requires between $1 million to $15 million to build a modular refinery.

    Stakeholders identified flexibility as another attraction as investors can build refineries that are relatively inexpensive, in multiple locations as and where demand is required.

    Besides, modular units can be expanded, thereby providing a cost-efficient and highly flexible means of delivering ‘on the spot’ refining capacity, either to remote geographical locations, or to regions requiring the benefits of locally processed oil products to meet increasing operational and local demand.

    This was what the 20, 000bpd modular refinery in Rivers State, Southsouth set out to achieve. The project, with an initial cost of $480 million and a 12-month completion period, is to be handled by an international consortium comprising the National Standard Finance of the United States (U.S.) and Omega-Butler Refineries of the United Kingdom (UK).

    Apart from producing petrol, diesel and gas, it will also produce bitumen. The Rivers State government will provide 40 hectares of land for the project, that has a capacity to generate 1,500 jobs.

     

    Experts speak

    The job creation potential of modular refineries is not lost on the Joint Task Force (JTF) Commander, Maj-Gen Emmanuel Atewe, who believes that modular refinery will improve fuel supply, create jobs and grow the economy.

    Gen. Atewe told The Nation that if modular refineries were working, scarcity and distribution glitches would become a thing of the past.

    He said: “I think the country needs modular refineries to refine crude oil. By this, I mean refineries with smaller capacities. When we have modular refineries, they will help in refining thousands of barrels of crude oil and the economy will be better for it. Besides reducing the perennial fuel scarcity, it will also provide jobs for people.”

    According to the JTF Commander, with gainful employment for the restive Diger Delta youths,  they will no longer engage in pipeline vandalism and oil theft.

    “Even, if they are going to commit such crimes, the rate at which they do so would not be high. Job creation is one way of reducing restiveness in the Niger Delta. I’m advising stakeholders to come together and see how they can build modular refineries and further provide multiplier effects on the economy,” he said.

    The Registrar/Chief Executive Officer, Institute of Business Development (IBD), Mr. Paul Ikele, was on the same page with the JTF chief. He described modular refineries as a sustainable option that will boost products supply across the country and also resolve the subsidy controversy.

    He said the granting of franchise to investors to build and operate modular refineries with newer technologies, will end the raging controversy over whether or not to remove subsidy.

    “If petroleum products are available to Nigerians on sustainable basis, the issue of payment of subsidy would not arise,” the IBD manager said. He pointed out that the technologies used in building the existing refineries were obsolete and demanding so much in maintenance.

    He said the country cannot cope with such huge resources on TAM in the face of the prevailing global economic downturn, occasioned by  tumbling oil prices.

    “Let’s look at modular or mini-refineries with newer technologies that can assist existing refineries whose maintenance demand so much due to obsolete technology,” he recommended.

     

    Government’s take

    The government has not lost sight of the benefits of modular refineries. At a recent conference on Health, Safety and Environment (HSE), organised by the DPR, the former Petroleum Resources Minister, Mrs. Dizeani Alison-Madueke, gave a hint of a plan to scrutinise and franchise aspiring operators to install and operate modular refineries.

    She said the government believed the short project cycle, low cost and flexibility for the establishment  of modular refineries will stimulate investors’ interest in local oil production and minimise oil theft and operation of artisanal (illegal) refineries.

     

    The minister further stated that to ensure the success of the initiative, several financial institutions had been approached to assist operators in the funding of the initiative, adding that the regulatory agency will soon roll out the details of the programme.

    At a one-day sensitisation programme, organised in Lagos, for the sstablishment of modular refineries, the DPR Deputy Director in charge of Technology and Standards, Mr. Alfred Ohiani, echoed Mrs. Alison-Madueke that the government has decided to once again encourage the establishment of modular refineries.

    He said investment in modular refineries, whose timeline and cost is limited, holds a better chance of achievement more quickly than the conventional refineries.

    Pointing out that the DPR will fast-track the process for investors in modular refineries, Ohiani added that the regulatory agency has slashed the licensing fee from $1 million to $500, 000 to further sway investors’ interest.

    Apart from reducing the fee, the government is also dangling other incentives such as reliable, sustainable and cheap sources of crude oil feedstock for the refineries and freedom to locate plants at numerous tax free zones across the country.

    Investors are also to enjoy the liberty of exploring regional and international markets.

     

    Price regulation, PIB as clogs

    With such mouth-watering incentives, investors should be falling over themselves to establish modular refineries. But that has not been the case. Rather, most investors have adopted a ‘wait-and-see-attitude’.

    The Nation learnt that government’s regulation of petroleum products’ prices and the delay in the passage of the controversial Petroleum Industry Bill (PIB) are two critical issues clipping investors’ wings.

    An economist, Mr. Henry Boyo, captured investor’s frustrations when he said there is uniformity in the price of crude oil produced in Nigeria, Saudi Arabia, and America, or elsewhere and that most investors are afraid of being asked by the Nigerian government to sell below production cost.

    Boyo said: “The process of producing crude oil or refined products is the same everywhere in the world; it is the same equipment. So, if you put in the same feed stock, what you will get at the end will be the same price.

    “At that level of business, investors have to go and borrow money. If they borrow money to set up refineries here in Nigeria and they produce and the output from their refineries is priced all over the world at X dollars per litre, that price is uniform because crude oil is the same price all over the world.”

    Boyo, who identified labour as the only thing that might change, Boyo said those who have either gotten licenses for refineries, or ready to do so, are worried that repaying loans may become herculean when compelled to accommodate subsidy   after borrowing to set up refineries.

    According to him, the existence of local refineries is not the issue, the price at which the products will be sold is critical, as this will determine how fast the investor recoups his money.

    Noting that although, the government, through the NNPC has pumped in so much money, enough to build new refineries, on TAM, the issue at stake is at what price will the products sell?

    The economist insisted that the issue is not whether or not to sell the refineries, but pricing.

    “Investors cannot produce and sell to marketers below the production cost. In no time, they will pack their loads and go,” he said, adding that once the pricing is right, those who got licenses for refineries will begin operation.

    He, however, was quick to point out that the naira-dollar mechanism will influence pricing.

    In 2002, the Federal Government, through the DPR, franchised 18 investors (local and foreign) to establish refineries.

    But, 13 years down the line, only the Niger Delta Petroleum Resources is in the process of activating the license. The remaining firms have been watching the investment environment to make informed decisions.

    Although, investors continue to hold back because of stringent guidelines, corruption and a harsh business climate, inadequate project funding, among others, Boyo said  government’s regulation of the downstream sector remains the greatest reason behind the investors’ cold feet.

    He said this was what informed the decision of President of Dangote Group, Alhaji AlikoDangote that after borrowing to provide a world-class refinery, he will not sell at a price below his production cost.

    Dangote, Africa’s richest man is currently investing $9 billion in aworld-class refinery in the Lekki area of Lagos, Nigeria’s commercial capital.

    According to the master plan, Dangote Group wanted to build a 450,000 bpd-capacity refinery, it has since increased the capacity to 650, 000 bpd.

    Analysts in the industry say despite Nigeria having the largest petroleum refinery in the world, Messrs Dangote will sell products at international prices.

     

    PIB also a spoiler

    Beyond pricing, the failure of the Sixth and Seventh National Assembly to pass the PIB into law has also not helped investors. The non-passage of the bill has made the commercial framework unclear to banks that will offer loans to investors.

    The PIB was designed to reform the entire hydrocarbon sector to increase the government’s share of revenue; increase natural gas production; streamline the decision making process by dividing up the different roles of the NNPC into a profit-driven company; privatise its downstream activities; and promote local content.

    The PIB will also provide for greater share of oil revenues to the producing communities and expand the use of natural gas for domestic electricity generation.

    For as long as the bill remained in the works, Nigerians cannot reap the fruits of the benefits.

    The bill has since become a subject of intense politicking at the National Assembly, which has different versions, especially around the more contentious contents such as the renegotiation of contracts with the International Oil Companies (IOCs), the changes in tax and royalty  structures and clauses to ensure that companies use or lose their assets.

    Experts argue that if the PIB, which they described as the roadmap for the opening up of the industry for increased investments had been passed, it would have comprehensively addressed the persistent fear of investors in building refineries, settled the issue of deregulation, as well as uncertainty concerning regular supply of crude oil at reasonable prices.

    Rivers State chapter Chairman of the Trade Union Congress of Nigeria (TUC), Comrade Chika Onuegbu, recently warned government and politicians to stop playing politics with the passage of the PIB.

    According to him, the non-passage of the document has blocked foreign investment in the sector that accounts for over 90 per cent of the nation’s foreign exchange earnings.

    Onuegbu, who made the declaration at a media chat with reporters in Lagos, noted that investors have continued to adopt a wait-and-see game, refraining from making any new investment pending the passage of the PIB.

    He said no Final Investment Decision (FID) has been taken on any oil and gas project in the country, not even on the government-promoted, Brass Liquefied National Gas (LNG) project since the introduction of the PIB as an Executive Bill in 2008  by the administration of  the late President Umaru Musa Yar’Adua.

    Onuegbu said: “It is worrisome that while we are dithering in Nigeria, there are new oil discoveries all over Africa, drawing in investors just as new technology is making hitherto unreachable and uneconomic hydrocarbon deposits accessible in Europe and North America, thus attracting investors to those environments.

    “We believe that the PIB represents a great opportunity for Nigeria to ensure a solid foundation on which the future of oil and gas operations in the country will rest. Also, that the petroleum resources which Nigeria have been endowed, work for and benefit the Nigerian people.”

    The delayed passage of the PIB is also believed to be responsible for the non-take-off of the three new green refineries with a total capacity of one million barrels in three states. The $23 billion (N3.7 trillion) project remained in the pipeline five years after it was conceived.

    On May 13, 2010, the Federal Government signed an agreement with the China State Construction Engineering Corporation (CSCEC) for the establishment of Greenfield Refineries in Lagos, Bayelsa and Kogi states at the cost of $23 billion (about N3.7 trillion) with a five-year completion period.

    Under the terms of the agreement, 80 per cent of the project cost was to be funded with a loan provided by CSCEC and a consortium of Chinese banks, led by the Industrial Commercial Bank of China (ICBC).  The NNPC was to provide 20 per cent of the funding as Nigeria’s equity stake.

    But five years after, the project is yet to see the light of the day, prompting legislative investigation last year by the House of Representatives Committee on Petroleum (Downstream).

     

    Calls for deregulation gather steam

    President, Lagos Chamber of Commerce and Industry (LCCI), Mr. Remi Bello, called for the deregulation of the downstream sector of the oil and gas sector as a way of out of the myriads of problems in the industry. He noted that a deregulated downstream will end scarcity of petroleum products, halt corruption in the subsidy regime, resuscitate the collapsed refineries, boost investments and create jobs.

    Insisting that the current regime of subsidy and government’s direct involvement in the operations of oil and gas sector should be discontinued, the LCCI chief said government’s management of the sector has done a colossal damage to the economy.

    “It is in the overall interest of the economy and the citizens that government should quickly deregulate the sector,” Bello said, urging labour unions and Nigerians to give the reform a chance.

    He was not alone. The Nigeria Employers’ Consultative Association (NECA) is also rooting for deregulation. It’s Director-General Segun Oshinowo argued that the the N10 reduction in the pump price of a litter of petrol by the government begged the more fundamental issue of appropriate policy framework that will promote investment in the sector and put a stop to the embarrassing and shameful practice of importation of products.

    Oshinowo said: “Our expectation therefore, is that government would seize the opportunity of the current decline in the price of crude oil to commence implementation of the policy on deregulation.

    “This is a unique timing the government cannot afford to miss as full implementation of deregulation, which in time past had led to price increase and reaction by the labour movement in form of industrial action, does not have any negative effect on the masses.”

    The NECA director further said that rather than the reduction from N97 to N87, there ought to be a far more holistic announcement of a new policy thrust of deregulation of the downstream sector and privatisation of the four refineries.

    According to him, the economy stands to gain a lot from the deregulation of the oil sector.

     

     

    Oil marketers’ position

    Oil marketers, under the aegis of Major Oil Marketers Association of Nigeria (MOMAN), argues that deregulation will bring in investments into the sector and encourage the establishment of private refineries.

    Its Executive Secretary Obafemi Olawore said the government should summon the courage to fully deregulate and remove subsidy, or embark on continuous subsidy regime payment as at when due.

    Olawore said: “If the government likes, they can introduce gradual removal of subsidy. But, it should not go beyond six to 18 months period.”

    He added that if fully deregulated with rules, the country will have serious investors coming in to invest adequately.

    He insisted that deregulation is the answer and that the government must educate the people to make them understand the advantages.

    Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, urged the government to muster the political will to push through the deregulation policy.

    “The government has no business in business. Deregulation is an idea whose time has come. Put the right policies in place so that private investors can come in,” he told The Nation.

    Okereke recalled that because of political exigency, the administration of former President Goodluck Jonathan could not take the bull by the horns and deregulate the sector.

    He recalled how the Federal Government administration buckled under the pressure of civil society groups in 2012 during the nationwide protest against the removal of fuel subsidy.

    Saying that subsidy has become unsustainable, Okereke said: “Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the wood as long as we continue to subsidise the price of petroleum products. We cannot continue to postpone the evil day.”

    Agreeing that Nigerians will pay more at the initial stage, he said the benefit will be more on long-run when price mechanism, determined by competition, ultimately forces down prices.

    One of the key issues driving the agitation for deregulation is the payment of an estimated N1 trillion annually as subsidy. This has pitted the government against oil marketers on one hand, and against Nigerians on the other.

    Will President Buhari retain or jettison oil subsidy? He has left nobody in doubt on his plans to reorganise the NNPC. He has begun that process with the disbandment of the corporations’ board.

  • ‘PIB threatens $80b investment’

    ‘PIB threatens $80b investment’

    The Chairman, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) Producers’ Forum, Emmanuel Onourah has warned that the proposed fiscal terms under the Petroleum Industry Bill (PIB) would threaten $80 billion investment in the oil sector between now and 2020.

    The proposed fiscal terms was based on $100 per barrel model.

    He said the development would bring about $44 billion reduction in accruable revenue to the Federal Government in the sector under the period.

    Onourah, who spoke in Lagos, said the fiscal terms would affect the sector because no deepwater Production Sharing Contract (PSC) production will be viable and production of gas under the Joint Venture (JV) with the government would reduce by 90 per cent.

    He said production of oil under the JV with government would reduce by 30 per cent while there would be an overall decline of 25 per cent production due to the proposed fiscal regime.

    According to him, it is therefore better imagined what the impact of the terms will be in a depressed market economy of $50 to $60 per barrel as the country is presently experiencing.

    “Although the government is disputing the results of this modeling as a major stakeholder in the industry, we will align with the recommendation of our parent body, PENGASSAN and demand that the new government should employ the service of an independent third party consultant to run the models and come up with a non-biased assessment,’’ he said.

    He expressed disappointment over the non-passage of the PIB by the 7th National Assembly and urged the new government to re-present the bill to the current Assembly for accelerated passage and assent by the president.

    He further suggested that the bill should be broken into manageable segments to allow the needed reforms to commence while the more controversial issues like host community fund, frontier exploration and fiscal terms can be further debated to some points before being passed.

    “We also advocated that the gas policy for PSC and appropriate domestic gas should be addressed because it affects gas supply to Independent Power Projects (IPPs), which impacts negatively on electricity,’’ he said.

    Onourah also implored President Muhammadu Buhari to unveil his plans for the nation’s oil and gas industry within the first 100 days of his administration.

  • New government and PIB

    New government and PIB

    •The new National Assembly should take a fresh and comprehensive look at the bill

    The tales woven around the Petroleum Industry Bill (PIB) during the tenure of the last legislative assembly would fill a sizeable basket. It was most times full of fury, but empty in delivery. At the end of the tenure of the 7th National Assembly, what we had was an inchoate legislation, as only the House of Representatives passed a version of the many variants of the bill.

    Now that we have a new government, with a fresh legislative mandate, it will be their responsibility to sort through the labyrinth, and work to enact into law; a PIB that would take care of the many promises of the bill, as originally conceived. Such a bill should also stem any restiveness in the Niger Delta.

    The PIB as conceived was meant to bring international best practices to the management of the petroleum industry sector. A peep into the fundamental objectives of the Bill, shows so many advantages that it is difficult to understand why the many controversies among the stakeholders. In concept, the PIB was designed to vest the oil and gas resources in the sovereign state of Nigeria, establish a transparent procedure for the issuance of licences, leases and permits. It was also designed to infuse good governance, transparency, development of Nigerian content, sustainable development and community relations.

    Intriguingly, while nearly all the stakeholders are in support of the Bill, there is a fundamental disagreement as to what it should contain. In the past dispensation, it was a common tale that the main challenger of the PIB in its virgin format, was the International Oil Companies (IOCs), that were alleged to have forsworn that the bill would never be passed. At home, there were also some lobbyists who felt that the PIB was giving too much to the oil-bearing communities, at the expense of the wellbeing of the national financial coffers.

    Indeed, even among the oil-bearing zones of the country, there is disagreement as to who should be the recipient of the money that was due to be paid by the oil companies from their profit. In contention were those in favour of state government as beneficiaries, while others preferred the oil-bearing communities directly suffering the impact of the oil despoliation. There was also the issue of what percentage of the profit should go to the coffers of the state or communities, including what should accrue to the communities, whose belly the pipelines passed.

    The PIB was also envisaged as an opportunity to end the environmental degradation of the Niger Delta. Also, there were provisions for the criminalisation of the pipeline vandalism, which should be very urgent in the context of the challenges facing the nation presently. In pushing for transparency, the National Oil Companies, which will have separate policy, regulation and commercial divisions, were to be guided by the provisions of the Nigeria Extractive Industry Transparency Initiative (NEITI) Act, 2007.

    So, it is strange that despite the enormous gains touted by the stakeholders to accrue from the PIB, politics was allowed to frustrate the passage of the bill by the 7th National Assembly. Now that a new government has been installed, it is hoped that the authentic PIB will be represented by the new government for passage. In other not to fall into the hands of those who opposed the bill previously, we urge the Buhari government to engage in wide consultations before making a move. We are also hopeful that the 8th National Assembly will give the bill the deserved attention, in the overall interest of the petroleum sector and the wellbeing of majority of Nigerians.

    ‘So, it is strange that despite the enormous gains touted by the stakeholders to accrue from the PIB, politics was allowed to frustrate the passage of the bill by the 7th National Assembly. Now that a new government has been installed, it is hoped that the authentic PIB will be represented by the new government for passage’

     

  • Why we passed PIB, by ex-House Minority Whip

    The leadership of the immediate past Seventh Assembly of the House of Representatives passed the Petroleum Industry Bill to ensure reform in the oil and gas sector.

    Minority Whip of the House Samson Osagie said this in a chat with reporters at the Benin airport, the Edo State Capital at the weekend after his arrival from Abuja.

    He said the country depends on oil and gas as its major revenue earner, adding that there was need for the outgoing legislators to demonstrate their support for the present administration in its determination to reform the sector for national growth.

    Osagie said the last-minute move was borne out of the desire to give boost to the sector by taking into account that Nigeria is a mono economy.

    He hoped that members of the Eighth National Assembly would take a cue from where the past lawmakers stopped.

    His words: “What we did was a demonstration of our commitment to ensure transparency in the running of our oil and gas sector to ensure that the petroleum sector is sanitised for the greater advantage of the Nigerian people.

    “As you can see, we rounded up with the passage of the Petroleum Industry Bill (PIB). That was borne out of the desire of the House of Representatives to ensure a reform in the oil and gas sector because you know oil and gas remains the mainstay of our economy.

    “Our economy is largely dependent on oil and that is why we say that Nigeria is a mono economy. So, we need reform in that sector and conscious of that fact we said that the least we would do is to ensure the passage of that Bill, even though the Senate have not done their own. The next assembly will take it up from there.”

    The APC lawmaker lauded people of Orhionwmon/Uhunmwode federal constituency in Edo State and Nigerians for the opportunity they gave him to serve the country.