Why National Assembly Must Consent to the Petroleum Industry Bill?
The idea behind the enactment of the Petroleum Industry Bill (PIB Bill) originated about fourteen years ago under former President Olusegun Obasanjo when he set up an Oil and Gas Reform Implementation Committee (OGIC) to assess modality for the reformation of the oil industry. The committee was saddled with the responsibility to carry out a comprehensive reform of the oil Industry with a view to bring Nigerian system under the international best practices and to replace the opaqueness haunting our oil industry with transparency. The Act is to establish legal and regulatory framework, institutions and regulatory authorities for the Nigerian petroleum industry and to establish guidelines for the operation of the upstream and downstream sectors.
The Act which was generally applauded by Nigerians was somehow prevented from not seeing the light of the day hence it was fraught with myriad of problems militating against it. This includes multiplicity of oil reform Bills at the National Assembly and lack of political will by the Federal Government to push through the PIB Bill. In addition, are the activities of multinational companies who wanted the status quo to be maintained in respect of Pre-PIB Joint Venture Agreements with the NNPC/Federal Government.. They are afraid that tampering with the Joint Venture Agreements will cede too much control to the Federal Government. .The multinational oil companies are not comfortable with the fiscal regime and increased Royalty Payments in the PIB. Some provisions of the “PIB” were poorly drafted and not well articulated and some salient important issues not addressed at all and/or included in past draft versions of “the PIB” .For instance:
• Fiscal regime for gas not touched and/or addressed at all;
• Fiscal regime for offshore drilling is poorly drafted and omitted ultra deep offshore drilling;
• Blueprint for NNPC privatisation is completely superficial –need to include strong provisions for commercialising and privatising NNPC in line with international best practices;
• The role of Minister of Petroleum Resources in the post PIB regime is not properly defined – for instance:
• Who oversees the reform implementation process?
• Should the minister’s discretionary power to award and revoke licenses be retained?
• Should the minister’s role be restricted to policy making and setting directives for the industry only?
Despite the aforementioned obstacles on the way of the Bill, Nigerians breathed a sigh of relief when President Goodluck Jonathan in his national broadcast in commemoration of Nigeria’s democracy day on 29th May 2012 promised that a new PIB would be ready in June 2012 for onward transmission to the National Assembly.
Subsequently. Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke inaugurated a task force chaired by former senator and chairman of the Board of Securities and Exchange Commission (SEC), Udo Udoma Udo, was also expected to work alongside a technical sub-committee headed by the Director-General of Department for Petroleum Resources (DPR), Mr. Osten Olurunsola, which was charged with reviewing all former versions of the bill and come out with a draft within the next 30 days. They were saddled with the responsibility of drafting a new PIB Bill.
Thus, the new PIB Bill presented by Minister of Petroleum Resources Mrs Allison-Madueke to the President recently is meant to change everything from fiscal terms to overhauling the Nigerian National Petroleum Corporation (NNPC), promote Nigerian content and significantly increase domestic gas supplies, especially for power generation and industrial development. The ultimate aim of the PIB was to refine the Petroleum laws, after more than 50 years of oil and gas operations in Nigeria. This was taking good care off by consolidating the 16 existing laws into a single set of provisions, leading to an overhaul of the legal, fiscal, commercial and governance frameworks.
The core principles of the new PIB, are to imbibe global best practices of openness, transparency, good governance, indigenous participation and sustained revenues for Government. Under the new PIB Bill two new institutions would be formed to replace the NNPC once the draft PIB was passed. These are the National Oil Company (NOC) and National Assets Management Company (NAMC).
These institutions and the petroleum industry would be under the supervision of the petroleum minister. The NAMC is expected to be 100 percent government owned, while the government is to adequately capitalise and progressively sell government’s stake in the NOC, down to 49 percent.
A critical study of the Bill revealed that it reaches into all the facets of the petroleum industry and it liberates the sector from all the government constraints and impediments which hitherto rock the industry, rendering it unattractive to both local and international investors. It gives incentives to both small and big players in the industry through transparent and fair rules of participation. The concept of good corporate governance is also evident in the provisions of the Bill, which also features strong fiscal framework beneficial to the country. In a nutshell, it moves Nigeria clearly towards the international best practices in the extractive sector.
Furthermore, the Bill has far reaching provisions on the issues of Nigerian content. For example, it provides that no project can be approved without a comprehensive “Nigerian Content Plan” which must include obligations on the part of the investor to purchase local goods and services, increase employment, as well as to focus on training, education research and development. It also requires the foreign investors to follow guidelines in order to assist local companies. Adherence to the provisions of the Bill will surely boost the purchase of local goods and services leading to higher employment opportunities for Nigerians.
Series of landmark provisions are also addressed in the Bill to correct the anomalies of the current petroleum regime. For example, it is a notorious fact that the Deep Sea Water Blocks contract that Nigeria entered into in 1993 with foreign investors is one of the worst contracts any oil-exporting nation can enter into as it seems to foster unilateral advantages only on the foreign partners with Nigeria having very little or no gains under the production sharing formula in the agreement.
The royalties accruable to the country are Zero per cent! The foreign partners take I00 per cent of the products. Even the taxes system under the said “bad deal” contract does not provide much benefit for the country as the tax regime included generous tax credits to these foreign investors which wiped out a great percentage of the collectible tax by the Federal Government. Now under the Bill, there are a number of provisions on ventures like Deep Water operations that are much more beneficial to the countries and comparable to what other oil exporting nations do collect under such contracts.
In totality, the Bill would both eradicate the practice of discretionary award of licenses and contracts in the upstream sub-sector of the industry, as well as ensuring that only genuine investors with appropriate technical and financial capacity get the oil licenses.
In spite of all the advantages described above, it is very surprising and worrisome that the National Assembly, since 2008, has not given it the urgent attention it deserves by passing it into a law. As a matter of fact, there is a school of thought that believes that some cabalistic vested interests are the brains behind the non-passage of the bill through underground machinations. There is a belief that a regime of openness and transparency the Bill would usher in would erase some accruable gains under the present shady regime.
No doubt, the government must be losing billion of Naira daily as a result of non passage of the Bill by the National Assembly .Only a few days ago, Regional Executive Vice President, Sub-Sahara Africa, Shell Upstream, Mr. Ian Craig, who spoke at the opening of the 2012 edition of the Nigerian Oil and Gas, in Abuja, said Nigeria loses approximately 150,000 barrel per day to theft – an amount translating to a whopping N2.9 billion daily!
The pertinent question here is that “Is the prolonged delay in the passage of this all-important Petroleum Industry Bill attributable to underground manipulation of the vested interests or is it just a case of unpatriotic nonchalance on the part of the lawmakers?
Whatever maybe the situation, Nigerians are appealing to the law makers saddled with the responsibility of passing the Bill into law to as a matter of urgency save Nigerians the billions of Naira lost daily for the delay of the Bill by assenting to it once it is passed to the Chamber by President Goodluck Jonathan.
Oghenekevwe Laba a Lagos based journalist