Few months after the National Assembly unbundled the Petroleum Industry Bill (PIB) and passed one of its six components – the Petroleum Industry Governance Bill (PIGB) – the law chambers are being accused of putting the cart before the horse. Stakeholders in the oil and gas industry say the Petroleum Industry Host Community Bill and the Petroleum Industry Fiscal Bill should have preceded the PIGB. The two bills, they argue would guarantee peace and stimulate investment. EMEKA UGWUANYI and AMBROSE NNAJI report.
WILL the passage of the Petroleum Industry Governance Bill (PIGB) attract the expected investment in the oil and gas sector? Some players feel the passage of the PIGB by the Senate was like putting the cart before the horse. To them, the lawmakers should have considered the Host Community Bill and the Petroleum Industry Fiscal Bill. The two bills, according to them, would guarantee peace in the Niger Delta incentivise International Oil Companies (IOCs) and indigenous operators to invest.
One of the players in the industry and a Managing Partner, J.O Adidi and Co., Mr. John Adidi, said that massive and unfettered investments by IOCs and local operators would reposition the industry and deliver immense benefits to all stakeholders.
According to Adidi, the most critical part of the reform in the oil and gas industry, which started about 17 years ago, should be a robust fiscal framework that deals with taxation and incentives to stimulate investors’ interest.
He said: “It is the tax and incentives that will actually bring in investors. If the fiscal framework is friendly, investors will put their money down, and they will get their reward for venturing into upstream activities in the industry.”
Adidi’s position underscored his disappointment over the passage of the PIGB, which is an aspect of the Petroleum Industry Bill (PIB) by the Eighth Senate. He described the PIGB as a component of the original Petroleum Industry Bill (PIB).
“It’s not the most critical aspect of the PIB as far as the IOCs and indigenous operators are concerned”, Adidi said, stressing the importance of investors.
The Eighth Senate, under the leadership of Senate President Bukola Saraki and the Joint Committee on the Petroleum Industry Governance Bill (PIGB), chaired by Senator Tayo Alasoadura, passed the PIGB 2016, after PIB’s 17 year’s hiatus.
The PIGB only deals with an aspect of the PIB – the governance and institutional framework of the petroleum industry, leaving out five other components.
The other aspects of the PIB, which was unbundled into five different components, ostensibly for easy passage, include: Petroleum Fiscal Framework Bill; Petroleum Industry Downstream Administration Bill; Petroleum Industry Revenue Management Framework Bill and Petroleum Host Community Bill.
Adidi and other industry experts argue that the National Assembly put the wrong foot forward by first passing the PIGB without first considering other critical aspects of the bill particularly the Petroleum Host Community Bill and the Petroleum Fiscal Framework Bill.
Besides, they pointed out government that the Federal Government has consistently ignored the Petroleum Industry Host Community Bill that will guarantee peace and stability in the oil producing region.
Echoing the frustrations of industry experts, Adidi said: “Now you have passed the PIGB and the other bills are nowhere to be found, what will the PIGB do on its own without being complemented by the Petroleum Fiscal Framework Bill, the Petroleum Industry Downstream Administration Bill, the Petroleum Industry Revenue Management and the Host Community Bill?”
According to him, splitting the PIB into six components and passing an aspect that has nothing to do with fiscal and host community concerns will hurt current efforts at driving significant investments in the industry.
But Adidi’s concern may not be without justification afterall. Since the reform in the oil and gas industry began about 17 years ago, experts claim that Nigeria has lost over $235 billion worth of investments to the non-passage of the PIB.
It is believed that without addressing the issues around fiscal framework and host community concerns, the envisaged investment inflow may continue to elude the industry.
“When you give out oil blocks, the host communities will not allow you to operate because their concerns have not been addressed,” an expert, who pleaded for anonymity, said.
“We are just dancing in circles. The most important bills have not even gone anywhere in the House. The first reading in the House is just for mention. The international investors are watching and they would want to see what has been passed”, Adidi said.
He identified taxation, royalty and incentives as the critical areas to investors, pointing out that investors do cost benefit analysis of available incentives in terms of taxation in crude oil production and exploration.
The Chairman, Enfrasco Energy and Infrastructure Services, Mr. Chukwuma Okolo, said the unbundling of the PIB into components and their passages in instalments will hurt investment.
He accused the National Assembly of avoiding the real subject matter (fiscal matters and peace and stability in the Niger Delta) and settling for the least important issue (governance and institutional framework).
Okolo reiterated that the Senate avoided the fiscal incentives, ownership of the oil blocks, renewal, peace and security in the oil producing areas. He described the avoided areas as the major factors that must be addressed to encourage IOCs to drive investment in Nigeria and not Angola or Uganda.
He was emphatic that a robust fiscal regime and lease management bill would either encourage or discourage companies like Shell, Chevron, Mobil or even indigenous operator such as Seplat, to make additional investment in the industry.
The Enfrasco chair also emphasised the need to deal with community related issues such as content, revenue accruing to the community and development of the communities hosting the oil assets. This, he said, would engender lasting peace, security and stability in the area.
Okolo maintained that unless and until the government developed the oil-bearing communities, peace will continue to elude the region, and by extension, hurt investment.
The Managing Director/Chief Executive Officer, Gacmork (Nigeria) Limited, Alex Neyin, advised the Senate to pass a bill that would be conclusive, insisting that it was wrong for the Red Chamber to have passed the governance bill and ignored the component that is expected to add value to the lives of the host communities.
He said: “If you pass the bill without the host community part of it, then it could be classified as scam because you cannot be telling the people that you are going to compensate them and you will now turn around and talk of how much money to make out of them without thinking of what to put back to improve their lives.”
Neyin urged the lawmakers to avert further resentment in the oil producing region, warning against the consequences of not doing the right thing.
Mrs. Ibilola Amao of Lonadek Consulting and Local Content Advisory Services also stressed the need for the communities to be more involved in the exploration and exploitation of resources in their areas. She said there must be equity and fairness.
Mrs. Amao, who commended the PIB, however, said there must be adequate provision that the owners of the resources are engaged more effectively. This, she said, will make them more participatory stakeholders.
Her words: “We would like to see that the communities are more involved. The primary intent of the PIB was to commit the communities to maximising the return on investment for harnessing their natural resources so that it would create jobs and wealth for members of the communities.”
Mrs. Amao also accused governors in the Niger Delta for not addressing the welfare and wellbeing of people in their domains.
According to her, the state governors see the assets as avenue to enrich themselves and not to address the local community issues rather.
She said: “The state governments should be engaging with the oil companies and the people in the communities to make sure that work goes on, and not seeking for their own personal interests.
“We need to go back to equity and fair play if we want to move forward as a country.”
Mrs. Amao insisted on the need for more responsible and responsive government at state levels.
The consultant blamed destruction of pipeline facilities and unrests on the hijack of benefits accruing from the natural resources by a few people.
She emphasised that no investor (local or foreign), would want to put his money in a volatile atmosphere.
“We need to address the root cause and ensure that the communities are well engaged and committed to the development of their region in an equitable and fair manner”, she stated.
Host communities kick
The non-passage of the PIB has not gone down well with the host communities. For instance, some Ijaw youths under the auspices of the Ijaw Youth Council (IYC) Worldwide, said passing the PIGB version of the PIB portrayed members of the Senate as insensitive lawmakers.
IYC spokesman Henry Iyalla said the PIGB, which failed to provide special funds for oil-producing communities, would not guarantee peace in the Niger Delta region.
He said: “We condemn the show of insensitivity by the Nigerian Senate on the recent passage of the PIGB, which makes it clear that the only interest the government has in the region is control of her oil.”
Iyalla insisted that the only the PIB that would ensure peace in the region and calm frayed nerves must include the Oil Communities Fund Act. Such Act, he said, would give Niger Delta indigenes a stake in the industry and provide avenues to alleviate the suffering of the people in the region.
He was emphatic that without such funds, any governance structure put in place in the region would fail.
“It must be stated that for oil and gas related activities to operate smoothly within the Niger Delta region, the National Assembly, saddled with the responsibility of law-making, should immediately take further steps for the quick passage of the Host Community Bill”, he said.
The youth leader stated that the host community bill will guarantee 10 per cent of the net profit of upstream oil companies on both onshore areas and offshore shallow areas to the community.
“Otherwise, the Niger Delta would see the passage of the PIGB as a calculated move aimed at making laws for the smooth governance of exploitation and exploration of the abundant oil reserve within the region without any consideration to host communities,” he said.
Iyalla further stated that the singular passage of the PIGB will not deliver the full benefits of the intended reforms, except the other aspects of the PIB are legislated upon.
He warned: “The passage of the complete PIB is the only guarantee for a smooth and conducive operational environment in the Niger Delta, as the people of the region cannot guarantee conducive operational base without the protection of their interest.”
The PIGB as disincentive to investors
Okolo, who noted that no investor would be willing to put his money, insisted that the most important aspects of the bill should be given urgent and speedy passage. Commending the idea of breaking the bill into separate parts to make its passage easier, Okolo said the Senate should have dealt with the aspects that would make impact on the industry first and not the least among them.
According to him, the government must offer investors very attractive incentives so that rather than invest elsewhere, they would bring their money to Nigeria.
He said: “Whatever we are already collecting from their current production, we don’t have to collect less. But then, when they make new substantial investment, they should be able to get some incentives higher than what they have now.
“We are not charging less, but if people should invest to discover new oil, even if you charge them a lower percentage, it is still additional revenue for the government.”
Splitting of NNPC also under scrutiny
The PIGB, which split the Nigeria National Petroleum Corporation (NNPC) into three different entities, was also faulted by Okolo. He expressed doubt over government’s readiness to run the NNPC in a way that it would compete with its peers such as Petro Brass, PETRONAS or Saudi Aramco.
The PIGB as passed by the Senate created three entities from the NNPC, including: Nigeria Petroleum Regulatory Commission (NPRC), National Petroleum Assets Management Company (NPAMC) and Nigeria Petroleum Company (NPC).
The NPRC will serve as a regulatory entity for the entire petroleum industry (upstream, midstream and downstream), the NPAMC will serve as the counterpart and administrator of production sharing agreements and such other risk-based agreements as the government may decide to conclude.
On the other hand, the NPC will serve as an integrated oil and gas company operating as a fully commercial entity across the value chain.
Its activities include: joint venture operations, operation of the Nigeria Petroleum Development Company (NPDC), frontier exploration and other upstream/service activities, refineries, and petrochemicals, among others.
Okolo said: “I don’t think we are yet politically mature to run a true international oil company that is owned by the government. You don’t make somebody competent by passing a law, without competent hands. The skills set necessary to drive the oil and gas industry does not exist within Nigeria, it does not exist in the NNPC.
“If the government wants to run an organisation with competent hands, then it should select people purely on the basis of competence and merit. There must be consideration to quota system, ethnicity or even nationality.
Neyin, however, recommended that the NNPC workers and other government employees be reoriented, adding that their attitudes have never made the system profitable.
The Nation learnt that until a truce was brokered by Acting President Yemi Osinbajo’s trips to the Niger Delta, militancy led to significant amounts of shut-in production at onshore and shallow offshore fields and frequent declaration of force majeure by oil and gas companies in Nigeria.
These and other fears earlier expressed by experts informed the stakeholders’ push for the passage of the other aspects of the PIB.
The Deputy Chairman, House Committee on Federal Character, Petroleum Resources (Upstream), Sergius Ose Ogun, informed that the bill had gone through the second reading in both chambers.
Ose Ogun said that an ad hoc committee was set up to look into it. According to him, both the host community and the fiscal framework bills were all in the component bill that went through the second reading in the Senate and in the House.
He added that they are being considered all together. “The committee set up had met and hopefully before the end of the year, the bill will be passed into law,” the lawmaker assured.
